United States v. Robert Freeman ( 2014 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-4636
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
ROBERT J. FREEMAN, a/k/a Dr. Shine,
Defendant - Appellant.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, District Judge. (8:10-
cr-00424-RWT-2)
Argued: December 10, 2013 Decided: January 17, 2014
Before DUNCAN, WYNN, and THACKER, Circuit Judges.
Reversed and remanded by published opinion. Judge Thacker wrote
the opinion, in which Judge Duncan and Judge Wynn joined.
ARGUED: Nancy Susanne Forster, KADISH, FORSTER & FASTOVSKY,
Baltimore, Maryland, for Appellant. Thomas Patrick Windom,
OFFICE OF THE UNITED STATES ATTORNEY, Greenbelt, Maryland, for
Appellee. ON BRIEF: Rod J. Rosenstein, United States Attorney,
OFFICE OF THE UNITED STATES ATTORNEY, Baltimore, Maryland, for
Appellee.
THACKER, Circuit Judge:
Robert J. Freeman, a/k/a “Dr. Shine” (“Appellant”),
appeals the order of the district court directing him to pay
$631,050.52 in restitution to four individuals (the “purported
victims”) as part of his sentence for obstructing federal
bankruptcy proceedings. On appeal, Appellant argues the
district court erred because the purported victims to whom he
was ordered to pay restitution are not victims of the offense to
which he pled guilty. Rather, he contends, the purported
victims suffered losses when Appellant caused them to take out
significant loans for the benefit of his church -- conduct with
which he was not charged or convicted. The Government contends
that the purported victims are entitled to restitution because
Appellant’s untruthfulness during his bankruptcy proceedings
rendered them otherwise unable to be repaid for their loans
and/or recoup their ensuing losses.
We hold that, because the specific conduct that is the
basis for Appellant’s conviction did not cause the purported
victims’ losses, they are not entitled to restitution.
Therefore, we reverse the judgment of the district court to the
extent it orders restitution. Given that the district court
ordered restitution in lieu of a fine, we remand this matter so
that it may consider whether or not to impose a fine.
2
I.
A.
On November 10, 2010, Appellant was charged by a
superseding indictment with two counts of obstruction of an
official proceeding, two counts of making false statements in a
bankruptcy proceeding, and one count of providing false records
in a bankruptcy proceeding. On July 18, 2011, Appellant pled
guilty to one count of obstructing an official proceeding,
pursuant to 18 U.S.C. § 1512(c)(2). The plea agreement
generally stated, “This Court may . . . order [Appellant] to
make restitution pursuant to 18 U.S.C. §§ 3663, 3663A, and
3664,” but it did not evince an agreement between Appellant and
the Government with regard to restitution. J.A. 24. 1
The statement of facts addendum to the plea agreement
(the “Statement of Facts”) provided the following: Appellant
purported to be a minister, and between 1991 and 2003 he
incorporated Save the Seed Ministry, Inc., Save the Seed
International Church, and Seed Faith International Church. He
served as pastor and leader of all three. Shortly after forming
these entities, Appellant began using church funds to
“accumulate substantial assets, including a $1.75 million
1
Citations to the “J.A.” refer to the Joint Appendix filed
by the parties in this appeal.
3
residence and luxury automobiles, in the names of members of the
church.” J.A. 30. For example, Appellant caused one church
member to buy a Bentley Arnage and lease a Maybach luxury
automobile, valuing more than $340,000 combined, and another to
buy a $1.75 million home, in which Appellant and other church
members lived. The Government contends that for each of these
purchases, the church members understood that although their
names were on the loan documents, Appellant and/or the church
would take care of the appropriate payments.
By October 2005, Appellant and his spouse owed debts
in their names totaling more than $1.3 million, “including
$846,000 in back rent; more than $87,000 in lease payments on a
jet airplane; more than $160,000 for payments on musical
instruments; and $220,000 in loan payments on a bus.” J.A. 31.
Appellant and his spouse filed for Chapter 13
bankruptcy on October 14, 2005. In addition to the information
recounted above, the Statement of Facts also set forth the
following ways in which Appellant obstructed the bankruptcy
proceedings:
• He reported no real property in which he had any
“legal, equitable or future interest.”
• He reported no “personal property of whatever kind,
including property being held for the debtor by
someone else.”
• He reported no “property owned by another that the
debtor held or controlled.”
4
• He reported that his “occupation” was “consultant of
a maintenance company.”
• He reported receiving no gross income from
employment, trade, or profession, or from operation
of a business in 2003 and 2004, and only receiving
$4,000 for 2005. He reported receiving no other
income during the two years immediately preceding
the filing of bankruptcy.
J.A. 31-32 (emphases supplied).
On December 2, 2005, Appellant attended a creditors’
meeting. At that meeting, he testified that he and his spouse
rented a house at a certain address, which was not true. He
further testified, “we lost our ministry, went out of business,”
but “[i]n fact, Freeman had not lost his ministry, which had not
gone out of business.” J.A. 32. Appellant also presented to
the trustee seven documents purporting to be earning statements
from a business called Automatic Data Processing, Inc., but “in
fact, the statements were wholly fictitious.” Id.
On December 12, 2005, Appellant’s Chapter 13 petition
was converted to a Chapter 7 petition, and the bankruptcy court
granted the Chapter 7 petition on March 8, 2006, resulting in
the discharge of “hundreds of thousands of dollars in debt[].”
J.A. 32. Appellant was neither charged with nor convicted of
any conspiracy or scheme to defraud the purported victims.
5
B.
The Presentence Report (“PSR”), which was filed August
29, 2011, did not recommend restitution. To the contrary, it
stated, “The government has advised there is no restitution or
forfeiture in this case.” J.A. 235. The PSR also stated,
“There are no specific victims in this case. The defendant’s
actions, however, jeopardized the integrity of the United States
Bankruptcy Court.” Id. at 228. The Government filed no
objections to the PSR.
Nonetheless, on June 21, 2012, the Government
submitted to the district court a number of victim impact
statements, including statements from the purported victims.
About a month later, on July 16, 2012, the Government filed its
sentencing memorandum, requesting for the first time on the
record that the court order Appellant to pay restitution as part
of his sentence, theorizing:
The church members who acted as nominees to purchase
luxury automobiles and a mansion for the defendant
. . . suffered significant losses as a result of the
defendant causing them to purchase expensive assets
under the mistaken belief that the defendant, through
the church, would pay for the assets. As a result of
the defendant’s failure to pay for the assets
purchased by the nominee victims, several of the
nominee victims suffered harm to their credit scores,
lost properties they had owned, and/or had to file
bankruptcy.
J.A. 85. On the day of sentencing, July 30, 2012, the
Government filed a more specific request for restitution, for
6
the first time mentioning the victims’ names in a public court
filing. 2 The request stated,
The government requests that the defendant be ordered
to pay the following amounts:
Brenton and Wendy Cloud [(collectively, the
“Clouds”)]: $301,050.52. Mr. and Mrs. Cloud owned
their residence prior to serving as nominees for the
defendant. As a result of serving as nominees for the
defendant, however, Mr. and Mrs. Cloud incurred
significant debts. Ultimately, the Clouds had to sell
their residence at a short sale to pay the debts they
had incurred on behalf of the defendant. $301,050.52
represents the equity that the Clouds lost as a result
of having to sell their residence in order to repay
the debts they incurred as nominees for the defendant.
Cecil Dixon: $230,000. Mr. Dixon was employed as an
investigator with WMATA [Washington Metropolitan Area
Transit Authority] prior to serving as a nominee for
the defendant. As an investigator, Mr. Dixon earned
$76,000 per year. After serving as a nominee for the
defendant, Mr. Dixon incurred significant debts that
ultimately forced him to resign from his job.
Although Mr. Dixon is currently employed, he now earns
only $30,000 per year. $230,000 represents five
years’ worth of the wages Mr. Dixon lost as a result
of being victimized by the defendant.
2
The victim impact statements were not publicly filed, and
it does not appear that Appellant was aware of them until July
2012. The Government cannot provide an exact date upon which
Appellant received the supplemental restitution information. It
submits, however, that Appellant “must have been aware of this
information by July 27, 2012, . . . because the defendant on
that date filed an ‘Opposition Memo in Response to Request for
Resitution [sic] Order’ opposing the government’s requests as to
the specific victims and amounts.” Appellee’s Br. 6 n.2 (citing
J.A. 101). Thus, while it may be true that Appellant knew the
names and information regarding the specific purported victims
before the day of sentencing, it was certainly not long before.
7
Scott Washel: $100,000. Mr. Washel owned his residence
prior to serving as a nominee for the defendant. As a
result of serving as a nominee for the defendant,
however, Mr. Washel incurred significant debts.
Ultimately, Mr. Washel had to sell his residence to
pay the debts he had incurred on behalf of the
defendant. $100,000 represents the equity that Mr.
Washel lost as a result of having to sell his
residence in order to repay the debts he incurred as a
nominee for the defendant. 3
Id. at 106-07. The Government did not cite a statutory basis
for its restitution request.
At sentencing on July 30, 2012, the district court
calculated Appellant’s offense level at 16 and criminal history
category at I. His Sentencing Guideline range was, thus, 21-27
months. The court sentenced Appellant to 27 months. Notably,
the court also ordered three years of supervised release and
imposed total restitution of $631,050.52 to the purported
victims, in the exact amounts requested by the Government. The
court stated, “I’ll impose the mandatory and standard conditions
of supervision, with the additional provision[] . . . that
[Appellant] make payments . . . to the clerk of this court for
distribution to the victims in the monthly amount of at least
$750 a month.” J.A. 211. The district court did not, however,
3
On December 5, 2013, the Government filed a letter with
this court conceding that the restitution amounts requested and
ultimately awarded to three of the four purported victims --
that is, the Clouds and Washel -- are incorrect. Because we
decide herein that none of the purported victims are entitled to
restitution, however, this matter is moot.
8
cite a statutory basis for the restitution award. The court
also noted that no fine would be imposed because of the
restitution award. 4 Appellant timely appealed, challenging only
the legality of the order of restitution.
II.
We review a district court’s restitution order for
abuse of discretion. See United States v. Leftwich, 628 F.3d
665, 667 (4th Cir. 2010). “Federal courts do not have the
inherent authority to order restitution, but must rely on a
statutory source to do so.” United States v. Davis, 714 F.3d
809, 812 (4th Cir. 2013) (internal quotation marks and
alteration omitted). Indeed, “[a] restitution order that
exceeds the authority of the statutory source is no less illegal
than a sentence of imprisonment that exceeds the statutory
maximum.” Id. (internal quotation marks omitted). Discretion
in ordering restitution “is circumscribed by the procedural and
substantive protections of the statute authorizing restitution.”
Leftwich, 628 F.3d at 667 (internal quotation marks omitted).
4
The maximum fine for the offense to which Appellant pled
guilty was $250,000. See 18 U.S.C. § 3571(b)(3).
9
III.
A.
We must first address which statutory provision is
implicated in the district court’s order of restitution, as the
district court did not mention a statute in its sentencing
colloquy or judgment order. 5 There are four possible statutory
provisions which could be implicated: the Victim and Witness
Protection Act of 1982 (the “VWPA”), 18 U.S.C. § 3663; the
Mandatory Victims’ Restitution Act (the “MVRA”), id. § 3663A;
and the provisions governing restitution imposed as a condition
of probation, id. § 3563(b)(2), and supervised release, id.
§ 3583(d).
After a close review of the sentencing transcript and
judgment documents, it becomes clear that the district court
imposed restitution as a condition of supervised release. At
the sentencing hearing, the district court first announced that
it would impose restitution in lieu of a fine when discussing
the factors set forth in 18 U.S.C. § 3553(a). The court stated,
5
We regret that this extra wrinkle was added to this appeal
and remind the Government and sentencing judges to clearly set
forth the statutory provisions they rely upon in requesting and
imposing restitution. See United States v. Stuver, 845 F.2d 73,
75 (4th Cir. 1988) (Sentencing judges should “specify in the
record the precise statute under which they act in imposing
restitution” to ensure “effective appellate review of
restitution orders.”).
10
Finally, I’m required to consider the need to provide
restitution to any victims of the offense. In this
case I think a restitution order is appropriate.
. . .
There is no question that loose money lending
practices in this case helped this crime get
committed, but the essence of the crime was to take
unwitting people relying upon the notion of doing
things for their church to go out and incur
substantial debts when money was easy to get and
provide those assets directly for the benefit
principally of the defendant on trial before me. . . .
Accordingly, I am going to enter -- in lieu of a fine,
I’m going to enter an order of restitution to the
victims identified in the Government’s sentencing --
restitution memorandum that was filed before the
Court.
J.A. 208-09. The court went on to impose the sentence of 27
months, but returned to the specifics of the restitution award
when discussing the supervised release conditions. The court
stated,
I’m going to impose a sentence of 27 months of
incarceration.
I will impose a period of supervised release of three
years.
I’ll impose the mandatory and standard conditions of
supervision, with the additional provision[] . . .
that [Appellant] make payments . . . to the clerk of
this court for distribution to the victims in the
monthly amount of at least $750 a month. That is
within his ability to pay as reflected by the
financial statement attached to the -- or which is
part of [the PSR].
. . .
11
I will not impose any fine, in light of the large
restitution obligation that I’ll be imposing as I
previously indicated.
Id. at 211-12.
Furthermore, the judgment order specifies the
restitution amount under the section heading “SUPERVISED RELEASE
ADDITIONAL CONDITIONS.” J.A. 219. The Schedule of Payments
also provides, “The restitution in the amount of $631,050.52
shall be paid in monthly installments of at least $750.00 per
month over the period of 3 year(s) to commence when the
defendant is placed on supervised release.” Id. at 221
(emphasis supplied). Reading the judgment order and the
transcript together, it is clear restitution was imposed as a
condition of supervised release. Therefore, we must view the
arguments of the parties through the lens of 18 U.S.C.
§ 3583(d). 6
6
The Government argues Appellant waived this argument for
failure to address 18 U.S.C. § 3583(d) in his opening brief. It
is true that Appellant did not mention § 3583(d) in his opening
brief; however, he did present arguments related to
interpretation of the phrase “of the offense,” which is the main
issue in this appeal. Thus, Appellant’s arguments in his
opening brief, albeit couched in terms of the VWPA and MVRA, are
certainly pertinent to the outcome of this appeal. Further,
Appellant can hardly be faulted for failing to cite the specific
statute under which restitution was imposed, when neither the
Government nor the district court did so in connection with the
sentencing proceedings.
12
B.
Ascertaining the meaning and context of 18 U.S.C.
§ 3583(d) involves applying several cross-references. Section
3583(d) itself provides, “The court may order, as a further
condition of supervised release, . . . any condition set forth
as a discretionary condition of probation in section 3563(b)
. . . .” 18 U.S.C. § 3583(d). The reference to § 3563(b)
invokes the statute allowing the imposition of restitution as a
condition of probation, which states,
The court may provide, as [a] further condition[] of a
sentence of probation . . . that the defendant . . .
(2) make restitution to a victim of the
offense under section 3556 (but not subject
to the limitation of section 3663(a) or
3663A(c)(1)(A)).
Id. § 3563(b)(2) (emphasis supplied). In turn, 18 U.S.C. § 3556
provides, “The court, in imposing a sentence on a defendant who
has been found guilty of an offense shall order restitution in
accordance with section 3663A [the MVRA], and may order
restitution in accordance with section 3663 [the VWPA].” Id.
§ 3556. Therefore, by operation of § 3556, an order of
restitution imposed as a condition of supervised release shall
13
be made “in accordance with” VWPA and MVRA, but not subject to
“the limitation” therein. 7
C.
Having discussed the applicable statutes, we now turn
to the crux of this appeal: whether the purported victims are
victims “of the offense” for the purposes of 18 U.S.C.
§ 3563(b).
7
The “limitation” mentioned in § 3563(b) is not specific.
The VWPA subsection referenced as a “limitation” discusses the
type of offenses for which restitution may be awarded, see 18
U.S.C. § 3663(a)(1)(A) (providing that a court may order
restitution to a victim of a Title 18 offense, certain
Controlled Substances Act offenses, and other federal offenses
involving aircraft piracy and transportation of hazardous
materials), and the type of harm a victim must experience, see
id. § 3663(a)(2) (defining victim as “a person directly and
proximately harmed as a result of the commission of an offense
for which restitution may be ordered including, in the case of
an offense that involves as an element a scheme, conspiracy, or
pattern of criminal activity, any person directly harmed by the
defendant’s criminal conduct in the course of the scheme,
conspiracy, or pattern”). Likewise, the MVRA mandates
restitution only “for convictions of, or plea agreements
relating to charges for, any offense . . . that is . . . a crime
of violence . . . ; an offense against property under this title
. . . including any offense committed by fraud or deceit; an
offense . . . relating to tampering with consumer products; or
an offense . . . relating to theft of medical products.” Id.
§ 3663A(c)(1)(A)(i) – (iv). Because we decide that the
purported victims are not victims of Appellant’s offense of
conviction, we need not address these potential limitations
here.
14
1.
We first discuss whether the statute requires the
purported victims to be victims only of the offense of
conviction. As explained below, we conclude it does.
In 1990, the Supreme Court held, “the language and
structure of [the VWPA] make plain Congress’ intent to authorize
an award of restitution only for 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) (emphasis supplied).
This concept was later extended to cases such as this, in which
the restitution was ordered as a condition of supervised
release. See, e.g., United States v. Batson, 608 F.3d 630, 637
(9th Cir. 2010) (“We now join our sister circuits in holding
that an award of restitution ordered as a condition of
supervised release can compensate ‘only for the loss caused by
the specific conduct that is the basis of the offense of
conviction,’ so long as that offense does not involve an element
of scheme, conspiracy or pattern of criminal activity.” (citing
Hughey, 495 U.S. at 413) (emphasis supplied)); United States v.
Varrone, 554 F.3d 327, 334 (2d Cir. 2009) (“We now join our
sister circuits in concluding that Hughey’s construction of the
VWPA is applicable to the restitution provision of the
supervised release statute. We hold that restitution can be
ordered as a condition of supervised release under 18 U.S.C.
15
§§ 3583(d), 3563(b)(2) only to compensate for losses caused by
the specific conduct that is the basis for the offense of
conviction.”); United States v. Frith, 461 F.3d 914, 920 (7th
Cir. 2006); United States v. Romines, 204 F.3d 1067, 1069 (11th
Cir. 2000) (per curiam); Gall v. United States, 21 F.3d 107, 110
(6th Cir. 1994).
In the face of this overwhelming authority, the
Government essentially conceded at oral argument that in order
to collect restitution, the purported victims must be victims of
the offense for which Appellant was convicted. See Oral
Argument at 25:16-25:24, United States v. Freeman, No. 12-4636
(Dec. 10, 2013), available at http://www.ca4.uscourts.gov/oral-
argument/listen-to-oral-arguments (“The Government is only
arguing that the basis of the restitution award was based on the
offense of conviction, not on the relevant conduct.”). We
nonetheless pause to consider this issue, as it is one we have
not yet addressed in a published opinion. 8
Persuaded by our sister circuits’ reasoning, we join
them in holding that awards of restitution ordered as a
8
We have addressed the issue in an unpublished opinion.
See United States v. Rosser, No. 91-5856, 1992 WL 113384, at *1
(4th Cir. May 29, 1992) (unpublished per curiam) (vacating
restitution award imposed as a condition of supervised release
because “the district court failed to limit restitution to the
amount of loss the Government sustained as a result of the
offense for which Rosser was convicted”).
16
condition of supervised release must compensate “only for the
loss caused by the specific conduct that is the basis of the
offense of conviction.” Hughey, 495 U.S. at 413.
The plain reading of the applicable statutory language
compels this result. Section 3563(b) states that a district
court may, as a condition of probation or supervised release,
“make restitution to a victim of the offense.” 18 U.S.C.
§ 3563(b)(2) (emphasis supplied). Further, restitution as a
condition of probation (and supervised release) is to be ordered
“under section 3556.” Id. Section 3556 refers to orders of
restitution pursuant to the VWPA and the MVRA, which provide,
“[t]he court, when sentencing a defendant convicted of an
offense [under listed titles or statutes] may order . . .
restitution to any victim of such offense,” id. § 3663(a)(1)(A),
and “when sentencing a defendant convicted of an offense
described in subsection (c), the court shall order . . . that
the defendant make restitution to the victim of the offense,”
id. § 3663A(a)(1) (emphases supplied); see also Batson, 608 F.3d
at 636.
As Batson explains, “The natural reading of these
provisions is that restitution is authorized for the offense of
conviction and not for other related offenses of which the
defendant was not convicted.” Batson, 608 F.3d at 636. Indeed,
these statutes do not allow restitution for “relevant conduct,”
17
“a related offense,” or a “factually relevant offense,” but
rather, “the offense,” which can only be read to mean the
offense of conviction. See Hughey, 495 U.S. at 418 (“[H]ad
Congress intended to permit a victim to recover for losses
stemming from all conduct attributable to the defendant,
including conduct unrelated to the offense of conviction,
Congress would likely have chosen language other than ‘the
offense,’ which refers without question to the offense of
conviction.”). To hold otherwise would be to improperly read
the words “of the offense” out of the statute. See United
States v. Nordic Vill., Inc., 503 U.S. 30, 36 (1992) (declining
to adopt a construction that would violate the “settled rule
that a statute must, if possible, be construed in such fashion
that every word has some operative effect”).
In sum, regardless of whether restitution is ordered
pursuant to the VWPA, the MVRA, or as a condition of supervised
release or probation, the alleged victims must be victims of the
offense of conviction. See United States v. Newsome, 322 F.3d
328, 341 (4th Cir. 2003) (“[T]he focus of the court in applying
the MVRA must be on the losses to the victim caused by the
offense.” (emphasis supplied)); id. (“[I]t is the ‘offense of
conviction,’ not the ‘relevant conduct,’ that must be the cause
of losses attributable as restitutionary liability.”); United
States v. Blake, 81 F.3d 498, 506 (4th Cir. 1996) (“For a person
18
to be considered a victim under the [VWPA], the act that harms
the individual must be . . . conduct underlying an element of
the offense of conviction . . . .” (emphasis supplied)). 9
2.
Therefore, we must next address whether the purported
victims’ losses were “caused by the specific conduct that is the
basis of” the defendant’s offense of conviction. Hughey, 495
U.S. at 413. The Government bears the burden of showing the
causal connection and the amount of the loss. See 18 U.S.C.
§ 3664(e) (“The burden of demonstrating the amount of the loss
sustained by a victim as a result of the offense shall be on the
attorney for the Government.” (emphasis supplied)); see also
United States v. Kieffer, 681 F.3d 1143, 1171 (11th Cir. 2012)
(demonstrating that it is the Government’s burden to prove
alleged victims are “victims of Defendant’s criminal conduct.”
9
This court has recognized that the act that harms the
alleged victim could also be “an act taken in furtherance of a
scheme, conspiracy, or pattern of criminal activity that is
specifically included as an element of the offense of
conviction.” Blake, 81 F.3d at 506; see also United States v.
Henoud, 81 F.3d 484, 489 (4th Cir. 1996) (affirming a
restitution order where the defendant was convicted of a
criminal scheme and “the district court had the authority to
order restitution for the losses by the entire fraud scheme”
(internal quotation marks omitted)). Given that Appellant was
not convicted of a scheme, conspiracy, or pattern, we are not
presented with such a situation in this case.
19
(internal quotation marks omitted)). We conclude that the
Government fell far short of meeting its burden in this matter.
a.
This court has overturned restitution awards in which
the Government could not show the requisite causal connection
between the specific conduct underlying the offense of
conviction and the victims’ losses. For example, in United
States v. Broughton-Jones, 71 F.3d 1143 (4th Cir. 1999), the
defendant was indicted on four counts of perjury and one count
of wire fraud in connection with a fraudulent brokerage scheme.
See id. at 1145. Broughton-Jones pled guilty to one count of
perjury, based upon false testimony she provided to a federal
grand jury. At sentencing, the district court ordered her to
pay restitution in the amount of $25,000, the amount of an
advance payment she obtained from a client under false
pretenses, which served as the basis for the wire fraud charge.
See id.
Pursuant to Hughey, we held Broughton-Jones did not
have to pay restitution to her unwitting client because the
restitution order did not “compensate[] a victim of Broughton-
Jones’s perjury for some loss caused by that offense.”
Broughton-Jones, 71 F.3d at 1148 (emphasis supplied). After
examining the “specific conduct” underlying the conviction of
grand jury perjury, we held, “[a]lthough there is a factual
20
connection between Broughton-Jones’s perjury and her alleged
financing scheme, that connection is legally irrelevant.” Id.
at 1149. Therefore, we vacated the entire sentence and remanded
for resentencing.
In United States v. Blake, 81 F.3d 498 (4th Cir.
1996), we again concluded that alleged victims’ losses were not
caused by a defendant’s offense of conviction and vacated the
restitution award to those individuals. In that case, Blake
pled guilty to using unauthorized access devices (i.e., stolen
credit cards), and the district court ordered him to pay
restitution to the owners of the credit cards. See id. at 503.
Again citing Hughey, we overturned the award of restitution with
regard to $1,922 that stemmed from “expenses related to lost
property and document replacement,” i.e., pocketbooks, wallets,
and other items Blake took when he stole the cards, reasoning
that the district court was required to look at the “specific
conduct that is the basis of the conviction.” Id. at 502, 506.
We explained,
For a person to be considered a victim under § 3663,
the act that harms the individual must be either
conduct underlying an element of the offense of
conviction, or an act taken in furtherance of a
scheme, conspiracy, or pattern of criminal activity
that is specifically included as an element of the
offense of conviction. But, if the harm to the person
does not result from conduct underlying an element of
the offense of conviction, or conduct that is part of
a pattern of criminal activity that is an element of
the offense of conviction, the district court may not
21
order the defendant to pay restitution to that
individual.
Id. at 506 (citations omitted). We then explained that the
elements of the crime to which Blake pled guilty (using the
stolen credit cards) did not “include the theft of the credit
cards,” and thus, “the loss to the robbery victims was not
caused by Blake’s offense of conviction.” Id. at 506-07
(emphasis supplied).
More recently, we held that a homeowner could not
collect restitution under the VWPA where the defendant broke
into a home and stole a firearm, but pled guilty only to
possession of a stolen firearm. See United States v. Davis, 714
F.3d 809, 816 (4th Cir. 2013). The homeowner requested
restitution of $500 for his insurance deductible for the
unrecovered stolen firearm, and $185 for damage caused when
Davis broke the window to enter the residence. See id. at 812.
The district court ordered Davis to pay $685 in restitution to
the homeowner, but we reversed. Relying on Blake, we explained,
Like Blake’s credit card theft, Davis’s burglary and
theft of the firearm represent “necessary step[s] in
the accomplishment of his objective,” here, possession
of a stolen firearm. But, like Blake, “the factual
connection between” these “necessary step[s]” and
Davis’s offense of conviction “is legally irrelevant
for the purpose of restitution.”
Id. at 814 (quoting Blake, 81 F.3d at 506). Therefore,
restitution was improper because the loss to the alleged victim
22
“was not caused by possession of a stolen firearm, the sole
offense of conviction.” Id. (internal quotation marks omitted).
b.
In 2012, the court was presented with an award of
restitution imposed as a condition of supervised release under
18 U.S.C. § 3583(d). See United States v. Oceanpro Indus.,
Inc., 674 F.3d 323, 330 (4th Cir. 2012).
Oceanpro Industries, Inc. (“Oceanpro”) was a seafood
wholesaler business operating in Maryland and Virginia. See
Oceanpro, 674 F.3d at 327. Oceanpro and two of its buyers were
convicted of purchasing untagged and oversized striped bass and
giving a false statement to law enforcement officers during the
investigation related to the same. See id. The district court
ordered Oceanpro and two of its fish buyers to, inter alia, pay
$300,000 in restitution, jointly and severally, to Maryland and
Virginia. See id. Oceanpro’s restitution was made a condition
of probation, and the fish buyers’ restitution was made a
condition of supervised release. All three appealed the
restitution order. See id.
This court recognized the “analysis for ordering
restitution as a condition of probation and supervised release
is similar” to that of the VWPA. See Oceanpro, 674 F.3d at 331.
It noted that the VWPA “defines victim as a person ‘directly and
proximately harmed as a result of the commission of an offense
23
for which restitution may be ordered,’” but also recognized that
§ 3563(b)(2) “specifically indicates that the restitution to a
‘victim of the offense’ for purposes of [supervised release or]
probation is ‘not subject to the limitation of’ the VWPA.” Id.
at 330-31 (quoting 18 U.S.C. § 3663(a)(2)) (emphasis in
original). This fact “indicat[es] that the definition of
‘victim’ in this context is even broader than the definition of
‘victim’ under the VWPA.” Id. (emphasis in original).
But the court did not say how much broader, nor did it
need to. Indeed, the court concluded that under the VWPA, the
MVRA, and as a condition of supervised release/probation, “the
district court was authorized to require the defendants to make
restitution to the ‘victims.’” Oceanpro, 674 F.3d at 332
(emphasis in original). It went on to declare Virginia and
Maryland “merely had to have interests that were ‘harmed’ as a
result of the defendants’ criminal conduct,” and because the
states had “a legitimate and substantial interest in protecting
the fish in their waters as part of the natural resources of the
State[s] and [their] fishing industries,” “their interests were
indeed harmed,” and restitution was appropriate. Id. at 331-32.
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c.
In light of this precedent, we conclude the Government
utterly failed to provide any evidence that the losses sustained
by the purported victims here were caused by the specific
conduct underlying Appellant’s offense of conviction --
obstruction of federal bankruptcy proceedings. The Government
simply states generally,
Each victim suffered significant losses as a result of
Freeman’s causing him or her to purchase expensive
assets under the mistaken belief that Freeman would
pay for the assets, when in fact Freeman, by virtue of
his obstruction, failed ever to repay these
individuals (and sought, through his obstruction, to
eliminate any legal obligation that he be required to
do so).
Appellee’s Br. 16. Further, the Government argues, “due to
Freeman’s obstruction, when the debts these victims incurred on
the defendant’s behalf came due, each individual was prevented
from collecting against the defendant, or from pointing
creditors to the defendant as the real party in interest.” Id.
But these arguments suggest no more than a tangential
connection between the purported victims’ losses and the
specific conduct underlying Appellant’s obstruction conviction.
Per a plain reading of the relevant statutes, and following the
lead of Hughey, Davis, Blake and Broughton-Jones, we look to the
elements of the offense of conviction and the “‘specific conduct
underlying these elements.’” Davis, 714 F.3d at 814 (quoting
25
Blake, 81 F.3d at 507). As delineated in the plea agreement,
the elements of obstruction are “(1) the defendant corruptly
attempted to and did obstruct, influence and impede an official
proceeding, in this case a bankruptcy proceeding; (2) the
defendant knew or should have known that the bankruptcy
proceeding was pending; and (3) the official proceeding, was a
federal proceeding.” J.A. 23; see also 18 U.S.C. § 1512(c)(2).
The “specific conduct” that serves as the basis for
these elements clearly did not cause the purported victim’s
losses. See Hughey, 495 U.S. at 413. As set forth in the
Statement of Facts, the specific conduct relevant to this appeal
is that Appellant falsely reported that he had no real property
in which he had any “legal, equitable or future interest,” no
“personal property of whatever kind, including property being
held for [Appellant] by someone else,” and no “property owned by
another that [Appellant] held or controlled.” J.A. 31-32. The
Government has failed to show that, even had Appellant been
completely truthful about these matters, the purported victims
would not have suffered the same harm. Cf. United States v.
Messner, 107 F.3d 1448, 1455 (10th Cir. 1997) (“Because the same
treatment would have resulted had Mr. Messner initially
disclosed his ownership of the assets, it is not evident
creditors were actually harmed by Mr. Messner’s initial attempt
to defraud them.”). It is unclear how Appellant’s
26
untruthfulness in the bankruptcy proceedings caused certain of
the purported victims to sell their homes and another to resign
from his job. We decline to make the leap the Government’s
theory requires based on no more than speculation.
Rather, it is quite obvious that the harm that befell
the purported victims stemmed from Appellant’s scheme of
inducing church members to incur substantial debts in the name
of the church, conduct for which Appellant was neither charged
nor convicted. Indeed, the court’s own words demonstrate the
attenuated relationship between the conduct underlying the
offense of conviction and the purported victims’ losses. See
J.A. 209 (“It was lying about [the debts of the church members
on Appellant’s behalf] to the Bankruptcy Court that produced the
offense of conviction, but under no circumstances do I consider
that it would not be appropriate to order restitution when there
have been victims of the very things about which this defendant
lied to this court.”); see also id. at 205 (“[T]he offense of
conviction is one committed . . . against . . . the Bankruptcy
Court.”). Appellant’s untruthfulness during his bankruptcy
proceedings may have exacerbated the purported victims’ harm,
but it certainly did not cause it, as required under our
precedent.
27
d.
Finally, we address the Government’s reliance on
Oceanpro. It argues that if the definition of “victim” is meant
to be “broader” for purposes of supervised release than it is
for the purposes of the VWPA and MVRA, Oceanpro, 674 F.3d at
331, then the purported victims in this case must fall into that
broader definition. We disagree.
First, in Oceanpro, the court decided that Maryland
and Virginia were “victims” under the VWPA, the MVRA, and 18
U.S.C. §§ 3563(b) and 3583(d). Thus, the statement that the
term “victim” is “broader” under the supervised release statute
versus the VWPA or MVRA is dicta. See The Pittston Co. v.
United States, 199 F.3d 694, 703 (4th Cir. 1999) (defining dicta
as “statement[s] in a judicial opinion that could have been
deleted without seriously impairing the analytical foundation of
the holding -- that, being peripheral, may not have received the
full and careful consideration of the court that uttered it.”)
(internal quotation marks and citations omitted)); Edwards v.
Prime, Inc., 602 F.3d 1276, 1298 (11th Cir. 2010) (“[D]icta is
not binding on anyone for any purpose.”).
Furthermore, Oceanpro, in stating that the definition
of victim is broader in a supervised release context, cites
Batson. See Oceanpro, 674 F.3d at 331 (quoting Batson, 608 F.3d
at 636). However, Batson, as explained above, ultimately holds
28
that regardless of which statute is used, “restitution is
authorized for the offense of conviction and not for other
related offenses of which the defendant was not convicted.” 608
F.3d at 636.
Additionally, the language in Oceanpro, which states
the victims “merely had to have interests that were ‘harmed’ as
a result of the defendants’ criminal conduct,” must be read in
the specific context of that case. 674 F.3d at 332. In
Oceanpro, the defendants were convicted, inter alia, of
conspiracy to violate the Lacey Act, 18 U.S.C. § 317. See
Oceanpro, 674 F.3d at 327. Congress has specifically expanded
the VWPA definition of victim in such cases: “the term ‘victim’
means . . . in the case of an offense that involves as an
element a scheme, conspiracy, or pattern of criminal activity,
any person directly harmed by the defendant’s criminal conduct
in the course of the scheme, conspiracy, or pattern.” 18 U.S.C.
§ 3663(a)(2) (emphasis supplied). Here, Appellant did not plead
guilty to a crime involving a conspiracy, scheme, or pattern as
an element. This court recognized, and it still remains good
law, that the VWPA’s expansion of the definition of victim in
such cases “does not authorize a district court to order
restitution to all individuals harmed by a defendant’s criminal
conduct.” Blake, 81 F.3d at 506. Furthermore, unlike here, in
Oceanpro it is clear the interests of Maryland and Virginia were
29
directly harmed by the illegal purchasing untagged and oversized
fish swimming in the states’ waters, as required by the VWPA.
Therefore, the Government’s argument that, under
Oceanpro, a “broader” reading of “victim” under §§ 3563(b) and
3583(d) would necessarily encompass the purported victims falls
flat.
We thus have no trouble concluding the district court
abused its discretion in awarding restitution to the purported
victims, as the award was contrary to the legal principles set
forth in Hughey, Davis, Broughton-Jones, and Blake. See Teleguz
v. Pearson, 689 F.3d 322, 327 (4th Cir. 2012) (“When a court
bases its decision on an error of law, it necessarily abuses its
discretion.”).
IV.
Therefore, we reverse the district court’s judgment to
the extent it orders restitution. Given that the district court
ordered restitution in lieu of a fine, see J.A. 209
(“Accordingly, . . . in lieu of a fine, I’m going to enter an
order of restitution to the victims . . .”), we remand this
matter so that the court may consider whether or not to impose a
fine. Cf. Batson, 608 F.3d at 636 (“There is no indication that
the amount of the fine was conditioned on the amount of
restitution, and we decline to reopen the matter.”).
REVERSED AND REMANDED
30