People v. Clapp ( 2021 )

Filed 4/5/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
THE PEOPLE, C081690
Plaintiff and Respondent, (Super. Ct. No. 14F00245)
v.
DANIEL CORY CLAPP,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Sacramento County, Steve W.
White, Judge. Affirmed.
Sandra Gillies, under appointment by the Court of Appeal, for Defendant and
Appellant.
Kamala D. Harris and Xavier Becerra, Attorneys General, Gerald A. Engler, Chief
Assistant Attorney General, Michael P. Farrell, Assistant Attorneys General, Stephen G.
Herndon and Daniel B. Bernstein, Supervising Deputy Attorneys General, for
Respondent.
1
Defendant Daniel Cory Clapp pleaded no contest to concealing the true extent of
his physical activities and abilities from his employer, the Department of the California
Highway Patrol (CHP), and the State Compensation Insurance Fund (SCIF). (Pen. Code,
§ 550, subd. (b)(3)). 1 Consistent with the resolution negotiated by the parties, the trial
court granted defendant three years’ probation, and as a condition of probation, ordered
him to pay restitution. Following a restitution hearing, defendant was ordered to pay
$30,095.68 to SCIF for temporary disability benefits and $81,768.01 to CHP for benefits
wrongfully obtained. He was also ordered to pay $1,350 and $70,159 to SCIF and CHP
respectively for investigative costs. Defendant appeals the restitution award as to
investigation costs contending that, as public investigative agencies, neither SCIF nor
CHP is entitled to reimbursement for the costs of investigating his claim.
We conclude that as direct victims of defendant’s fraud, both CHP and SCIF are
entitled to restitution for investigative costs incurred in an effort to justify discontinuance
of payments and recoup money defendant fraudulently obtained. Accordingly, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Defendant was a CHP officer at the Chester area substation of the Susanville
office, when he was injured on the job. Defendant claimed injuries to his shoulder, head,
and knees.
Defendant began collecting disability payments under Labor Code section
4800.5. 2 Those payments came out of CHP’s budget. In April 2012, based on a tip, the
1 Undesignated statutory references are to the Penal Code in effect at the time of the
charged offenses.
2 Labor Code section 4800.5, subdivision (a) provides in pertinent part: “Whenever any
sworn member of the Department of the California Highway Patrol is disabled by a single
injury, excluding disabilities that are the result of cumulative trauma or cumulative
injuries, arising out of and in the course of his or her duties, he or she shall become
entitled, regardless of his or her period of service with the patrol, to leave of absence
2
worker’s compensation fraud unit of the CHP began investigating defendant. The unit
conducted surveillance, including on travel, doctor’s visits, shopping, and camping,
which included boating, swimming, and chopping wood. In October 2013, CHP
investigators showed the surveillance videos to defendant’s doctor. Based on the videos,
the doctor agreed if she had been aware of defendant’s activities, she would have released
him to work in April 2012. She also agreed defendant’s complaints had been a “gross
misrepresentation.” On October 10, 2013, the doctor released defendant for full duty
with no restrictions.
Between April 2012 and October 2013, defendant received over $80,000 in Labor
Code section 4800.5 disability payments. And between March 2013 and October 2013,
defendant received over $30,000 in temporary disability payments from SCIF.
CHP officers logged 1,761 hours investigating defendant and his activities on
disability leave. Based on a median wage of $41.27 per hour, CHP sought
reimbursement for $70,159 in salary costs to investigate the case. CHP did not seek
restitution for gas and vehicle maintenance, lodging and meals for investigators while on
assignment, overtime pay for investigators, medical treatment and exams for defendant,
or video production.
SCIF investigators spent 59 hours investigating defendant’s claims. At an average
salary of $30 per hour, the agency spent approximately $1,770 on wages to investigate
this case.
Defendant was charged with conspiring to make a false or fraudulent statement to
obtain compensation (Ins. Code, § 1871.4, subd. (a)(3); count 1); making a false and
material statement to CHP and SCIF regarding his physical condition and abilities (Ins.
Code, § 1871.4, subd. (a)(1); count 2); concealing from CHP and SCIF the true extent of
while so disabled without loss of salary, in lieu of disability payments under this chapter,
for a period of not exceeding one year.”
3
his physical activities and abilities (§ 550, subd. (b)(3); count 3); grand theft from the
CHP (§ 487, subd. (b)(3); count 4); and perjury, committed on April 8, 2013 (§ 118,
subd. (a); count 5). Pursuant to a plea bargain, defendant pleaded no contest to count 3,
as a misdemeanor. In accordance with the plea, the trial court placed defendant on three
years’ informal probation. On the People’s motion, the trial court dismissed the
remaining counts in the interest of justice. 3
The People sought restitution for both CHP and SCIF in the amounts of benefits
fraudulently obtained by defendant as well as the costs incurred investigating defendant’s
disability claims. The trial court heard argument on the propriety of ordering restitution
for investigation costs to CHP and SCIF for a conviction under section 550, subdivision
(c)(3), focusing primarily on their status as governmental agencies. The trial court found
neither CHP nor SCIF were acting as a prosecuting agency in conducting their
investigations. Rather they were victims entitled to restitution for investigative costs,
under section 1202.4, including for wages paid to personnel investigating defendant.
Accordingly, in addition to ordering restitution for benefits paid, the trial court ordered
defendant to pay CHP $70,159 and SCIF $1,380 in restitution for investigative costs. 4
DISCUSSION
On appeal, defendant does not challenge the restitution order concerning the
payments he fraudulently obtained. His contention is limited to investigative costs. He
maintains the investigative costs/salaries of employees of public agencies, such as CHP
and SCIF, who were assertedly performing their normal job duties investigating
3 The alleged coconspirator was defendant’s wife. The charges against her were
dismissed in connection with the negotiated resolution of defendant’s case.
4 These amounts were based on the prosecution’s restitution brief. The actual amounts
are not challenged by defendant.
4
defendant’s claim do not constitute an economic loss and thus those entities are not
entitled to restitution for those costs. We disagree.
In determining on appeal whether it was error to award restitution “to the public
agencies for their investigative costs, we are mindful that the trial court’s ruling ‘must be
sustained unless it constitutes an abuse of discretion or rests upon a demonstrable error of
law.’ ” (People v. Ozkan (2004) 124 Cal.App.4th 1072, 1075 (Ozkan).) However, a
restitution order based on an error of law would constitute an abuse of discretion.
(People v. Jennings (2005) 128 Cal.App.4th 42, 49.)
As a general matter, where a victim has suffered economic losses as a result of a
defendant’s actions, a trial court must require the defendant to make restitution. (People
v. Phu (2009) 179 Cal.App.4th 280, 283.)
And where, as here, section 550 is violated, “[r]estitution shall be ordered,” with
the trial court determining “the amount of restitution and the person or persons to whom
the restitution shall be paid.” (§ 550, subd. (c)(4).) Section 550 also provides that, “[t]his
section shall not be construed to preclude the applicability of any other provision of
criminal law or equitable remedy that applies or may apply to any act committed or
alleged to have been committed by a person.” (§ 550, subd. (h).)
Along those lines, section 1202.4, subdivision (f) states in pertinent part: “[I]n
every case in which a victim has suffered economic loss as a result of the defendant’s
conduct, the court shall require that the defendant make restitution to the victim or
victims in an amount established by court order.” This section requires victims to be
fully reimbursed “for every determined economic loss incurred as the result of the
defendant’s criminal conduct” and contains an expressly nonexclusive list of
reimbursable losses, “including, but not limited to:” economic loss such as “wages . . .
lost by the victim . . . due to time spent as a witness or in assisting the police or
prosecution.” (§ 1202.4, subd. (f)(3)(E), italics added; see also Dyna-Med, Inc. v. Fair
Employment & Housing Com. (1987) 43 Cal.3d 1379, 1389 [“the phrase ‘including, but
5
not limited to’ is a phrase of enlargement”]; In re Johnny M. (2002) 100 Cal.App.4th
1128, 1133 (Johnny M.) [“The term ‘economic losses’ is thus entitled to an expansive
interpretation”].)
Further, under section 1202.4, “victim” includes: “A . . . government,
governmental subdivision, agency, or instrumentality, or any other legal or commercial
entity when that entity is a direct victim of a crime.” (§ 1202.4, subd. (k)(2), italics
added.) 5 The term “direct victim” includes: “ ‘entities against which the probationer’s
crimes had been committed’— that is, entities that are the ‘immediate objects of the
probationer’s offenses.’ ” (People v. Martinez (2005) 36 Cal.4th 384, 393 (Martinez),
quoting People v. Birkett (1999) 21 Cal.4th 226, 232-233.) 6 For example, “a defrauded
government agency can be a victim entitled to restitution.” (People v. Torres (1997) 59
Cal.App.4th 1, 3 (Torres), citing People v. Crow (1993) 6 Cal.4th 952, 960 (Crow)
[county was victim of welfare fraud committed against the county].)
Here, CHP and SCIF are direct victims in that both entities paid defendant money
he fraudulently obtained from them. This is undisputed. Defendant, however, contends
that even though CHP and SCIF are victims of his fraud, they are not entitled to
reimbursement of investigative costs. He maintains the agencies would have paid the
salaries to the investigators on defendant’s case, irrespective of his particular fraudulent
5 It is uncontested that CHP is a state law enforcement agency and SCIF is a quasi-state
entity. (Gilmore v. State Compensation Ins. Fund (1937) 23 Cal.App.2d 325, 329; Allied
Interstate, Inc. v. Sessions Payroll Management, Inc. (2012) 203 Cal.App.4th 808, 817
(Allied Interstate).)
6 In Martinez, the high court held a state agency that disposed of hazardous substances
from a methamphetamine lab was not entitled to restitution for cleanup costs because the
agency was not a direct victim. (Martinez, supra, 36 Cal.4th at pp. 393-394.) It reasoned
that the manufacture of methamphetamine was not an offense committed against the
agency, nor was the agency an object of the crime. (Ibid.)
6
claims. Thus, according to defendant, “neither agency lost work product as a result of the
investigation in this case.”
As this court and others have previously noted, “ ‘ “ ‘ “[a] victim’s restitution right
is to be broadly and liberally construed.” ’ ” ’ ” (People v. Nichols (2017) 8 Cal.App.5th
330, 342 (Nichols).) Indeed, “ ‘the word “loss” must be construed broadly and liberally
to uphold the voters’ intent.’ ” (People v. Keichler (2005) 129 Cal.App.4th 1039, 1046
(Keichler).) Additionally, “restitution ensures ‘ “that amends . . . be made to society for
the breach of the law,” ’ enables ‘people who suffer loss as a result of criminal activity
[to] be compensated for those losses,’ and acts ‘as a “deterrent to future criminality” . . .
and “to rehabilitate the criminal.” ’ ” (Crow, supra, 6 Cal.4th at p. 958.)
Neither party, nor our own research, has revealed case law directly on point
relative to the situation here. But while the People rely on cases that do not involve
governmental entities as the direct victim, those cases are nevertheless instructive.
The People cite People v. Ortiz (1997) 53 Cal.App.4th 791 (Ortiz), where a
nonprofit trade association representing music recording companies was awarded
restitution for investigative costs related to defendant’s acts of music piracy. 7 (Id. at
p. 704) The defendant asserted that the trade association was not a direct victim — and if
it was, the association was not entitled to investigatory costs. (Id. at p. 795.) To the first
issue, the Ortiz court concluded the trade association was a direct victim, citing the
statutory language and the clearly expressed public policy of the state that direct victims
be awarded restitution. (Id. at p. 796.) The court explained, if the music companies
forming the trade association combated music piracy individually, instead of through a
7 The Ortiz court described the trade association as: “a nonprofit trade association
representing various Latin American music labels in an effort to find and destroy
counterfeit versions of their recordings and assist in the prosecution of persons involved
in the counterfeiting.” (Ortiz, supra, 53 Cal.App.4th at p. 794.)
7
trade association, the companies would undoubtably be entitled to restitution as “direct
victims” of defendant’s crime. (Ibid.) Concluding the formation of the trade association
made “good business sense,” the court found no reason why the association could not
combat piracy on behalf of its membership. (Ibid.) As for investigative costs related to
assisting the police in the investigation and prosecution of the case, the court concluded
that those expenses were an economic loss incurred as the result of defendant’s criminal
conduct. (Id. at p. 797.) The court rejected the defendant’s argument that the statute
required the victim to demonstrate a link between out-of-pocket expenses and the loss of
wages or profits, stating: “We do not read the statute as limiting restitution for out-of-
pocket expenses to cases in which out-of-pocket expenses result in lost profits or wages.”
(Id. at p. 798.)
The People also rely on People v. Maheshwari (2003) 107 Cal.App.4th 1406(Maheshwari), where a private employer was the direct victim of defendant’s
embezzlement and sought restitution for attorney’s fees and private investigator’s fees
incurred in a civil action to recover the embezzled funds. (Id. at p. 1407.) The defendant
contended the employer was required to use public prosecutors and investigative agencies
to recover the embezzled funds, rather than bringing a civil action. (Id. at p. 1409.)
Rejecting that argument, the court held that the employer’s “economic loss included the
funds embezzled as well as the fees and costs incurred to recover those funds.” (Ibid.,
italics added.) The court reasoned: “Both the investigation and resulting civil action were
‘proper, necessary, and a logical result of appellant’s criminal conduct.’ ” (Id. at
pp. 1409-1410.)
Here, CHP and SCIF were both direct victims of defendant’s fraud, which resulted
in them paying defendant money to which he was not entitled. We therefore see no
principled reason to treat them differently than the private employer in Maheshwari.
Like the Maheshwari employer, both agencies here were entitled to try to recoup funds
defendant wrongfully obtained, and thus the investigations here were a “ ‘proper,
8
necessary, and a logical result of appellant’s criminal conduct.’ ” (Maheshwari, supra,
107 Cal.App.4th at pp. 1409-1410.)
We similarly discern no principled reason to treat the victims here differently from
the trade association in Ortiz, an association tasked with the mission of investigating
music piracy on behalf of its members and assisting in the prosecution of counterfeiters.
(See fn. 8, ante.) Indeed, because the fraud was committed against CHP and SCIF, and
they had a right to investigate the wrong against them, the connection is even less
attenuated than in Ortiz.
Defendant, for his part, relies on cases that are distinguishable and of no help to
him. He cites People v. Busser (2010) 186 Cal.App.4th 1503, 1506, where the defendant
was ordered to pay restitution to his insurance carrier after pleading guilty to hit and run.
(Id. at p. 1506.) The court held that the carrier was not entitled to restitution for repair
costs related to the collision it would have paid regardless of whether the defendant
committed fraud — a different situation than where no payments would be made absent
the fraud. (Id. at pp. 1506, 1509-1511.) Further, the defendant in Busser did not contest
the restitution award for investigative costs and thus that part of the award was not at
issue on appeal. (Id. at pp. 1506, fn. 2, 1508.) Busser does not help defendant here.
Defendant also cites Ozkan, supra, 124 Cal.App.4th 1072, where the defendant
was convicted of grand theft by fraud and filing false sales tax returns, arising out of a
scheme to sell regular gasoline as higher priced mid-grade and premium gasoline and the
failure to remit the full amount of sales taxes collected to the State Board of Equalization.
(Id. at pp. 1073-1074.) The court held the agencies involved were not entitled to
restitution for investigative costs, reasoning that “public agencies are not directly
‘victimized’ for purposes of restitution under Penal Code section 1202.4 merely because
they spend money to investigate crimes or apprehend criminals.” (Id. at p. 1077, italics
added.)
9
Similarly, in Luis M. v. Superior Court (2014) 59 Cal.4th 300 (Luis M.), cited by
defendant, a city sought restitution for graffiti abatement costs and the cost of
investigating and determining the perpetrator. (Id. at p. 303.) The court noted the
general restitution provision for juveniles, Welfare and Institutions Code section 730,6,
subdivision (a)(2) (the juvenile analogue to section 1202.4, subd. (f)), does not authorize
restitution orders for law enforcement investigative costs, quoting the Ozkan court’s
observation that “ ‘public agencies are not directly “victimized” for purposes of
restitution under Penal Code section 1202.4 merely because they spend money to
investigate crimes or apprehend criminals.’ ” 8 (Id. at p. 305, italics added.)
Here, in contrast to Ozkan and Luis M., CHP and SCIF were direct victims as they
paid out money as a direct result of defendant’s fraud. This situation is not one where the
agencies are claiming to be a victim for restitution purposes “merely because they spen[t]
money to investigate crimes.” (Luis M., supra, 59 Cal.4th 305; Ozkan, supra,
124 Cal.App.4th 1077, italics added.)
Defendant also relies on Torres, supra, 59 Cal.App.4th 1, where the defendant was
convicted of multiple sales of methamphetamine to undercover law enforcement officers.
(Id. at p. 2.) The trial court ordered defendant to pay restitution for law enforcement
funds used to make the purchases from defendant, but the appellate court reversed. (Id. at
pp. 2, 5.) While defendant maintains Torres stands for the proposition that a law
enforcement agency is not entitled to restitution for “overhead expenses incurred as part
of its regular investigatory duties,” Torres is not as broad as he suggests. Indeed, the
8 The opinion is not clear whether the city was a direct victim of the minor’s vandalism
in Luis M. It notes that a traffic sign and electrical boxes were vandalized. (Luis M.,
supra, 59 Cal.4th at pp. 303-304.) We might assume the traffic sign was city property
and thus the city might have been a direct victim as to that vandalism, but the owner of
the electrical boxes is not at all clear and in any event, the Luis M. court’s focus appeared
to be on the fact that investigative costs were sought merely because the funds were spent
to apprehend a criminal perpetrator, which was not the case here.
10
word “overhead” is not found in the opinion. Instead, after acknowledging a defrauded
government agency can be a victim entitled to restitution, the court stated: “we conclude
the Legislature did not intend to include as a ‘direct victim of a crime’ a law enforcement
agency that in the course of investigating criminal activity purchases illegal drugs.”
(Torres, supra, 59 Cal.App.4th at pp. 4-5.) Thus, Torres offers defendant no help where
the governmental agency — that happens to have as its mission the investigation of
crimes — investigates fraud perpetrated upon it by one of its employees, in order stop the
fraudulent payments and recoup monies fraudulently obtained. 9
Continuing with his “overhead” theme, defendant argues that because the victim
government entities used salaried employees to conduct the investigations, and those
employees would have been paid even if they did not participate in those investigations,
their labor costs were not economic losses incurred by those entities. Defendant’s
argument is similar to the argument rejected in Ortiz: that the direct victim should have
been required to demonstrate a link between out-of-pocket expenses and the loss of
wages or profits. (Ortiz, supra, 53 Cal.App.4th at p. 798.) Like the court in Ortiz, “[w]e
do not read the [restitution] statute as limiting restitution for out-of-pocket expenses to
cases in which out-of-pocket expenses result in lost profits or wages.” (Ibid.) Moreover,
9 As the People note, SCIF is not a law enforcement agency. SCIF is a quasi-state entity.
(Allied Interstate, supra, 203 Cal.App.4th at p. 817; P.W. Stephens, Inc. v. State Comp.
Ins. Fund (1994) 21 Cal. App.4th 1833, 1835 [“SCIF is at once both an agency of the
state and an insurance carrier. In these two roles, it is self-operating and of a special and
unique character”].) SCIF can earn profits; those profits may not be retained by SCIF or
the state, but must be returned to SCIF's insureds as a dividend or credit. (Allied
Interstate, at p. 817.) Law enforcement agencies, on the other hand, are not in the
business of making profits. We thus reject defendant’s implication that SCIF should be
treated like a law enforcement agency and conclude that Torres, supra, 59 Cal.App.4th 1,
is even less helpful to defendant on the question of restitution for SCIF’s investigatory
costs.
11
were it not for defendant’s fraud, those salaried resources could have focused on other
urgent matters for the benefit of the citizens of California.
Finally, both parties rely on Johnny M., supra, 100 Cal.App.4th 1128, where a
minor burglarized and vandalized a school, and the court ordered restitution for, among
other things, labor costs of salaried employees who cleaned up and repaired the damage.
(Id. at pp. 1129-1130.) The court concluded the term “economic losses” in Welfare and
Institutions Code section 730.6, subdivision (h) permitted restitution for such labor costs.
(Johnny M., at p. 1134.)
Defendant emphasizes one aspect of the Johnny M. court reasoning — that
cleaning up after the minor’s burglaries was not part of the employees’ normal duties and
the juvenile court could reasonably value the “lost work product” at the salary rate of the
district employees, for the lost time not devoted to their normal job duties. (Johnny M.,
supra, 100 Cal.App.4th at p. 1131, 1134.) Attempting to draw a contrast, defendant
argues the salaried employees here were performing their normal job duties and therefore
did not lose the value of their employees’ work — unlike in Johnny M. where the
employees were diverted from their normal duties. But while the Johnny M. court held
that “a restitution award may also properly include the reasonable value of employee
work product lost as a result of the criminal conduct of another” (Johnny M., supra, 100
Cal.App.4th at p. 1134, italics added), nothing in Johnny M. limits restitution for the
wages of salaried employees in the context of investigating, stopping and recouping
fraudulently obtained money paid to employees like defendant here. Moreover, even if
lost work product is a requirement, we conclude there was such a loss because of
defendant’s fraud. After all, while the CHP officers and SCIF personnel were
investigating defendant’s fraud, their work activities were diverted from other fraud
investigations involving other employees and/or from carrying out the statutory missions
of their agencies.
12
As we have noted, “ ‘ “ ‘ “[a] victim’s restitution right is to be broadly and
liberally construed.’ ” ’ ” ” (Nichols, supra, 8 Cal.App.5th at p. 342.) Section 1202.4,
subdivision (f) requires victims receive restitution for “for every determined economic
loss incurred as the result of the defendant’s criminal conduct” (italics added) and the
term “economic loss” is entitled to broad and expansive interpretation. (Keichler, supra,
129 Cal.App.4th at p. 1046; Johnny M., supra, 100 Cal.App.4th 1128, 1133.) The
“including but not limited” statutory language as it relates to section 1202.4, subdivision
(f), allows for restitution for wages beyond those expended in “assisting the police or
prosecution” as specified in subdivision (f)(E). We believe it is consistent with the
restitution statute’s purpose, to fully reimburse direct victims and deter future criminality,
to allow government agencies that are direct victims of fraud to receive restitution for
their investigative costs, where those costs were incurred in an effort to justify ending
payments and recoup wrongfully obtained funds, as well as assist in any prosecution.
Indeed, defendant does not argue that the agencies here could not have paid for outside
investigators to accomplish these goals and thereafter been awarded restitution for those
costs. In this regard, we adopt the reasoning of the Johnny M. court — denying the
agencies restitution here would result in a rule encouraging public entities to incur out-of-
pocket expenses for outside investigators rather than try to investigate the matter in-
house. (Johnny M., at p. 1134 [noting that to deny restitution for the wages of the
salaried school district employees “would encourage public entities and other victims to
incur out-of-pocket expenses rather than try to repair damage to property in-house, an
anomalous result given that the likelihood of actually receiving reimbursement from a
criminal defendant via a restitution order is problematic at best”].) “No public policy is
served by such a rule,” and “it is not compelled by statute.” (Ibid.) In our view, both
entities here were entitled to recover the investigative costs expended in an effort to
uncover evidence to justify discontinuing payments and to recover those funds already
13
fraudulently obtained by defendant, even if that investigation also assisted in the
prosecution.
Accordingly, we find no error in the trial court’s restitution order awarding these
direct victims investigating costs.
DISPOSITION
The judgment is affirmed.
/s/
MURRAY, J.
We concur:
/s/
MAURO, Acting P. J.
/s/
HOCH, J.
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