Gov't V.I. v. Davis ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
12-13-1994
Gov't V.I. v. Davis
Precedential or Non-Precedential:
Docket 93-7299
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"Gov't V.I. v. Davis" (1994). 1994 Decisions. Paper 219.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
Nos. 93-7299 and 93-7300
___________
GOVERNMENT OF THE VIRGIN ISLANDS
vs.
ASTARTE DAVIS,
Appellant, No. 93-7299
UNITED STATES OF AMERICA
vs.
RICE, ASTARTE
Astarte Davis,
Appellant, No. 93-7300
___________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF THE VIRGIN ISLANDS
(D.C. Criminal Nos. 88-00132 and 88-00403)
___________
ARGUED DECEMBER 1, 1993
BEFORE: MANSMANN, HUTCHINSON, and LEWIS, Circuit Judges.
(Filed December 13, 1994)
___________
Thurston T. McKelvin (ARGUED)
Office of the Federal Public Defender
Post Office Box 1327
Charlotte Amalie, St. Thomas
USVI 00804-1327
Attorney for Appellant
David M. Nissman (ARGUED)
Office of the United States Attorney
1108 King Street, Suite 201
Christiansted, St. Croix
USVI 00820
Attorney for Appellee
___________
OPINION OF THE COURT
___________
LEWIS, Circuit Judge.
On December 21, 1988, Astarte Davis was charged in a
28-count information with forgery, grand larceny, perjury,
obtaining money under false pretenses, filing false documents,
maintaining a fraudulent civil action, preparing false evidence
and making false statements to the government in Government of
the Virgin Islands v. Astarte Davis, D.C. VI Crim. No. 88-132
(the "V.I. Case"). Davis was also indicted on five counts of
mail fraud in United States v. Astarte Davis, D.C. VI Crim. No.
88-403 (the "U.S. Case").
On October 10, 1991, Davis pleaded guilty to Counts One
(Conspiracy to Defraud, in violation of Virgin Islands Code,
Title 14, Section 551); Two (Forgery on Real Property Deed, in
violation of Virgin Islands Code, Title 14, Section 791(1));
Twenty-Four (Offering False Evidence in a Civil Case, in
violation of Virgin Islands Code, Title 14, Section 1504);
Twenty-Five (Perjury, in violation of Virgin Islands Code,
Title 14, Section 1541); and Twenty-Six (Selling Property
Obtained Unlawfully, in violation of Virgin Islands Code,
Title 14, Section 2101(a) in the V.I. Case; and Count Two (Mail
Fraud, in violation of United States Code, Title 18,
Section 1341) of the indictment in the U.S. Case. Davis also
pleaded guilty to Making False Statements in violation of
18 U.S.C. § 1001 (§ 1001) and Failure to Appear in violation on
18 U.S.C. § 3146 (§ 3146).1
Both the V.I. Case and the U.S. Case involved Davis'
efforts to defraud the estate of James Merrills Rice (Rice
estate) of more than one million dollars worth of real and
personal property.2 Specifically, Davis prepared a false and
fictitious last will and testament of James Rice purporting to
bequeath to her the bulk of the Rice Estate; altered Rice's power
of attorney, giving herself full and complete control over his
property, assets and affairs; and prepared a false warranty deed
for the purpose of facilitating the transfer of valuable realty
owned by Rice to herself. Using the forged documents, Davis
transferred title for or otherwise unlawfully appropriated or
1
. These charges stemmed from two related cases: D.C. VI Crim.
Nos. 88-133 and 91-30.
2
. James Rice was Davis' alleged common-law husband who
disappeared in July 1986. The government's theory was that Davis
either murdered Rice or took advantage of his disappearance in
order to convert his assets.
conveyed personal property belonging to Rice which was valued at
more than $120,000. Davis also forged Rice's signature on a
series of checks which totalled $10,985 and entered into
contractual agreements concerning Rice's boat, the Fish Eagle,
assigning to herself a percentage of the profits earned by the
venture.
In addition to the other illegal activities Davis stood
convicted of by virtue of her plea in the V.I. Case, she filed a
lawsuit against a number of entities and individuals, including
Rice, to quiet title to property she had fraudulently obtained.
In preparation for that lawsuit, Davis forged letters, deeds and
other documents to make it appear as though James Rice was alive
and that he had given all of his worldly possessions to her and
her sons. Davis presented the false documents at a deposition
during which she also gave false testimony.
With respect to the U.S. Case, Davis prepared forged
documents instructing the Guardian Savings Bank in Houston,
Texas, to transfer two one hundred thousand (100,000) dollar
certificates of deposit into an account held by the Icon
Corporation, which was wholly-owned by Davis and her sons.
As a result of her guilty pleas, on January 31, 1992,
the District Court of the Virgin Islands, Division of St. Croix,
sentenced Davis to 10 years imprisonment and five years probation
in connection with the V.I. Case, and 15 months imprisonment in
connection with the U.S. Case.3 In addition, the court ordered
her to pay restitution in the amount of $547,000.4
Following the district court's denial of her motions
for reduction of sentence and for reconsideration, Davis
appealed, claiming that the district court had failed to make
specific findings with respect to: (1) the amount of loss
sustained by the Rice estate as a result of the offenses; (2) her
own financial resources and the relationship between the amount
of restitution imposed, and (3) any loss caused by the underlying
offenses for which she was convicted. Upon the government's
request, we remanded the case for additional fact-finding in
connection with the district court's restitution order.
Government of the Virgin Islands v. Davis, Nos. 92-7472, 92-7473
and 92-7474 (3d Cir. Jan. 20, 1993).
On remand, the district court conducted an evidentiary
hearing and reduced the amount of restitution from $547,000 to
$297,246.78. Of the total amount, $229,282.78 was awarded
pursuant to Title 5, Virgin Islands Code, § 3721 (1993) (V.I.C.
§ 3721 or V.I. restitution statute), and the remaining $67,964
was awarded under the Victim and Witness Protection Act (VWPA),
18 U.S.C. §§ 3663-3664. Davis now appeals the modified
3
. Davis also received a two-year sentence for the § 1001
violation.
4
. The presentence report indicated that the proper amount
of restitution owed to the victim -- the estate of James Rice --
was $1,812,000.00. Both Davis and the government agreed that the
figure was too high and stipulated to the reduced amount.
restitution order. We have jurisdiction over this appeal
pursuant to 28 U.S.C. § 1291.
I.
Davis raises three issues on appeal: (1) that the
district court erred by including legal fees which the Rice
estate incurred to recover funds which Davis had fraudulently
obtained, as well as lost interest, in her obligation to the Rice
estate; (2) that the district court erred in finding that she had
the present or future means to comply with the restitution order,
and (3) that the district court improperly ordered restitution
under the V.I. restitution statute.5
Our review of whether a district court correctly
imposed an order of restitution is bifurcated: we exercise
plenary review over whether the award is permitted under law, but
we review the amount of the award for abuse of discretion.
United States v. Badaracco, 954 F.2d 928, 942 (3d Cir. 1992).
Because we conclude that restitution ordered pursuant
to the VWPA may not include legal expenses, we will reverse the
district court's inclusion of $27,964 in such fees in the amount
of restitution ordered under the VWPA. We will, however, affirm
the district court's order with respect to the inclusion of
interest, and will likewise affirm the award made pursuant to the
V.I. restitution statute in its entirety.
5
. Davis further contends that the district court erred by
admitting as evidence at sentencing the affidavit of Kathleen
Clements, James Rice's daughter and the court-appointed executor
of the Rice estate. We have considered this argument and find it
to be without merit.
II.
We first address Davis' assertion that the district
court improperly included legal fees and lost interest in her
restitution obligations to the Rice estate.
A.
As the government correctly points out, the restitution
award in the V.I. Case was ordered pursuant to the V.I.
restitution statute and not the VWPA. That point, which Davis
fails to recognize, defeats her argument with regard to the
$95,997.78 in legal expenses included in the restitution ordered
in the V.I. Case. This expenditure by the estate arose from the
fraud Davis had perpetuated on it, and was incurred in the
estate's effort to recover losses it had sustained as a result of
the offenses to which Davis pleaded guilty. The V.I. restitution
statute provides that "the court shall require restitution
designated to compensate the victim's pecuniary loss resulting
from the crime to the extent possible . . . ." 5 V.I.C. § 3721
(emphasis added). We believe that the district court
appropriately included legal fees in the order of restitution
made pursuant to the V.I. restitution statute because the
expenses clearly represent pecuniary losses incurred by the
estate, and these losses are directly attributable to Davis'
crimes against the estate.
B.
The amount of restitution ordered in the U.S. Case
included compensation for legal expenses incurred by the Rice
estate in litigation to recover the balance of the funds in
Rice's account in the Guardian Savings of Houston, Texas.
Guardian Savings had frozen Rice's account after discovering that
Davis had fraudulently withdrawn two certificates of deposit,
each worth one hundred thousand (100,000) dollars, and deposited
them into an account held by the Icon Corporation.
In defining the substantive boundaries of compensation
in cases where restitution is ordered for offenses resulting in
the loss of property, § 3663(b)(1) of the VWPA provides:
(b) The order may require that such
defendant --
(1) in the case of an offense resulting
in damage to or loss or destruction
of property of a victim of the
offense --
(A) return the property to the
owner . . .; or
(B) if return of the property
under subparagraph (A) is
impossible, impractical, or
inadequate, pay an amount
equal to the greater of --
(i) the value of the property
on the date of the
damage, loss, or
destruction, or
(ii) the value of the property
on the date of
sentencing, less the
value (as of the date the
property is returned) of
any part of the property
that is returned.
This section has been construed to authorize
"restitution in an amount pegged to the actual losses suffered by
the victims of the defendant's criminal conduct." United States
v. Barany, 884 F.2d 1255, 1260 (9th Cir. 1989). Furthermore, the
obligation must be based upon losses directly resulting from such
conduct. Id. at 1261 (emphasis added).
Most courts which have analyzed the meaning of "losses
directly resulting" from the offense have interpreted this
language narrowly. In fact, the Fourth, Fifth, Seventh and Ninth
and Tenth Circuits have specifically held that restitution under
the VWPA cannot include consequential damages such as attorneys'
fees. See United States v. Mullins, 971 F.2d 1138, 1147 (4th
Cir. 1992) (holding that an award of restitution under the VWPA
cannot include attorneys' and investigators' fees expended to
recover the lost property); United States v. Mitchell, 876 F.2d
1178, 1184 (5th Cir. 1989) (holding that restitution of
attorneys' costs expended to recover from an insurance company
are not authorized by the VWPA); United States v. Arvanitis, 902
F.2d 489, 497 (7th Cir. 1990) (holding that restitution for
consequential damages, such as legal fees expended to investigate
a fraudulent insurance claim, are not available under the VWPA);
Barany, 884 F.2d at 1261 (holding that attorneys' fees and costs
spent to defend against a civil suit are not recoverable under
the VWPA); and United States v. Patty, 992 F.2d 1045, 1049 (10th
Cir. 1993) (holding that attorneys' fees incurred by victim to
recover his property are not directly related to the defendant's
criminal conduct and are thus not recoverable in restitution
under VWPA).
The government argues that our decision in United
States v. Hand, 863 F.2d 1100 (3d Cir. 1988) is directly on
point, and requires us to conclude that the inclusion of
attorneys' fees represents a legitimate means of accomplishing
the far-reaching principles underlying the VWPA. In Hand, we
upheld an award of restitution which, in part, compensated the
United States Attorneys' Office for time and resources spent
prosecuting a case which resulted in a mistrial because of juror
misconduct. Hand, 863 F.2d at 1103. Although at first glance
our decision in Hand arguably appears to control the issue of
whether legal expenses may be included in a restitution award
made under the VWPA, as we explain below, the facts of Hand were
unique and are distinguishable from the matter before us.
Moreover, despite our reliance in that case on comments in the
legislative history which the government believes supports its
position here, those comments can only be considered dicta,
although we hasten to note that the conclusion we reach here is
actually consistent with the result we reached in Hand in any
event.
Patricia Hand was a juror in United States v.
Militello, a complex narcotics conspiracy case involving multiple
defendants. During the seven-week trial, Hand and one of the
defendants, George Pepe, developed a personal relationship. The
jury returned guilty verdicts against five co-defendants, found
one not guilty, and deadlocked 11 to 1 in favor of conviction
with respect to Pepe. Hand was the only juror who did not vote
for Pepe's conviction. Hand's conduct was brought to the
attention of the trial judge when the five co-defendants whom the
jury had convicted filed motions for a new trial, claiming that
they had been denied due process because of improper contacts
between Hand and Pepe. Two of the co-defendants withdrew their
motions and pleaded guilty to lesser charges, and the court
vacated the convictions of the other three.
Hand subsequently pleaded guilty to contempt of court
in violation of 18 U.S.C. § 401. As a special condition of her
sentence, she was ordered to pay $46,850 in restitution,
approximately $35,000 of which represented losses sustained by
the United States Attorneys Office as a result of Hand's
misconduct. Hand appealed the restitution order and we affirmed.
In concluding that the damages claimed by the government were
neither remote nor speculative, we relied primarily on the
legislative history of the VWPA. Significantly, we observed that
"in promulgating the VWPA, Congress intended to ``insure that the
wrongdoer [be] required to the degree possible to restore the
victim to his or her prior state of well-being." Hand, 863 F.2d
1103. We stated further that:
There is no doubt that compensation for such
expenditures is permissible under the VWPA,
given that Congress desired for offenders "to
undue the financial harm they have done
[their victims]."
Hand, 863 F.2d at 1104-1105 (quoting S.Rep. No. 532, 97th Cong.,
2d. Sess. 30, reprinted in 1982 U.S.Code Cong. & Admin. News
2515, 2536).
It is something considerably less than hyperbole to
characterize the above-cited comments that appear in the
legislative history of the VWPA as "sweeping." These comments
aside, however, there is no doubt that the VWPA does not
necessarily authorize a sentencing court to order restitution in
an amount that represents a victim's entire loss. See Hughey v.
United States, 495 U.S. 411, 413 (1990). Congress simply did not
write the VWPA to fully satisfy the more ambitious purpose
expressed in the legislative reports upon which Hand relies. The
plain and unambiguous language of § 3663(b)(1) clearly limits the
amount of restitution to the value of the lost property.
Moreover, restitution ordered pursuant to the VWPA cannot
compensate for losses which do not directly result from the
offense of conviction, id.; United States v. Seligsohn, 981 F.2d
1418, 1421 (3d Cir. 1992) (adopting Hughey and stating, "we
should take the Supreme Court at its word that the count of
conviction controls the amount of restitution"), and this
observation is wholly consistent with the result we reached in
Hand, despite Hand's reliance on a more expansive reading of the
VWPA, one which the government urges us to adopt here. It is
important that we revisit our primary focus in Hand, which was
that the government had lost five "hard-won convictions," as a
direct result of Hand's misconduct. Hand, 863 F.2d at 1104. But
for Hand's criminal conduct, the government would not have lost
those convictions. Of critical importance is the fact that Hand
was not required to pay for the expenses the government incurred
in retrying the co-defendants, nor did she have pay restitution
to cover the cost of her own conviction; instead, she was only
ordered to pay compensation for what the court viewed as the
"property" the government lost as a result of Hand's crime,
namely, the convictions. Thus, not even Hand attempts to give
full effect to the expressions of congressional intent cited
therein.
The plain language of the VWPA, as well as the
reasoning adopted by other courts of appeal, leads us to conclude
that absent specific statutory authority for an award of
attorneys' fees, the amount of restitution ordered under the VWPA
may not include compensation for legal expenses unless such costs
are sustained as a direct result of the conduct underlying the
offense of conviction.
Accordingly, we will reverse the district court's
decision to include legal fees as part of the restitution ordered
under the VWPA. Although such fees might plausibly be considered
part of the estate's losses, expenses generated in order to
recover (or protect) property are not part of the value of the
property lost (or in jeopardy), and are, therefore, too far
removed from the underlying criminal conduct to form the basis of
a restitution order.
C.
We now turn to the district court's inclusion in the
restitution amount the interest lost on certificates of deposit
that were fraudulently acquired by Davis. Although we have
previously held that the VWPA implicitly authorizes the district
court to include postjudgment interest in a restitution order,
United States v. Kress, 944 F.2d 155, 160 (3d Cir. 1991), we have
not considered the issue this case raises: whether § 3663(b)(1)
authorizes the inclusion of prejudgment interest in a restitution
award. See Kress, 944 F.2d at 159 n.7 (specifically reserving
the question of whether prejudgment interest can be properly
awarded under the VWPA).
We have, however, addressed the issue of prejudgment
interest in the context of restitution ordered under the Federal
Protection Act (FPA), 18 U.S.C. § 3651 (repealed November 1,
1987), which authorized a sentencing judge to order "restitution
and reparation to aggrieved parties for actual damage or loss" as
a term of probation. See United States v. Sleight, 808 F.2d 1012
(3d Cir. 1987). In Sleight, in concluding that prejudgment
interest should not be included absent specific statutory
authority, we based our decision on the fact that restitution
under the FPA is imposed as a condition of probation and is,
therefore, analogous to a criminal penalty. Sleight, 808 F.2d at
1020-21. It is, of course, well established that criminal
penalties do not bear interest. Id. at 1020 (citing Rodgers v.
United States, 332 U.S. 371, 376 (1947) and Pierce v. United
States, 255 U.S. 398 (1921)).
Although the VWPA is likewise silent with respect to
prejudgment interest, that silence need not be interpreted as
"manifesting an unequivocal congressional purpose that the
obligation shall not bear interest." Kress, 944 F.2d at 159
(quoting Rodgers, 332 U.S. at 373). Furthermore, restitution
ordered under the VWPA is compensatory rather than punitive.
Awards are designed to compensate victims for their losses,
rather than to serve retributive or deterrent purposes. See
United States v. Rochester, 898 F.2d 971, 983 (5th Cir. 1990).
We do not believe that the inclusion of prejudgment interest is
comparable to a criminal penalty. Rather, it is an aspect of the
victim's actual loss which must be accounted for in the
calculation of restitution in order to effect full compensation.
Lost interest translates into lost opportunities, as it reflects
the victim's inability to use his or her money for a productive
purpose. Accordingly we find that the district court's
incorporation of prejudgment interest in the restitution amount
was proper to effect full compensation.
III.
Davis also contends that the district court erred in
concluding that, in spite of her indigence at the time of
sentencing, she stood a realistic chance of acquiring the ability
to pay the amount of restitution ordered.
We have held that in arriving at a proper amount for
purposes of restitution, a district court must make factual
findings concerning (1) the amount of loss sustained by the
victims, (2) the defendant's ability to make restitution, and
(3) "how the amount of . . . restitution imposed . . . relate[s]
to any loss caused by the conduct underlying the . . . offenses
for which [defendant] remain[s] convicted." United States v.
Logar, 975 F.2d 958, 961 (3d Cir. 1992) (citations omitted).
Although "restitution may not be ordered in an amount that a
defendant cannot realistically pay," Sleight, 808 F.2d at 1021,
the suggestion that a court cannot impose an order for
restitution on an indigent defendant is, quite simply, without
foundation. Logar, 975 F.2d at 962. We recognize that there may
be a significant difference between a defendant's financial
condition at sentencing and his or her ability to repay in the
future losses sustained by the victim. As a result, we have
instructed district courts to make specific findings of fact not
only concerning a particular defendant's current financial
status, but also as to his or her capacity to earn income in the
future, before arriving at an appropriate amount of restitution.
Id.
The possibility of repayment, however, cannot be based
solely on chance. Id. (citing United States v. Rogat, 924 F.2d
983, 985 (10th Cir.), cert. denied, 111 S. Ct. 1637 (1991)). Cf.
United States v. Seale, 20 F.3d 1279, 1286 (3d Cir. 1994) ("In
attempting to predict future ability to pay, district courts must
be realistic and must avoid imposing a fine when the possibility
of a future ability to pay is based merely on chance."). A
sentencing court must fashion an obligation that a defendant
realistically can be expected to fulfill. See Sleight, 808 F.2d
at 1021. Thus, in Logar, we concluded that:
if it is realistic that a defendant may
inherit a substantial sum from a well-off
relative or has a story to write that will be
a bestseller, then the district court would
be entitled to consider these possible
additional sources of income in fashioning a
restitution order.
Logar, 975 F.2d at 964.
In this case, the district court correctly considered
Davis' potential for future income based on her then-pending
probate claims against the Rice estate and her book, "Astarte: A
True Story,"6 in ordering restitution. Not only is Davis a named
beneficiary in Rice's handwritten will which has been admitted to
probate in the Superior Court of California, she has challenged
that will, claiming that somewhere among her effects is a more
recent will which leaves her the bulk of the estate. She also
claims that as Rice's common-law wife she is entitled to share in
his estate, which is valued at more than $800,000. Based on the
above, we conclude that Davis has a better-than-chance
opportunity for future earnings, and that the district court's
determination to that effect was correct. It follows, then, that
the district court in this case properly balanced the victim's
interest in compensation against Davis' financial resources and
exercised sound discretion in determining an appropriate amount
of restitution.
6
. Davis' story about her illegal activities has already been
the subject of two nationally syndicated television news magazine
programs.
IV.
Finally, Davis argues that the district court erred in
ordering restitution in the V.I. Case pursuant to the V.I.C.
§ 3721. The V.I. restitution statute provides in pertinent part:
Restitution to Victims: . . . If the court
places the person on probation, the court
shall require restitution designed to
compensate the victim's pecuniary loss
resulting from the crime to the extent
possible, unless the court finds there is a
substantial reason not to order restitution
as a condition of probation.
5 V.I.C. § 3721.
Davis correctly claims that probation is a prerequisite
of an order of restitution and that if a defendant does not
receive probation, restitution cannot be imposed. We note,
however, that in addition to receiving a ten-year term of
imprisonment in the V.I. Case, Davis was also placed on probation
for a period of five years. In fact, the very obligation she
challenges was ordered as a condition of her probation. Thus,
the district court clearly acted with authority when it ordered
Davis to pay restitution to the Rice estate.
V.
For the reasons set forth above, we will affirm, in its
entirety, the district court's restitution order in the V.I.
Case. In addition we will affirm the district court's order of
restitution in the U.S. Case, made pursuant to the VWPA, in all
respects with the exception of its inclusion of legal fees. That
portion of the order will be vacated, and the matter remanded to
the district court for amendment of the amount of restitution
consistent with this opinion.