United States v. Tarnawa ( 2022 )

Case: 20-40295 Document: 00516218442 Page: 1 Date Filed: 02/25/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
February 25, 2022
No. 20-40295 Lyle W. Cayce
Clerk
United States of America,
Plaintiff—Appellee,
versus
Donald Tarnawa,
Defendant—Appellant.
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:03-CR-144-1
Before Jones, Haynes, and Costa, Circuit Judges.
Edith H. Jones, Circuit Judge:
The original criminal judgment entered against Appellant Donald
Tarnawa recommended that he contribute some of his prison wages toward
his multimillion-dollar restitution obligation through the Inmate Financial
Responsibility Program (“IFRP”). The obligation was vacated, however, by
a federal habeas judgment issued in another circuit. Subsequently, the
government moved to modify the original judgment because Tarnawa’s
exemption from the IFRP materially changed his economic circumstances as
contemplated by 18 U.S.C. § 3664(k). The convicting court granted the
modification. Its judgment is AFFIRMED.
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No. 20-40295
I. BACKGROUND
After serving a prison sentence in Florida in the 1990s, Tarnawa
assumed the identities of several fellow prisoners, formed at least six
corporate entities, and proceeded to swindle investors out of $27,636,962.00.
A jury convicted Tarnawa of five counts of wire fraud, six counts of bank
fraud, and 20 counts of money laundering. The district court sentenced him
in May 2005 to 480 months of imprisonment, followed by five years of
supervised release. The court further ordered Tarnawa to pay
$13,491,048.00 in restitution to five victims, specifying:
Restitution payments to being [sic] immediately. Any amount
that remains unpaid when the defendant’s supervision
commences is to be paid on a monthly basis at a rate of at least
ten percent of the defendant’s gross income, to be changed
during supervision, if needed, based on the defendant’s
changed circumstances pursuant to 18 U.S.C. § 3664(k). While
incarcerated, it is recommended that the defendant participate
in the [IFRP] at a rate determined by the Bureau of Prisons staff
in accordance with the requirements of the Inmate Financial
Responsibility Program. 1
The Bureau of Prisons (“BOP”) transferred Tarnawa from Texas to
California in August 2009. Tarnawa thereafter filed a 28 U.S.C. § 2241habeas petition. He contended that the warden impermissibly forced him to
pay $30 a month toward restitution because the judgment did not establish a
payment schedule and thereby unlawfully delegated authority to do so under
1
“Inmates participating in IFRP commit a percentage of funds earned through
prison employment toward payment of court-ordered monetary obligations.” United States
v. Diehl, 848 F.3d 629, 633 (5th Cir. 2017) (citing United States v. Pacheco-Alvarado,
782 F.3d 213, 218 (5th Cir.), cert. denied, 577 U.S. 879, 136 S. Ct. 175 (2015)); see also
28 C.F.R. § 545.10-11. Though participation is voluntary, “inmates who decline to
participate or fail to comply with their agreed upon financial plan may face consequences
such as limitations on work details or housing placement.” Diehl, 848 F.3d at 633 (citations
omitted).
2
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the Mandatory Victim Restitution Act (“MVRA”). Tarnawa v. Ives, No.
2:09-CV-02429, 2011 WL 1047701, at *1 (E.D. Cal. Mar. 18, 2011). The
California district court granted Tarnawa’s habeas petition in April 2013 and
ordered the warden to exempt him from the IFRP “unless the sentencing
court specifies the restitution schedule.” 2 Tarnawa v. Ives, No. 2:09-CV-
02429, Dkt. 28 (E.D. Cal. Apr. 4, 2013).
The government then moved the sentencing court in the Eastern
District of Texas to modify the original judgment under 18 U.S.C. § 3664(k)
based on Tarnawa’s materially changed economic circumstances, namely
“his exemption from the [IFRP].” It argued that Tarnawa’s exemption from
the IFRP materially changed his economic circumstances because Tarnawa
would no longer face consequences for not contributing earnings toward his
restitution obligation while incarcerated. The government emphasized that,
given Tarnawa’s lengthy sentence, his victims could only be compensated
with funds he earned while incarcerated. Thus, it requested a modified
judgment requiring Tarnawa to pay 50 percent of his earnings toward the
restitution obligation. Tarnawa moved to dismiss on the grounds that the
sentencing court lacked jurisdiction to modify the judgment, and an order
under § 3664(k) could not require him to participate in the IFRP. Tarnawa
further emphasized that his economic circumstances had not materially
2
The California district court originally dismissed the petition. Id. at *3. But the
Ninth Circuit vacated that judgment and remanded in light of its decision in Ward v.
Chavez, 678 F.3d 1042 (9th Cir. 2012) (holding that that a judgment impermissibly
delegated authority to set a payment schedule to the BOP). Tarnawa v. Ives, No. 11- 17641
(9th Cir. Feb. 26, 2013); Tarnawa v. Ives, No. 2:09-CV-02429, Dkt. 25 (E.D. Cal. Feb. 26,
2013). The Ward court did, however, acknowledge that “‘the Fourth, Fifth, and Seventh
Circuits have held that a judgment of conviction need not contain a schedule of restitution
payments to be made during the period of incarceration.’” 678 F.3d at 1047 n.2 (quoting
United States v. Lemoine, 546 F.3d 1042, 1048 n.4 (9th Cir. 2008)).
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changed. The sentencing court granted the government’s motion and
amended the judgment to state:
While incarcerated, it is recommended that the defendant
participate in the [IFRP]. During the term of imprisonment,
restitution is payable every three months in an amount, after a
telephone allowance, equal to 50 percent of the funds
deposited into the defendant’s inmate trust fund account.
Tarnawa timely appealed and was appointed pro bono counsel.
II. STANDARD OF REVIEW
This court “review[s] the legality of the district court’s order of
restitution de novo . . . . [and] the propriety of a particular award for an abuse
of discretion.” United States v. Hughey, 147 F.3d 423, 436 (5th Cir. 1998)
(citing United States v. Chaney, 964 F.2d 437, 451 (5th Cir. 1992)). Factual
findings supporting the award are reviewed for clear error. See United States
v. Sharma, 703 F.3d 318, 322 (5th Cir. 2012) (citation omitted)).
The parties appear to dispute the appropriate standard of review of a
judgment modified under Sec 3664(k). Our sister circuits seem to take
different positions on whether to conduct appellate review de novo 3 or for
abuse of discretion. 4 We need not take a position on the precise standard
3
See United States v. Grant, 235 F.3d 95, 99 (2d Cir. 2000); United States v. Bratton-
Bey, 564 F. App’x. 28, 29 (4th Cir. 2014) (per curiam) (citing Grant, 235 F.3d at 99); United
States v. Baxter, 2019 WL 661502, at *1 (D.C. Cir. 2019) (per curiam) (citing United States
v. Simpson-El, 856 F.3d 1295, 1296 (10th Cir. 2017) (assuming without deciding that a de
novo standard of review applied)).
4
See United States v. Knight, 315 F. App’x. 435, 436-37 (3d Cir. 2009) (citation
omitted); United States v. Holley, No. 19-5492, 2020 WL 2316052, at *2 (6th Cir. Jan. 29,
2020) (per curiam) (citing United States v. Dale, 613 F. App’x 912, 913 (11th Cir. 2015) (per
curiam)); United States v. Boal, 534 F.3d 965, 968 (8th Cir. 2008) (citing United States v.
Vanhorn, 399 F.3d 884, 886 (8th Cir. 2005) (per curiam)); United States v. McClamma,
146 F. App’x. 446, 448 (11th Cir. 2005) (per curiam) (citing Vanhorn, 399 F.3d at 886). The
4
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because the modification must be affirmed either way. And on this record, it
is also unnecessary to decide which party bears the burden of proof when the
government seeks modification pursuant to § 3664(k).
III. DISCUSSION
The MVRA requires defendants pay restitution if they commit “an
offense against property . . . including any offense committed by fraud or
deceit[,]”and “an identifiable victim or victims . . . suffered a physical injury
or pecuniary loss.” 18 U.S.C. § 3663A(c)(1)(A)(ii), (c)(1)(B). Upon making
such findings, district courts must “order restitution to each victim in the full
amount of each victim’s losses as determined by the court and without
consideration of the economic circumstances of the defendant.”
18 U.S.C. § 3664(f)(1)(A)). “A person sentenced to pay . . . restitution, shall
make such payment immediately, unless, in the interest of justice, the court
provides for payment on a date certain or in installments.”
18 U.S.C. § 3572(d)(1). But the MVRA further requires courts to “specify
in the restitution order the manner in which, and the schedule according to
which, the restitution is to be paid in consideration of . . . .” the defendant’s
assets, income, and financial obligations. 18 U.S.C. § 3664(f)(2).
A sentence imposing restitution constitutes a final judgment; but,
because § 3664(f)(2) only accounts for the defendant’s financial
circumstances at sentencing, the MVRA instructs that:
the defendant shall notify the court and the Attorney General
of any material change in the defendant’s economic
circumstances that might affect the defendant’s ability to pay
restitution. The court may also accept notification of a material
different standards may depend on whether a court is interpreting the statutory language
to determine if there is jurisdiction to modify as opposed to review of the exercise of
discretion where the statute allows it.
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change in the defendant’s economic circumstances from the
United States or from the victim. The Attorney General shall
certify to the court that the victim or victims owed restitution
by the defendant have been notified of the change in
circumstances. Upon receipt of the notification, the court may,
on its own motion, or the motion of any party, including the
victim, adjust the payment schedule, or require immediate
payment in full, as the interests of justice require.
18 U.S.C. § 3664(k), (o)(1)(D). Procedurally, courts determine whether a
defendant’s economic circumstances have materially changed “by an
objective comparison of a defendant’s financial condition before and after a
sentence is imposed.” United States v. Franklin, 595 F. App’x 267, 273 (5th
Cir. 2014) (per curiam) (quoting Grant, 235 F.3d at 100). Substantively, a
material change is “a bona fide change in the defendant’s financial condition,
either positive or negative.” Cani v. United States, 331 F.3d 1210, 1215 (11th
Cir. 2003) (citation omitted) (emphasis in original); see also United States v.
Grigsby (Grigsby II), 579 F. App’x 680, 684 (10th Cir. 2014) (citing Cani,
331 F.3d at 1215). A change must also be immediate to be material. See
Vanhorn, 399 F.3d at 886; see also United States v. Surber, 94 F. App’x. 355,
356 (7th Cir. 2004) (per curiam).
“In summary, the MVRA requires the district court to: (a) order the
full amount of restitution; (b) establish an original payment schedule that
takes into consideration the defendant’s financial situation; and (c) respond
to any change in the defendant’s economic condition by adjusting the
schedule. All of this has the goal of making ‘full payment’ in the shortest time
possible.” United States v. Scales, 639 F. App’x. 233, 239 (5th Cir. 2016).
A.
Tarnawa argues that the sentencing court erred by modifying the
judgment pursuant to § 3664(k) without articulating its consideration of the
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factors under § 3664(f)(2). To support this argument, Tarnawa cites the
Fourth Circuit’s decision in United States v. Grant. In Grant, the court held
that “it is not sufficient that the district court merely consider [the
defendant’s financial resources, assets, projected income and other financial
obligations under § 3664(f)(2)]; the court must actually demonstrate its
consideration of them on the record.” 715 F.3d 552, 558 (4th Cir. 2013)
(citations omitted). But the § 3664(f)(2) factors are relevant when the court
fixes the original restitution payment schedule. Tarnawa cites no authorities
that link the § 3664(f)(2) factors to § 3664(k). The absence of any such link
in the MVRA’s plain text forecloses Tarnawa’s attempt to import
interpretations of § 3664(f)(2) into § 3664(k).
But, even if the § 3664(f)(2) factors did apply to modifications under
§ 3664(k), Grant conflicts with this court’s precedents. The Fifth Circuit
holds that district courts “need not make specific findings [when originally
imposing restitution] if the record provides an adequate basis to support the
restitution order.” United States v. Blocker, 104 F.3d 720, 737 (5th Cir. 1997)
(citing United States v. St. Gelais, 952 F.2d 90, 97 (5th Cir.), cert. denied,
506 U.S. 965, 113 S. Ct. 439 (1992)). Put another way, “[s]entencing judges
are accorded broad discretion in ordering restitution and are not required to
make specific findings on each factor listed in § 3664.” United States v.
Impson, 129 F.3d 606, 1997 WL 680365, at *1 (citations omitted) (5th Cir.
1997) (per curiam). Thus, Tarnawa’s first argument for vacating the modified
judgment fails.
B.
Tarnawa further argues that the sentencing court erred because his
ability to accumulate wages while incarcerated does not constitute a material
change in his economic circumstances. He relies on United States v. Hughes,
914 F.3d 947, 951 (5th Cir. 2019), where this court remarked in dicta that “it
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is dubious whether the gradual accumulation of prison wages constitutes a
‘material change in the defendant’s economic circumstances,’” as
contemplated by § 3664(k). This argument is also unpersuasive.
The “material change” occurred in Tarnawa’s economic
circumstances when, as a consequence of the California court’s habeas
judgment, he became exempt from the IFRP and was allowed to keep 100%
of his prison wages, as opposed to being required to hand over $30/month
toward restitution (the amount prescribed by the prison warden). For more
than seven years, until the district court here ordered a payment schedule,
Tarnawa was not required to devote any of his wages to the restitution
obligation. This one-time event occurred when the court relieved Tarnawa
from what would otherwise have been a significant deduction from his inmate
wages. Hence this event differentiates Tarnawa’s situation from the mere
gradual accumulation of prison wages. See, e.g., Grant, 235 F.3d at 97-98,
100-01 (defendant’s circumstances changed materially after state authorities
unfroze inmate account holding $400); United States v. White, 745 F. App’x
646, 648 (7th Cir. 2018) (per curiam) (influx of over $5,000 into inmate
account was material change); United States v. Dye, 48 F. App’x 218, 220
(8th Cir. 2002) (per curiam) (access to previously seized computer and $1,261
constituted material change); United States v. Kidd, 23 F.4th 781, 787 (8th
Cir.) (“even a ‘gradual accumulation of prison wages’ could in some
circumstances constitute a ‘material change in the defendant’s economic
circumstances[]’”) (quoting Hughes, 914 F.3d at 951).
Moreover, holding that an exemption from the IFRP does not
materially change a defendant’s economic circumstances would undermine
the principles of criminal restitution. A convicted criminal “cannot escape
his responsibility to restore his victims by hiding behind his sentencing order,
not when he has the means to pay and not when the law provides a remedy
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that the government and the district court may act upon.” United States v.
Rand, 924 F.3d 140, 143-44 (5th Cir. 2019). Because § 3664(k) expressly
provides a mechanism to avoid that result, Tarnawa should not be allowed to
exploit his conditional exemption from the IFRP to limit or deny
compensation to the victims. Particularly is this true because Tarnawa
himself sought the habeas order that only conditionally exempted him from
what the California courts considered a technically-unauthorized IFRP
order.
For these reasons, the judgment of the district court is AFFIRMED.
9