Today the U.S. Court of Appeals for the Eleventh Circuit agreed with my argument that anyone who is injured as the result of a financial fraud is a “crime victim” protected by the Federal Crime Victims’ Rights Act. The ruling, found here, could have major implications for the prosecution of financial fraud crimes in the future and will significantly expand restitution available for those crimes.
A bit of background: On December 2, 2008, Sarasota, Florida Attorney Alan E. Tannenbaum and I filed an emergency petition on behalf of Janis W. Stewart and 111 victims of a financial fraud committed by Philip William Coon. The petition challenged a ruling by U.S. District Judge Elizabeth A. Kovachevich on November 21, 2008, that these borrowers on loans from Coast Bank were not "crime victims" of Coon's criminal conspiracy because they were not specifically listed in the criminal charges against him. The petition contended that, because the borrowers suffered financial losses from the fraud, they were "crime victims" entitled to the protections of the federal Crime Victim's Rights Act, including the right to restitution. The petition cited documents showing that Coon received more than $1.1 million from his crime, which he used to buy overseas vacations, fine wine, expensive jewelry, a $20,000 piano, and other luxury items. The petition stated that "while Coon was enjoying the high life on his ill-gotten gains, the borrowers were all paying interest on the money financing it." The petition sought restitution for the borrowers.
The borrowers’ petition arose out of scheme by Coon to "skim points" off of residential mortgage loans. On November 5, 2008, Coon pled guilty to the scheme in U.S. District Court in Tampa. One hundred and twelve borrowers of these loans then filed a motion with Judge Kovachevich to be recognized as "victims" of his crime of conspiracy because they had to pay extra on their mortgages because of the crime. Judge Kovachevich denied the motion because the government's charges only specifically listed Coast Bank, Coon's employer, as the victim of the crime.
In a ruling released today, the Eleventh Circuit held that borrowers were protected “victims” under the Crime Victims Rights Act (CVRA) because they suffered financial harms because the became legally obligated to pay the point that Coon skimmed off the loan and had to pay interest on the point. The Eleventh Circuit stated: “The CVRA does not limit the class of crime victims to those whose identity constitutes an element of the offense or who happen to be identified in the charging document. . . . Under the plain language of the statute, a party may qualify as a victim, even though [he] may not have been the target of the crime, as long as [he] suffers harm as a result of the crime’s commission.”
The ruling is an important victory for crime victims. It means that all those who have been harmed by a financial crime are entitled to be protected in the federal criminal justice system. As a result, all such victims will be entitled to confer with the prosecutor on the charges, to obtain restitution for the crime, and to make a statement at sentencing about the proper punishment for the crime.
My co-counsel, Alan Tannebaum, has laid out the next steps in the case: “We intend to go back into district court and seek restitution for the victims who have been harmed by this crime. The defendant lived the high life through this crime, and the victims should not be left bearing the financial burden.”
Related Posts (on one page):
- All Those Harmed by a Federal Financial Crime Are "Victims" Protected by the Crime Victims' Rights Act
- Crime Victims Right Petition in the Eleventh Circuit
If no civil claims were likely to prevail, then I agree that this motion is an important victory.
If civil claims would likely prevail, what is the argument for making restitutions through the criminal justices system?
Pretty Please??
In addition, criminal restitution can be paid in small chunks for literally as long as the defendant is alive and the Court can place very tight controls on the defendant's ability to manage his finances. For instance, a typical restitution order will state that the defendant cannot open new lines or credit or liquidate any assets without the approval of the Probation Office unless it is in service of the restitution obligation.
My question for Judge Cassell is if he thinks his clients have a good chance of having restitution ordered. His clients' loss seems to be in the nature of "consequential damages" and not "direct damages." Every court to interpret the restitution statute, to my knowledge, has held that criminal restitution cannot be ordered for consequential damages.
For those who read a previous post regarding NCVLI, some clarification. NCVLI does work with a network of 8 pro bono legal clinics, which together have provided representation to more than 1,000 victims of crime in criminal cases nationwide. These are legally complex cases often involving issues of first impression – a daunting task but one that is leading to critical precedent helping thousands more victims. We also actively encourage of pro bono legal representation of victims so that more victims can have assistance. If each attorney out there (even each attorney that reads this) would take 1 pro bono case as Professor Cassell has done, victims would be better off, and the speed with which the contours of victims’ rights are defined would increase exponentially. NCVLI is happy to help for free any attorney willing to take a case for a victim! Just contact us!
I hope you’ll keep us posted on the next steps in this case.
Curt, if these "victims" were not likely to prevail in a civil claim, then why should a judge in the criminal case award them money anyway?
"As a consequence of the increase in the mortgage brokerage fee, therefore, petitioners became liable under their contract with the Bank for an extra one percent of their total loan, suffering direct and proximate harm."
As the court noted, "Under the plain language of the statute, a party may qualify as a victim, even though it may not have been the target of the crime, as long as it suffers harm as a result of the crime’s commission." But the "victims" suffered no harm as a result of the crime, which was the diversion of the portion of the fee; their "harm" was being charged the fee, which is no harm at all if they agreed to it--which they did.
Second, in many if not most instances, the victims in these cases fell victim first and foremost to their own greed, or at least their failure to recognize that when something sounds too good to be true, they need to walk away. In most cases that I've seen, prosecutors make defensible judgment calls about which victims should have a seat at the table. I'm disappointed that courts are willing to revoke their discretion on this important issue.
Under such circumstances, what makes these people "victims of a Federal crime"? More importantly, what makes them specifically victims of Mr. Coon (who should be presumed innocent of any crimes that might or might not have been committed)?
That the prosecutor chose to charge Mr. Coon with certain crimes cannot mean that people who assert they were harmed by whatever happened are automagically presumed to be "crime victims".
For example, to successfully intervene, the so-called "victims" surely have to produce evidence that they are, in fact, victims, and not random people off the street. For the court to decide whether that evidence proves that these people were in fact victims of Mr. Coon will, by definition, prejudice Mr. Coon's case beyond belief.
This is a valid criticism in general perhaps, but not in this case. I am not sure if you had followed the link, but in this case the victims attempted to intervene at Coon's guilty plea. That is, Coon admitted his guilt. Indeed, he even waived indictment by the grand jury and pleaded guilty to a one-count information as opposed to an indictment.
So in this case, your criticism does not bear out. There was a crime committed because Coon admitted there had been a crime committed.
In this particular case, note that letting these people intervene will harm the interest of the real victim (Mr. Coon's employer). For example, consider the problem of remitting the proceeds of the crime back to the victims.
Some amount of money (the additional 1% fee) was paid by the unfortunate borrowers to the bank. Mr. Coon then misappropriated this very same money from the bank. The bank will certainly argue that their property has been taken by Mr. Coon and he should give it back. By declaring the borrowers "victims", the court implicitly recognizes that this 1% money is theirs. Shall Mr. Coon be forced to return this 1% to the borrowers, and also to return the very same money to the bank? If not, then the trial court will have to decide who gets the reimbursement.
There is a clear dispute between the bank and the borrowers regarding this money: did the bank unfairly extract it from the borrowers via its agent Mr. Coon (say under a "they should have supervised him better" theory), or did the borrowers voluntarily agree to higher fees on their loans, and the bank can hold them to the contract. This dispute should certainly be resolved by a court -- but that should be in civil litigation between the two parties, not by Mr. Coon's criminal trial court!
In short, allowing victims to intervene in the penalty phase creates problems when the interests of different victims are adverse to each other. Having a criminal trial court resolve legal disputes between non-parties to a case seems rather absurd.
Again, that's not necessarily true. One can be a victim without being necessarily entitled to criminal restitution. Under CVRSA, a crime victim is anyone harmed as proximate cause of the criminal act, but only those who have suffered a loss of "property" are entitled to restitution.
In a simple case, say an assault, one can be a crime victim because he was hit, but not entitled to criminal restitution because he has no medical bills (which the CVRSA allows reimbursement for).
Being designated a crime victim allows certain procedural rights but does not guarantee restitution, though that is obviously what the victims here are seeking.
This all ties back to the question I asked up thread. Even if Prof. Cassel's clients are crime victims, I doubt they are entitled to restitution under CVRSA. Their losses are consequential damages, not direct damages, of the fraud, and CVRSA does not entitle the victims to recover consequential damages.
But I don't think the question is as unusual as Lior thinks it is. In white collar crime prosecutions, my understanding is that "what the loss amount is" and "what the restitution amount is" (which can be widely different numbers for a variety of reasons) as well as "who is restitution owed to?" is a common question. Indeed, stipulations as to loss amount and restitution amount often become the main negotiating point between the U.S. Attorney's office and defense counsel.
So while Lior is right to say this is a tricky issue in the case, I don't think the issue is rare or outside the scope of what we ask sentencing courts to normally do.
In reality, this decision will mean that defendants and AUSA's will have to be more careful in the charge bargaining process (which is how most federal cases are resolved). Crimes can be charged narrowly so as to minimize the number of "victims." It takes very little to get to very high punishments in the federal system, so it won't be too hard.
Bob
We have a system like that, its called the tort system.
Consider the perspective of the victim who has been given rights only to perceive that the prosecutor, defendant, and court conspire to deprive the victim of the victim’s right. How about your being told that your rights were violated and their was no remedy and there was no remedy for the deprivation of your rights. Check out Hoile v. State . If the same analysis was provide to defendants as it is often to victims that defendants do not have remedies when their rights are violated, then our Bill of Rights would be meaningless.
Quite frankly, we need more academics and attorneys to write and litigate to develop the case law around victims’ rights as well as courts like the 11th Circuit to act when rights are violated.
The lack of attorneys who can do what Professor Cassell did for the victims must be addressed. While there are many prosecutors and defense attorneys, how many of you can indicate the name of one attorney or case that you were involved where an attorney entered an appearance on behalf of a victim in a state or federal prosecution? Not many victims will have a highly respected former federal judge as their attorney. As we have victims rights as part of our federal and state laws, victims must have attorneys to ensure the rule of law applies to victims just as it applies to defendants.
If as a judge recently indicated regarding a victim’s right to be present at any hearing where the defendant has a right to be present, if that what the law means - it goes too far. The prosecutor, defense attorney, and judge cared less of a disabled victim’s right to be informed, present, and heard at a plea hearing regarding an attempted murder which left the victim paralyzed and incapacitated. One should in this country not ignore a law if you think it goes too far. Yet that is exactly what happens to many victims.
Many of us are proud of our justice system. In fact, we encourage others around the world to emulate our justice system. Perhaps many of those in the justice system ought to reevaluate their own beliefs regarding the rule of law to crime victims. The 11th Circuit opinion will perhaps start the reevaluation process for prosecutors, defense attorneys, and trial judges.
Thank you, Professor Cassell for your important leadership in this area.
Nothing changes if prosecutors and defense attorneys are smart. You just have to charge bargain the case. Victims have no right to have criminal charges brought, so prosecutors can control the cases that way. That's not "conspiring," that's just smart practice.
Federal prosecutors already are very selective in the cases they choose to prosecute (they leave a lot of cases to state prosecutors to deal with under state law). Having a long list of lawyered-up victims might actually be a deterrent to taking a case. It could also encourage prosecutors to pick charges that have fewer victims.
That said, even though victims should not be parties, they need to be shown more courtesy in the criminal justice system. Many prosecutors use and abuse victims to try to win a case, and then forget about them. I've found that I can sometimes form respectful relationships with victims just by showing basic courtesy. It's weird when the victims rely more on defense counsel than on the prosecutor.
And as I said before, defense counsel for other defendants on this prosecutors docket owe Professor Cassell a debt of gratitude. They will get slightly better deals because their prosecutor is that much busier.
Agreed. The real winners here are the white collar defendants who will now be undercharged (if they are charged at all) and, of course, Prof. Cassel, who seems to be having more success with this latest crusade than with his effort to overturn Miranda.
Actually, we already do. They're called plaintiffs' lawyers. They're in the yellow pages everywhere. Cassell is no more or less noble than the plaintiff's lawyers suing businesses and other wrongdoers every day. He just has the government pick up part of the tab. And this is a libertarian blog?
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