United States v. Vaknin
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Opinion
USCA1 Opinion
UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
_________________________
No. 96-1394
UNITED STATES OF AMERICA,
Appellee,
v.
MOSHE VAKNIN,
Defendant, Appellant.
_________________________
No. 96-1393
UNITED STATES OF AMERICA,
Appellee,
v.
E. ERIC YEGHIAN,
Defendant, Appellant.
_________________________
No. 96-1373
UNITED STATES OF AMERICA,
Appellee,
v.
MICHAEL J. FONSECA,
Defendant, Appellant.
_________________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Francis J. Boyle, Senior U.S. District Judge] __________________________
_________________________
Before
Selya, Circuit Judge, _____________
Bownes, Senior Circuit Judge, ____________________
and Stahl, Circuit Judge. _____________
_________________________
Mark J. Gillis, by appointment of the court, for appellant ______________
Vaknin.
C. Leonard O'Brien for appellant Yeghian. __________________
John A. MacFadyen for appellant Fonseca. _________________
Ira Belkin, Assistant United States Attorney, with whom __________
Sheldon Whitehouse, United States Attorney, and Margaret E. ___________________ ____________
Curran, Assistant United States Attorney, were on brief, for the ______
United States.
________________________
May 6, 1997
_________________________
SELYA, Circuit Judge. These consolidated appeals SELYA, Circuit Judge. ______________
raise, inter alia, an interesting question anent the standard of _____ ____
causation that courts must apply in fashioning restitutionary
orders under the Victim and Witness Protection Act (VWPA), 18
U.S.C. 3663(a), 3664(a) (1994). The appeals arise out of a
multi-count indictment: each of the three appellants bribed the
same bank official in connection with the making of loans; some
of the loans soured; the bank failed; and the Federal Deposit and
Insurance Corporation (FDIC) was left holding an empty bag. When
the appellants pled guilty to criminal charges, the district
court imposed sentences which included orders of restitution to
cover what the court considered to be the attributable losses.
The appellants now challenge these impositions, and, in
addition, one appellant, citing his cooperation with the
prosecution, assails the district court's refusal to depart
downward from the guideline sentencing range (GSR). We affirm
the court's eschewal of a downward departure, uphold one
restitutionary order (albeit with a modest modification), vacate
the other two, and remand for further findings.
I. AN HISTORICAL PERSPECTIVE I. AN HISTORICAL PERSPECTIVE
Compulsory restitution as a societal response to
criminal wrongdoing dates back over 4,000 years to the Code of
Hammurabi and the Old Testament. See, e.g., Exodus 22:1-3 ("If a ___ ____ ______
man shall steal . . . he should make full restitution."). In its
earliest iterations, the practice was designed to forfend against
the high social costs of blood feuds and the wreaking of personal
3
vengeance by compensating victims in a more civilized way. See ___
generally Thomas M. Kelly, Note, Where Offenders Pay for Their _________ ______________________________
Crimes: Victim Restitution and Its Constitutionality, 59 Notre _______________________________________________________
Dame L. Rev. 685, 686-88 (1984). By the Middle Ages, however,
the sovereign had begun to administer the criminal law directly,
and criminal restitution fell into desuetude. See id. The ___ ___
device remained moribund for several centuries. In the United
States, for example, federal judges were not able to impose
criminal restitution as a condition of probation until 1925 when
Congress passed the Federal Probation Act, 18 U.S.C. 3651
(repealed 1984). Even then, judges used the power sparingly.
See Peggy M. Tobolowsky, Restitution in the Federal Criminal ___ _____________________________________
Justice System, 77 Judicature 90, 90-91 (1993). ______________
The tectonic plates shifted in 1982 when Congress
enacted the VWPA in response to a growing cognizance of victims'
rights. Notable for the speed of its election-year passage the
legislation was introduced in the Senate on April 22, 1982, and
signed into law by President Reagan less than six months later
the VWPA transmogrified criminal restitution from a sporadically
imposed condition of probation into the sentencing norm in cases
involving quantifiable economic loss.
The congressional purpose that animated the VWPA is no
secret: "the court in devising just sanctions for adjudicated
offenders, should insure that the wrongdoer make good[], to the
degree possible, the harm he has caused his victim." S. Rep. No.
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USCA1 Opinion
UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
_________________________
No. 96-1394
UNITED STATES OF AMERICA,
Appellee,
v.
MOSHE VAKNIN,
Defendant, Appellant.
_________________________
No. 96-1393
UNITED STATES OF AMERICA,
Appellee,
v.
E. ERIC YEGHIAN,
Defendant, Appellant.
_________________________
No. 96-1373
UNITED STATES OF AMERICA,
Appellee,
v.
MICHAEL J. FONSECA,
Defendant, Appellant.
_________________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Francis J. Boyle, Senior U.S. District Judge] __________________________
_________________________
Before
Selya, Circuit Judge, _____________
Bownes, Senior Circuit Judge, ____________________
and Stahl, Circuit Judge. _____________
_________________________
Mark J. Gillis, by appointment of the court, for appellant ______________
Vaknin.
C. Leonard O'Brien for appellant Yeghian. __________________
John A. MacFadyen for appellant Fonseca. _________________
Ira Belkin, Assistant United States Attorney, with whom __________
Sheldon Whitehouse, United States Attorney, and Margaret E. ___________________ ____________
Curran, Assistant United States Attorney, were on brief, for the ______
United States.
________________________
May 6, 1997
_________________________
SELYA, Circuit Judge. These consolidated appeals SELYA, Circuit Judge. ______________
raise, inter alia, an interesting question anent the standard of _____ ____
causation that courts must apply in fashioning restitutionary
orders under the Victim and Witness Protection Act (VWPA), 18
U.S.C. 3663(a), 3664(a) (1994). The appeals arise out of a
multi-count indictment: each of the three appellants bribed the
same bank official in connection with the making of loans; some
of the loans soured; the bank failed; and the Federal Deposit and
Insurance Corporation (FDIC) was left holding an empty bag. When
the appellants pled guilty to criminal charges, the district
court imposed sentences which included orders of restitution to
cover what the court considered to be the attributable losses.
The appellants now challenge these impositions, and, in
addition, one appellant, citing his cooperation with the
prosecution, assails the district court's refusal to depart
downward from the guideline sentencing range (GSR). We affirm
the court's eschewal of a downward departure, uphold one
restitutionary order (albeit with a modest modification), vacate
the other two, and remand for further findings.
I. AN HISTORICAL PERSPECTIVE I. AN HISTORICAL PERSPECTIVE
Compulsory restitution as a societal response to
criminal wrongdoing dates back over 4,000 years to the Code of
Hammurabi and the Old Testament. See, e.g., Exodus 22:1-3 ("If a ___ ____ ______
man shall steal . . . he should make full restitution."). In its
earliest iterations, the practice was designed to forfend against
the high social costs of blood feuds and the wreaking of personal
3
vengeance by compensating victims in a more civilized way. See ___
generally Thomas M. Kelly, Note, Where Offenders Pay for Their _________ ______________________________
Crimes: Victim Restitution and Its Constitutionality, 59 Notre _______________________________________________________
Dame L. Rev. 685, 686-88 (1984). By the Middle Ages, however,
the sovereign had begun to administer the criminal law directly,
and criminal restitution fell into desuetude. See id. The ___ ___
device remained moribund for several centuries. In the United
States, for example, federal judges were not able to impose
criminal restitution as a condition of probation until 1925 when
Congress passed the Federal Probation Act, 18 U.S.C. 3651
(repealed 1984). Even then, judges used the power sparingly.
See Peggy M. Tobolowsky, Restitution in the Federal Criminal ___ _____________________________________
Justice System, 77 Judicature 90, 90-91 (1993). ______________
The tectonic plates shifted in 1982 when Congress
enacted the VWPA in response to a growing cognizance of victims'
rights. Notable for the speed of its election-year passage the
legislation was introduced in the Senate on April 22, 1982, and
signed into law by President Reagan less than six months later
the VWPA transmogrified criminal restitution from a sporadically
imposed condition of probation into the sentencing norm in cases
involving quantifiable economic loss.
The congressional purpose that animated the VWPA is no
secret: "the court in devising just sanctions for adjudicated
offenders, should insure that the wrongdoer make good[], to the
degree possible, the harm he has caused his victim." S. Rep. No.
532, at 31 (1982), reprinted in 1982 U.S.C.C.A.N. 2515, 2536. To _________ __
4
accomplish this purpose, a district court, when pronouncing
sentence, "may order, in addition to . . . any other penalty
authorized by law, that the defendant make restitution to any
victim of such offense." 18 U.S.C. 3663(a). In determining
whether to award restitution (and, if so, in what amount), the
sentencing court "shall consider the amount of the loss sustained
by any victim as a result of the offense, the financial resources
of the defendant, the financial needs and earning ability of the
defendant and the defendant's dependents, and such other factors
as the court deems appropriate." Id. at 3664(a). ___
In general, restitution under the VWPA is limited to
"the loss caused by the specific conduct that is the basis of the
offense of conviction." Hughey v. United States, 495 U.S. 411, ______ _____________
413 (1990).1 When the fact, cause, or amount of the loss is
____________________
1The defendant in Hughey had used credit cards in an ______
unauthorized manner, and the Court limited restitution to the
loss attributable to the lone count on which he had pled guilty
(as opposed to the total loss from all his fraudulent conduct).
Congress reacted by amending the VWPA in November of 1990, adding
3663(a)(2) [the former 3663(a) became 3663(a)(1), but its
substance remained essentially unchanged]. This amendment
provides that "a victim of an offense that involves as an element
a scheme, a conspiracy, or a pattern of criminal activity means
any person directly harmed by the defendant's criminal conduct in
the course of the scheme, conspiracy, or pattern." As we
explained in United States v. Hensley, 91 F.3d 274, 276-77 (1st _____________ _______
Cir. 1996), restitution for all criminal conduct done in the
course of a single scheme, conspiracy, or pattern of activity is
now appropriate, whether or not the defendant has been convicted
of (or even charged with) the specific acts, as long as the
offense of conviction has as an element the broader scheme,
conspiracy, or pattern.
There are two reasons why the 1990 amendment has no bearing
here. In the first place, the criminal conduct of which the
appellants stand convicted occurred prior to the date of the
amendment. Thus, the pre-1990 version of the VWPA governs our
inquiry. See United States v. Royal, 100 F.3d 1019, 1032 (1st ___ _____________ _____
5
disputed, the government must establish it by a preponderance of
the evidence. See United States v. Baker, 25 F.3d 1452, 1454-55 ___ _____________ _____
(9th Cir. 1994); United States v. Diamond, 969 F.2d 961, 967 _____________ _______
(10th Cir. 1992); see also 18 U.S.C. 3664(d). ___ ____
II. THE FACTUAL PREDICATE II. THE FACTUAL PREDICATE
We present the facts relevant to these appeals as best
they have presented themselves, mindful that the record is
noticeably underdeveloped.
Kenneth Annarummo was a bad apple. While working as a
loan officer for Attleboro-Pawtucket Savings Bank (APSB or the
Bank), he solicited and accepted bribes from numerous customers.
Annarummo's skulduggery came to light after the Bank failed and
the FDIC intervened. In due course, the government indicted
Annarummo and several complicit borrowers, including appellants
Moshe Vaknin, Michael J. Fonseca, and E. Eric Yeghian (all real
estate developers).2 We recount the circumstances of each
appellant's involvement.
A. Vaknin's Troubles. A. Vaknin's Troubles. _________________
Vaknin first approached APSB in 1987, seeking to
refinance several properties. Informed by Annarummo that his
request for funds would be facilitated if he greased the wheels,
____________________
Cir. 1996); United States v. Gilberg, 75 F.3d 15, 20-21 (1st Cir. _____________ _______
1996). In the second place, the offenses of conviction here do
not have as an element any broader scheme, conspiracy, or
pattern.
2Annarummo eventually pled guilty to three counts of bank
bribery, 18 U.S.C. 215 (1994), and one count of subscribing to
a false tax return, 26 U.S.C. 7206(1) (1994).
6
Vaknin paid Annarummo $17,500 and thereafter received the loan.
In 1988, Vaknin sought to borrow more money and Annarummo again
asked for a bribe in exchange for his assistance in getting the
loan underwritten. Vaknin paid him $12,500 prior to securing
loan approval. This sequence repeated itself later that same
year, when Vaknin slipped Annarummo another bribe and secured a
third loan (which was approved by the bank after a series of
machinations in which Annarummo presented false information to
the credit committee). Although Vaknin repaid the initial
refinancing in full, he defaulted on both the 1988 loans and the
Bank sustained losses in excess of $900,000.
When indicted, Vaknin pled guilty to a single count of
bank bribery. See 18 U.S.C. 215 (1994). The Presentence ___
Investigation Report (PSI Report) did not recommend restitution.
In response to the prosecution's objection, the probation officer
explained:
[I]t is not clear as to whether the
losses incurred by the bank were a direct
result of a fraudulent loan being negotiated
as a result of the bank bribery or whether
the losses were attributable to other
factors, such as a downturn in the economy
which affected the real estate market.
At the disposition hearing, Judge Boyle sentenced
Vaknin to an incarcerative term of twelve months and one day, two
years' supervised release, and a $50 special assessment. On the
restitution issue, the judge sided with the prosecution;
concluding that there would have been no funds advanced if the
bribes had not been paid, the judge held Vaknin liable for the
7
losses resulting from the defaulted loans, rejected the probation
officer's "downturn in the economy" hypothesis, and ordered
Vaknin to pay restitution to the FDIC in the sum of $1,000,000.
B. Fonseca's Troubles. B. Fonseca's Troubles. __________________
By the time Annarummo arrived on the scene, Fonseca was
a valued customer of the Bank, having roughly $750,000 in
outstanding loans. This debt had been incurred through normal
channels and without subterfuge, mostly in connection with
single-family residential properties in Rhode Island. Annarummo
made no immediate demands on Fonseca, and Fonseca succeeded in
securing additional financing through APSB.
In 1987, Fonseca encountered business difficulties and
became fearful that he would not be able to meet the repayment
schedule on an outstanding APSB note. When he voiced concern to
Annarummo, the banker demanded a bribe for his help in warding
off trouble should a default ensue. Fonseca paid Annarummo
$3,000 but proved able to meet his payment obligation on time and
in full.
In 1988, Fonseca applied for a $4,250,000 loan to cover
the development of a much larger project than he had ever tackled
a subdivision of more than 50 lots in Bristol, Rhode Island.
The record suggests (though it does not pin down) that, after
approval of the loan request but prior to its disbursement,
Annarummo demanded one of the lots as a bribe. Fonseca
acquiesced and transferred title to Annarummo's nominee, leaving
one less lot as security for APSB's loan.
8
The Bank terminated Annarummo's employment in March
1990. Fonseca's subdivision loan (which had a remaining
principal balance of $611,500) was then 30 days in arrears, and
Annarummo's successor recommended foreclosure. Fonseca
negotiated with APSB (which knew nothing of the bribes), and the
parties agreed to enter into a forbearance agreement (FA) under
which Fonseca would make a lump-sum payment of $450,000 in full
satisfaction of the outstanding indebtedness. Fonseca tendered
the funds within the agreed 35-day period. In time, the Bank
failed, the FDIC intervened, the bribes were discovered, and the
indictment materialized.
Fonseca pled guilty to a single count of bank bribery.
The district court sentenced him to serve twelve months and one
day in prison and a three-year term of supervised release. The
court also imposed a $5,000 fine and a $50 special assessment.
The matter of restitution proceeded much as in Vaknin's case.
The probation officer recommended against a restitutionary
impost; the prosecution objected; and the district judge
sustained the objection, ordering Fonseca to make restitution in
the sum of $161,500 (the difference between the loan balance and
the amount that Fonseca paid pursuant to the FA).
C. Yeghian's Troubles. C. Yeghian's Troubles. __________________
Yeghian, a newcomer to APSB, applied for a loan of
$2,930,000 in 1988 to fund the purchase of real property located
in Providence, Rhode Island. Annarummo demanded a bribe of
$20,000 (although the record is tenebrous as whether he
9
approached Yeghian before or after the loan had been approved).
In any event, Yeghian, using a corrupt lawyer as an internuncio,
paid the bribe out of the loan proceeds.
Later that same year, Yeghian sought a loan of
$1,400,000 to acquire and develop a parcel of real estate in
Seekonk, Massachusetts. Once again, Annarummo demanded a bribe
and received $22,909.52.3 Both loans turned sour. The Bank's
demise, the FDIC's entry onto the scene, the deterration of the
bribes, and the indictment followed.
Yeghian pled guilty to one count of bank bribery. At
sentencing, Judge Boyle imposed a ten-month prison sentence, a
three-year supervised release term, a $10,000 fine, and a $50
special assessment. Rejecting a recommendation contained in the
PSI Report, the judge ordered Yeghian to pay restitution in the
sum of $2,213,654.74.
III. THE DEPARTURE DECISION III. THE DEPARTURE DECISION
Vaknin challenges the incarcerative portion of his
sentence. The salient facts are as follows. The court sentenced
Vaknin under the 1988 edition of the federal sentencing
guidelines. The court figured the GSR as 8-14 months (adjusted
offense level 11; criminal history category I), and this
calculation is not in dispute. At the time of sentencing, the
government asked the court to depart downward because Vaknin had
made a good faith effort to render substantial assistance. See ___
____________________
3The odd amount stems from the fact that the bribe took the
form of a payment by Yeghian to liquidate an outstanding loan
encumbering Annarummo's Porsche.
10
USSG 5K1.1 ("Upon motion of the government stating that the
defendant has made a good faith effort to provide substantial
assistance in the investigation or prosecution of another person
who has committed an offense, the court may depart from the
guidelines."). For his part, Vaknin solicited an even more
generous departure. Nevertheless, departure decisions are
entrusted primarily to the courts, and the sentencing judge's
role cannot be usurped by agreements between the prosecutor and
the defendant. See United States v. Mariano, 983 F.2d 1150, 1154 ___ _____________ _______
n.3, 1155-56 (1st Cir. 1993). Exercising this authority, the
court refused to impose a sentence below the GSR. Vaknin assigns
error.
Vaknin's claim of error is doubly flawed. The short,
entirely dispositive answer to it is that he stakes out his
position in a perfunctory manner. For that reason, the argument
is deemed waived. See, e.g., United States v. Tardiff, 969 F.2d ___ ____ _____________ _______
1283, 1287 (1st Cir. 1992); United States v. Zannino, 895 F.2d 1, _____________ _______
17 (1st Cir. 1990).
The slightly longer but equally dispositive answer is
that, in the main, departure decisions are discretionary, and
appellate review of refusals to depart is tightly circumscribed.
See Koon v. United States, 116 S. Ct. 2035, 2046-47 (1996); Bruce ___ ____ _____________
M. Selya & Matthew Kipp, An Examination of Emerging Departure ______________________________________
Jurisprudence Under the Federal Sentencing Guidelines, 67 Notre ______________________________________________________
Dame L. Rev. 1, 13-14 (1991). Jurisdiction will only attach
"when it appears that the failure to depart stemmed from the
11
sentencing court's mistaken impression that it lacked the legal
authority to depart or, relatedly, from the court's
misapprehension of the rules governing departure." Mariano, 983 _______
F.2d at 1153. No such bevue occurred here.
To be sure, Vaknin labors to find a cognizable error.
In this vein, he contends that the district court believed itself
unable to depart downward because Vaknin had not provided
information about his fellow borrowers' criminal activities but
only about the bribe-taker's criminal activities. He builds this
contention on scraps drawn from counsel's colloquy with the judge
at the disposition hearing. But an appellate court, seeking to
ascertain a sense of what transpired at sentencing, must look to
the whole of the record rather than isolated snippets extracted
from it. See, e.g., United States v. Santiago, 83 F.3d 20, 25 ___ ____ ______________ ________
(1st Cir. 1996); United States v. Rostoff, 53 F.3d 398, 407 (1st _____________ _______
Cir. 1995); cf. United States v. Tavano, 12 F.3d 301, 304 (1st ___ _____________ ______
Cir. 1993). Applying this tenet here, the record, read as a
seamless whole, belies Vaknin's contention.
We need not tarry. The sentencing transcript shows
with pristine clarity that Judge Boyle knew he could depart once
the government invoked USSG 5K1.1, but chose instead to impose a
sentence within the GSR. As we read the record, his reasons for
demurring were clear and entirely permissible. In his view,
Vaknin's cooperation had been adequately rewarded because (a) the
government had prosecuted only one count of bribery despite the
fact that Vaknin had paid multiple bribes referable to separate
12
borrowings, and (b) Vaknin's offense level (and, hence, the GSR)
already had been reduced for acceptance of responsibility under
USSG 3E1.1.
The transcript also reveals that the court weighed the
quintet of factors under which a substantial assistance motion
must be evaluated: the nature and extent of the assistance
provided; its significance and utility to the prosecution; its
timeliness; the truthfulness and reliability of the information
conveyed; and the injury to, or risk exposure of, the defendant
resulting from his cooperation. See Mariano, 983 F.2d at 1156 ___ _______
(enumerating factors and explaining that "[a] district court,
faced with a section 5K1.1 motion, must at a bare minimum
indicate its cognizance of these factors"). After mulling these
and other relevant considerations, the court determined that,
under the specific circumstances of Vaknin's case, no departure
was warranted. Such a decision is quintessentially a judgment
call, and, thus, within the sentencing court's discretion. See ___
Tardiff, 969 F.2d at 1290. Consequently, we lack both the _______
authority to second-guess the departure decision and the
inclination to do so.
IV. THE CAUSATION QUANDARY IV. THE CAUSATION QUANDARY
All three appellants challenge the district court's
restitutionary orders. Those challenges are similar insofar as
they implicate the standard of causation. Therefore, we treat
them in the ensemble to that extent.
A. Standard of Review. A. Standard of Review. __________________
13
Restitution orders customarily are reviewed under an
abuse of discretion rubric. See United States v. Hensley, 91 ___ _____________ _______
F.3d 274, 277 (1st Cir. 1996). In the course of this review, the
sentencing court's subsidiary factual findings must be credited
unless they are clearly erroneous. See id. To the extent that a ___ ___
challenge to a restitution order hinges on a legal question,
however, the sentencing court's answer to that question is
reviewed de novo. See United States v. Gilberg, 75 F.3d 15, 20 ___ _____________ _______
(1st Cir. 1996); United States v. Savoie, 985 F.2d 612, 619 (1st _____________ ______
Cir. 1993). The appellants' allegation that the district judge
employed an improper legal standard of causation presents such a
question.
B. The Legal Landscape. B. The Legal Landscape. ___________________
The level of causation required under the VWPA is not
immediately apparent, and the parties' views on the subject are
sharply divergent. The appellants advance a theory of "direct"
causation, exhorting us to rule that restitution can be imposed
only if the victim's losses result directly from the offense of
conviction and therefore that restitution cannot be imposed when
an intervening phenomenon (e.g., a collapsing real estate market)
is the more immediate cause of the loss.4 Transposed into the
m tier of this case, the appellants' theory seemingly would
require the government to eliminate the possibility of concurrent
____________________
4While the appellants profess to know direct causation when
they see it, they have been unable either to muster a
comprehensive definition of the term or to suggest a viable
limiting principle. The government's arguments in support of but
for causation, see infra, suffer from much the same vice. ___ _____
14
causes and prove that the FDIC's losses occurred as a direct
result of the bribes that Annarummo solicited and received. The
government cannot do so, the appellants posit, because stimuli
unrelated to the bribes, such as intervening market forces,
caused the ultimate losses.
The government's counter-argument is that "but for"
causation suffices; it urges us to rule that restitution can be
imposed as long as the victim's losses would not have eventuated
but for the criminal activity. But for the bribes, this thesis
runs, there would have been no loans, without which there would
have been no losses. In this very general sense, the bribes
caused the losses and that, to the government's way of
thinking, is enough.
The appellants' rejoinder is twofold. First, they
debunk the legal standard articulated by the government. Second,
they say that even if this articulation accurately reflects the
state of the law, it does not justify the district court's
restitutionary orders. On the appellants' shared hypothesis, the
loans would have issued whether or not the bribes were
forthcoming; thus, the Bank would have incurred the losses even
if the appellants had played it straight.
The parties' positions stand at opposite ends of a
continuum. Our effort to determine where on the continuum the
correct legal standard is housed starts with the language of the
VWPA itself. Section 3663(a) authorizes restitution to "any
victim" for a covered offense. This provision must be read in
15
tandem with section 3664(a), which directs the sentencing court
to consider "the amount of the loss sustained by any victim as a
result of the offense." For purposes of this case, see supra ___ _____
note 1, restitution is appropriate only for "the loss caused by
the specific conduct that is the basis of the offense of
conviction." Hughey, 495 U.S. at 413. ______
Since the text of the VWPA does not speak explicitly to
the dimensions of the requisite standard of causation,5 we must
consult other sources in our quest to discover it. Next on the
list is legislative history. This material, like the statute
itself, does not specifically limn the standard of causation.
Nonetheless, it offers some important insights.
In enacting the VWPA, Congress strove to encourage
greater use of a restitutionary remedy. See S. Rep. No. 532, ___
supra, 1982 U.S.C.C.A.N. at 2536-37. At the same time, it _____
____________________
5Though the amended version of the VWPA does not apply to
this case, see supra note 1, the appellants asseverate that the ___ _____
amendment's use of the adverb "directly" heralds Congress' intent
vis- -vis the type of causation that it envisioned. We do not
agree. The legislative history of the 1990 amendment plainly
indicates that the language employed, albeit containing the word
"directly," does not support the appellants' theory of causation.
As Congress explained:
The use of "directly" precludes, for example,
an argument that a person has been harmed by
a financial institution offense that results
in a payment from the insurance fund because,
as a taxpayer, a part of a person's taxes go
to the insurance fund.
H.R. Rep. No. 681(I), at 177 n.8 (1990), reprinted in 1990 _________ __
U.S.C.C.A.N. 6472, 6583 n.8. This definition ranges far afield
from the definition of direct that the appellants tout. Thus, we
conclude that the 1990 amendment did not alter the standard of
causation applicable to VWPA cases.
16
disclaimed any intent to convert the main event the sentencing
hearing into a time-consuming sideshow prolonged litigation
over restitution-related issues. This disclaimer was made
manifest in a variety of ways. For example, rather than
requiring great precision in fixing the amount of restitution
due, Congress visualized the VWPA as "authoriz[ing] the court to
reach an expeditious, reasonable determination of appropriate
restitution by resolving uncertainties with a view towards
achieving fairness to the victim." Id. at 2537. ___
In short, the legislative history clearly signals a
congressional preference for rough remedial justice, emphasizing
victims' rights. In our view, this preference counsels against
importing a stringent standard of causation (such as might be
appropriate in a tort context) into the VWPA.
Of course, rough remedial justice does not mean leaving
matters to the whim of the sentencing judge, and Congress did not
conceive of restitution as being an entirely standardless
proposition. The government must bear the burden of establishing
the loss, 18 U.S.C. 3664(d), and an award cannot be woven
solely from the gossamer strands of speculation and surmise. See ___
United States v. Neal, 36 F.3d 1190, 1200-01 (1st Cir. 1994). By _____________ ____
like token, just as insisting upon a modicum of reliable evidence
reinforces the specific advantages of the restitutionary remedy,
so too does insisting upon a certain degree of causal precision.
As the Supreme Court has noted, demanding a "direct relation
between the harm and the punishment gives restitution a more
17
precise deterrent effect than a traditional fine." Kelly v. _____
Robinson, 479 U.S. 36, 49 n.10 (1986). ________
Finding the legislative history suggestive rather than
compelling, we examine the caselaw. In previous decisions, this
court has remarked the broad policy goals of the VWPA and
concluded that difficulty in achieving an exact measurement of
victim loss should not preclude the imposition of restitution.
See Savoie, 985 F.2d at 617. On the subject of causation, ___ ______
however, our decisions have tended to involve either situations
in which the closeness of the causal link could not seriously be
questioned, see, e.g., United States v. Lilly, 80 F.3d 24, 28 ___ ____ _____________ _____
(1st Cir. 1996), or those in which we found restitution to have
been ordered in contravention of Hughey, see, e.g., United States ______ ___ ____ _____________
v. Newman, 49 F.3d 1, 11 (1st Cir. 1995). Neither polar extreme ______
brings much light to the vexing issue which these appeals
present.
Neal is the only notable exception to this taxonomy. ____
That case featured a defendant who had been found guilty both of
being an accessory after the fact to a bank robbery and of
laundering funds. The district court imposed a restitutionary
award that equalled the bank's entire loss from the thievery. We
vacated the award, noting that it could not be determined on the
sparse record available "whether the court calculated, pursuant
to Hughey, the portion of [the bank's] losses that were actually ______
caused by the specific criminal conduct forming the basis for
Neal's convictions." 36 F.3d at 1200 (italics omitted). We
18
instructed the district court, on remand, to hold a hearing on
the causation issue and modify the award to the extent that any
portion of the loss was not "attributable to" Neal's criminal
conduct. Id. at 1201. In dictum, we cautiously suggested that ___
some varietal of but for causation might suffice. See id. at ___ ___
1201 n.10 ("If . . . evidence is presented indicating that Neal
played a significant role in helping the other defendants escape
and that but for his actions, there was a substantial likelihood
that the full proceeds would have been recovered, the court could
well be within its statutory authority in imposing the full
[restitutionary amount]."). Thus, circuit precedent furnishes a
weak indication that but for causation can suffice under the
VWPA.
Reading the out-of-circuit cases is like attending a
bar association meeting in a small town; one can find congenial
cases, like friendly faces in the crowd, to support almost any
standard of causation for the VWPA. We have found decisions
which appear at least superficially to reject but for causation
in favor of a "direct result" standard. See, e.g., United States ___ ____ _____________
v. Silkowski, 32 F.3d 682, 689-90 (2d Cir. 1994); Ratliff v. _________ _______
United States, 999 F.2d 1023, 1026-27 (6th Cir. 1993). By ______________
contrast, we have found decisions which seem to accept
unqualified but for causation as sufficient under the VWPA. See, ___
e.g., United States v. Keith, 754 F.2d 1388, 1393 (9th Cir. ____ ______________ _____
1985); United States v. Richard, 738 F.2d 1120, 1122-23 (10th _____________ _______
Cir. 1984). We have found decisions which straddle the question,
19
see Government of the Virgin Islands v. Davis, 43 F.3d 41, 46 (3d ___ ________________________________ _____
Cir. 1994) (seemingly endorsing, in a single paragraph, both but
for and direct causation), and those which confess confusion on
the issue, see United States v. Cloud, 872 F.2d 846, 856 n.13 ___ _____________ _____
(9th Cir. 1989) (acknowledging "a conflict in this circuit
regarding the nexus the government must establish between the
defendant's criminal conduct and the victim's losses to support a
VWPA restitution order").
C. Choosing a Standard. C. Choosing a Standard. ___________________
Upon close perscrutation, the extreme positions
advocated by the parties do not hold out much promise in our
quest for a serviceable standard of causation.
On the one hand, the sort of direct causation standard
that the appellants propose is simply too rigid. Under their
theory of intervening forces, a court could not impose
restitution even if the defendant's conduct were a substantial
cause of a loss, unless it were the last cause. Such a standard
would flout the basic purpose of the VWPA.6 In our judgment,
Congress did not contemplate such adamantine formalism when it
moved to expand the availability of restitutionary remedies by
____________________
6Imagine a situation in which D, a convicted felon who is
carrying a handgun, is speeding down a highway, fleeing from the
authorities. D's car slams into an unregistered automobile, with
defective brakes, owned and operated by Stranger (S), causing S
to swerve and hit V, who suffers severe injuries. D is then
prosecuted for reckless endangerment and found guilty. S's
miscreancy should not preclude a court from ordering D to make
restitution for V's medical expenses. Yet the appellants' theory
would erect just such a barrier.
20
enacting the VWPA. See S. Rep. No. 532, supra, 1982 U.S.C.C.A.N. ___ _____
at 2537.
On the other hand, concerns of fairness require us to
reject the unbridled but for causation standard that the
government propounds. Under it, a court could impose restitution
based on the most tenuous of connections.7 While it is true that
for want of a nail the kingdom reputedly was lost, cf. Benjamin ___
Franklin, Poor Richard's Almanac (1758), it could hardly have _______________________
been Congress' intent to place the entire burden on the
blacksmith if the nail was an insignificant factor in the
calculus of concurrent causes. Such a result would countervail
principles of fundamental fairness and, in the bargain, would be
at odds with the majority of reported cases. See, e.g., United ___ ____ ______
States v. Holley, 23 F.3d 902, 914-15 (5th Cir. 1994); United ______ ______ ______
States v. Tyler, 767 F.2d 1350, 1351-53 (9th Cir. 1985). ______ _____
Having rejected the parties' proposals, it falls to us
to fashion the appropriate legal standard. Despite the gaps in
the statute and in its legislative history, and notwithstanding
the contradictions that permeate the cases, we think it is
possible to distill certain bedrock principles from the sources
____________________
7Imagine a situation similar to that described in note 6,
supra; but, instead of being prosecuted for a vehicular offense, _____
D is charged with and convicted of being a felon in possession of
a handgun. While but for causation may be present after all,
but for his unlawful possession of a weapon, D would have had no
occasion to flee from the authorities, and, thus, would not have
been careening down the road and would not have precipitated the
accident it is hard to make a principled argument that the
offense of conviction (felon in possession) supports an order
against D to make restitution for V's medical expenses. Yet the
government's theory ordains just such a result.
21
that we have consulted.
First: Restitution should not be ordered in respect to First: _____
a loss which would have occurred regardless of the defendant's
conduct. A good illustration of this principle in operation is
found in United States v. Blackburn, 9 F.3d 353 (5th Cir. 1993). _____________ _________
There, the sentencing court included foreclosure expenses in
calculating the amount of restitution due. The Fifth Circuit
reversed, citing proof that the foreclosure would have happened
even if the defendant had not committed the crime. See id. at ___ ___
359; see also United States v. Walker, 896 F.2d 295, 305-06 (8th ___ ____ _____________ ______
Cir. 1990) (holding that when defendants, who owned a company,
defrauded the United States, restitution to laid-off company
employees was improper because the record failed to show that the
fraud caused the company to cease operations).
Second: Even if but for causation is acceptable in Second ______
theory, limitless but for causation is not. Restitution should
not lie if the conduct underlying the offense of conviction is
too far removed, either factually or temporally, from the loss.
We offer two examples of remoteness in fact. The first arises in
a case that bears some similarity to the instant case.
In Diamond, 969 F.2d at 963-64, the defendant pled _______
guilty to filing false financial reports with a lender. The loan
had already been made before Diamond authored the reports, but
the reports apparently helped in obtaining an extension. The
loan proved uncollectible. The sentencing court ordered the
defendant to make restitution, reasoning that the loss stemmed
22
from the false reports. The court of appeals refused to equate
the extension of an existing loan with the granting of the loan
in the first place, and negated the restitutionary order because
there was no proof that the extension worsened the lender's
position. See id. at 966. ___ ___
A somewhat different example of factual remoteness is
found in United States v. Sablan, 92 F.3d 865 (9th Cir. 1996). _____________ ______
There, the defendant had been convicted of computer fraud. The
district court ordered restitution for expenses incurred by the
victim in meeting with investigators to discuss the case. The
Ninth Circuit struck these amounts from the award, ruling that
the expenses were not connected closely enough to the fraudulent
conduct. See id. at 870; see also United States v. Kenney, 789 ___ ___ ___ ____ _____________ ______
F.2d 783, 784 (9th Cir. 1986) (invalidating that portion of a
restitution order which was designed to reimburse the corporate
victim for the cost of having its employees testify at the
defendant's trial, but upholding that part of the order
encompassing the cost of removing film chronicling the robbery
from the bank's surveillance cameras).
Typical of the situations in which but for causation
existed but restitution was denied because the claimed losses
were temporally remote is Holley, in which the court deemed ______
restitution improper when the victim, who received foreclosure
property from the defendant in the course of the criminal
activity, unnecessarily held onto the property for a lengthy
interval after the crime was discovered, and the property
23
declined in value during that period. 23 F.3d at 914-15.
Similarly, in Tyler, the defendant cut down a tree in a national _____
forest and was apprehended as he tried to take it to a nearby
lumber mill. 767 F.2d at 1351. The government retained the
lumber, needlessly, for a long period of time, then sold it in a
fallen market for considerably less than it would have fetched if
sold promptly. See id. The district court ordered restitution, ___ ___
pegging the loss by reference to the reduced price. The
appellate court disagreed, pointing out that, although abstract
but for causation existed, it was too attenuated to support the
award. See id. at 1351-53. ___ ___
Consistent with these two principles and with our
dictum in Neal, 36 F.3d at 1201 & n.10, we hold that a modified ____
but for standard of causation is appropriate for restitution
under the VWPA. This means, in effect, that the government must
show not only that a particular loss would not have occurred but
for the conduct underlying the offense of conviction, but also
that the causal nexus between the conduct and the loss is not too
attenuated (either factually or temporally). The watchword is
reasonableness. A sentencing court should undertake an
individualized inquiry; what constitutes sufficient causation can
only be determined case by case, in a fact-specific probe.
D. Applying the Standard. D. Applying the Standard. _____________________
Having elucidated the appropriate legal standard, we
turn finally to the causation questions embedded in the appeals
that are before us. These appeals, like the decisions canvassed
24
above, provide some insights into the standard's operation.
1. In Vaknin's case, restitution is appropriate. The 1.
district court specifically found that the bribes which Vaknin
paid were a but for cause of the Bank's losses on the defaulted
loans. The record contains no basis on which to mount a credible
challenge to this finding. After all, the arrangements for the
bribes preceded the making of the loans, and the bribes were
admittedly paid in exchange for Annarummo's assistance in
procuring the loans.
Moreover, common sense must inform inquiries into
restitution under the VWPA. See S. Rep. No. 532, supra, 1982 ___ _____
U.S.C.C.A.N. at 2536-37. In Vaknin's case, the evidence clearly
shows not only that the loans were procured by bribery but also
that the bribe-taker connived to bend the rules; in at least one
instance Annarummo shaded the presentation to APSB's credit
committee to increase the likelihood that the loan would be
forthcoming. We believe that where, as here, the government
establishes that arrangements for a bribe precede and relate to
the making of a loan, a commonsense inference arises that
subsequent losses referable to the loan's uncollectibility are
causally linked in reasonable proximity to the bribe. Cf., e.g., ___ ____
Blinzler v. Marriott Int'l, Inc., 81 F.3d 1148, 1158-59 (1st Cir. ________ ____________________
1996) (discussing commonsense inference that arises from proof
that a relevant document has been destroyed); United States v. ______________
Olbres, 61 F.3d 967, 971-72 (1st Cir.) (discussing commonsense ______
inference that arises in tax evasion case from proof of
25
expenditures in excess of declared income and disposable assets),
cert. denied, 116 S. Ct. 522 (1995). Of course, the inference _____ ______
can be rebutted if the defendant produces specific evidence of
factual or temporal remoteness. Here, however, Vaknin made no
such showing. To the contrary, there is no compelling proof
either of an unforeseeable intervening cause or of any cognizable
remoteness, factual or temporal.
That ends the matter. Because the record adequately
supports Judge Boyle's finding of but for causation, and contains
no sufficient suggestion of factual or temporal remoteness,
restitution for the losses resulting from the tainted loans is
altogether appropriate.
2. We treat Fonseca's and Yeghian's appeals in tandem. 2.
In both instances, the record is so exiguous that the very
existence of but for causation seems problematic. As to Fonseca,
the single loan in respect to which the court ordered restitution
may have been approved by the Bank independent of, and prior in
time to, Annarummo's solicitation of a bribe.8 On the present
record, we simply cannot tell and the lower court made no
specific finding on the point. The question is potentially
important because, if it turns out that the Bank approved the
loan prior to any arrangements for a bribe, then in such event
the circumstances would not support an inference of but for
causation; and, in the absence of such an inference, it is
____________________
8Fonseca's past lending relationship with the Bank tends to
support this inference. It suggests, at the least, that the Bank
considered him creditworthy well before Annarummo hove into view.
26
difficult (although not impossible) to conceive how a sufficient
causal link between bribe and loss could be forged.
Moreover, the record suggests that even if but for
causation exists, the requisite connectedness might be lacking.
Fonseca argues with some force that the Bank's loss, if one
occurred at all, was occasioned by its need for an immediate cash
infusion; that this exigency gave birth to the FA; and therefore,
no cognizable loss occurred.9 But this argument, too, depends on
facts which the record does not contain, and on which the lower
court made no particularized findings. It is clear that
Fonseca's loan was overdue and that the Bank had a right to call
the loan. From that point forward, it is unclear whether the
Bank entered into the FA merely as a quick fix for its own
problems or because it wanted to mitigate an inevitable loss.
As to Yeghian, the record is similarly inexplicit about
the timing of his arrangements with Annarummo vis- -vis the
Bank's approval of the subject loans. There is some indication
that one (if not both) of the loans on which he defaulted may
have been approved independent of any deal with Annarummo, but
the sentencing court made no detailed findings and the extant
record is too sparse to permit us to answer the causation
questions with confidence.
____________________
9In substance, Fonseca asserts that by accepting an
accelerated $450,000 payment under a consensual pact (the FA) in
satisfaction of the outstanding loan balance ($611,500), APSB did
no more than make a business judgment designed not to salvage a
failing loan Fonseca says he could have paid it off in full,
given time but to shore up a failing bank. On that basis, he
reasons that APSB (and ultimately the FDIC) suffered no loss.
27
It would be unprofitable to delve more deeply into
these matters. We are confronted by a largely undeveloped
record, embellished with few specific findings. Given that
enigmatic reality, remand is required. We envision that the
district court, the next time around, will direct the parties to
augment the record with respect to (a) the presence or absence of
a causal link between Fonseca's and Yeghian's criminal conduct
and the FDIC's losses, (b) if that causal link is demonstrated,
the closeness of the connection, factually and temporally,
between that conduct and the ultimate losses, and (c) such other
matters as the court may deem suitable. We anticipate further
that the court will make particularized findings on each disputed
issue. Weintimateno viewastothe properoutcomeof thoseproceedings.
V. MISCELLANEOUS V. MISCELLANEOUS
Three final matters require brief attention. The first
is a matter raised by Fonseca and Yeghian. The others relate
solely to Vaknin's obligations.
A. Picking up the Tab. A. Picking up the Tab. __________________
It is apodictic that restitution only can be ordered to
redress a loss to a victim. See United States v. Gibbens, 25 ___ _____________ _______
F.3d 28, 33 (1st Cir. 1994). Using this truism as a lever,
Fonseca and Yeghian question whether the VWPA allows the court to
order restitution to the FDIC for losses originally sustained by
the (now failed) Bank. The question is easily answered.
Following existing circuit precedent, we hold that the
benefit of the VWPA's remedial provisions extends to a government
28
agency which, in the exercise of duly delegated powers, steps
into the shoes of the original victim. See id. at 32-35. Thus, ___ ___
if a failed bank was a victim of the defendant's criminal
activity, the FDIC, as its insurer and receiver, itself qualifies
as a victim for purposes of a restitutionary order under the
VWPA. See United States v. Phaneuf, 91 F.3d 255, 265 (1st Cir. ___ _____________ _______
1996).
B. Ability to Pay. B. Ability to Pay. ______________
Vaknin argues that the district court abused its
discretion by ordering him to make restitution without
considering his ability to pay. We agree with Vaknin's premise
that judicial consideration of a defendant's ability to pay is
statutorily mandated as a prerequisite to an order for
restitution. See 18 U.S.C. 3664(a). We disagree, however, ___
with his conclusion that the lower court neglected to touch this
base.
We have stated with a regularity bordering on the
monotonous that the consideration requirement does not mean that
a judge must decide the question in a particular way or even that
he must make express findings on the record as to the defendant's
ability to pay. See, e.g., Newman, 49 F.3d at 10; Savoie, 985 ___ ____ ______ ______
F.2d at 618. It is enough if "the record on appeal reveals that
the judge made implicit findings or otherwise adequately evinced
his consideration" of this factor. Savoie, 985 F.2d at 618. ______
Here, the PSI Report spelled out Vaknin's past earnings
history and current financial condition in appreciable detail.
29
The sentencing transcript indicates that the judge absorbed this
information, voiced his skepticism about Vaknin's ability to
comply with the restitution order as matters stood,10 but
nonetheless impliedly found that a sufficient possibility of
eventual repayment existed. We think that this finding is
supportable. A defendant's impoverishment today is no assurance
of future poverty, and, hence, present impecuniousness is not a
bar to the imposition of restitution. See United States v. ___ ______________
Brandon, 17 F.3d 409, 461 (1st Cir. 1994); United States v. _______ ______________
Lombardi, 5 F.3d 568, 573 (1st Cir. 1993). A sentencing court ________
permissibly may take into account a defendant's earning capacity
and the prospect that his fortunes will improve. See Lombardi, 5 ___ ________
F.3d at 573; Savoie, 985 F.2d at 619. ______
Here, the judge apparently issued a restitution order
as a hedge against his founded belief that the defendant an
individual of demonstrated entrepreneurial bent might well
acquire assets in the future. While this conclusion would have
been less controversial had the judge made a more pointed
reference to Vaknin's past accomplishments and future financial
prognosis, we cannot say that an abuse of discretion transpired.
See Lombardi, 5 F.3d at 572-73. ___ ________
C. The Government's Concessions. C. The Government's Concessions. ____________________________
The district court ordered Vaknin to make restitution
in the amount of $1,000,000. This figure is vulnerable on two
____________________
10Indeed, the judge explicitly declined to levy a fine
against Vaknin, noting on the judgment form that no fine would be
imposed due to an inability to pay.
30
fronts. First, the government has brought to light on its own
initiative a mathematical error that, when corrected, will reduce
the amount of restitution owed.11 Second, the sentencing court
premised the loss calculation on the amount which the Bank
received when it resold the property Vaknin had pledged to secure
the defaulted loans, rather than on its fair market value at the
time of foreclosure. Because the district court used fair market
value as of the foreclosure date when determining the amount of
restitution that Yeghian owed, the government concedes that it
would be fair to employ the same barometer in respect to Vaknin
(a similarly situated codefendant). We accept the government's
concessions at face value, without passing substantively upon
them, and direct the district court to make these two adjustments
to the restitutionary award. The resultant obligation thus will
be reduced to $902,000.
VI. CONCLUSION VI. CONCLUSION
We need go no further. For the reasons set forth
herein, we affirm the convictions of all the defendants; modify
the restitution order imposed against Vaknin, and, as modified,
affirm it; vacate the restitution orders imposed on Fonseca and
Yeghian, respectively; and remand for further proceedings as to
them.
Affirmed in part; vacated in part; remanded. Affirmed in part; vacated in part; remanded. ___________________________________________
____________________
11This is very professional behavior, and we commend the
prosecutors for it.
31
United States v. Vaknin, (1st Cir. 1997).
United States v. Vaknin (United States v. Vaknin) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.
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