United States v. Lazarenko , 624 F.3d 1247 ( 2010 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,  No. 08-10185
Plaintiff-Appellee, D.C. No.
PETER KIRITCHENKO, 3:00-cr-00284-
Intervenor, CRB-1
v. ORDER
PAVEL IVANOVICH LAZARENKO, aka  AMENDING
Pavlo Ivanovych Lazarenko, OPINION AND
Defendant-Appellant. DENYING
PETITION FOR
REHEARING AND
AMENDED
 OPINION
Appeal from the United States District Court
for the Northern District of California
Charles R. Breyer, District Judge, Presiding
Argued and Submitted
August 10, 2010—San Francisco, California
Filed November 3, 2010
Amended December 2, 2010
Before: Susan P. Graber, Consuelo M. Callahan, and
Carlos T. Bea, Circuit Judges.
Opinion by Judge Graber
19139
UNITED STATES v. LAZARENKO 19141
COUNSEL
Dennis P. Riordan, Riordan & Horgan, San Francisco, Cali-
fornia, for the defendant-appellant.
Peter B. Axelrod, Assistant United States Attorney, San Fran-
cisco, California, for the plaintiff-appellee.
George D. Niespolo and Stephen H. Sutro, Duane Morris
LLP, San Francisco, California, for the intervenor.
ORDER
The opinion filed November 3, 2010, is amended as fol-
lows:
On slip opinion page 18160, replace footnote 3 with the
following: “The government filed an information against
Kiritchenko. As part of a plea deal, he testified for the govern-
ment at Lazarenko’s trial.”
19142 UNITED STATES v. LAZARENKO
With this amendment, Kiritchenko’s petition for rehearing
is DENIED. The current deadline for filing petitions for
rehearing and rehearing en banc remains in effect.
OPINION
GRABER, Circuit Judge:
Defendant Pavel Ivanovich Lazarenko, former Prime Min-
ister of Ukraine, was convicted of money laundering and con-
spiracy to commit money laundering. See United States v.
Lazarenko, 564 F.3d 1026 (9th Cir.), cert. denied, 130 S. Ct.
491 (2009). In this appeal, Lazarenko challenges the district
court’s order of restitution of more than $19 million to his co-
conspirator, Peter Kiritchenko. We hold that, in the absence
of exceptional circumstances, a co-conspirator cannot recover
restitution. Because no exceptional circumstances exist here,
we reverse and vacate the order of restitution.
FACTUAL AND PROCEDURAL HISTORY
This appeal is the latest in a series related to Lazarenko’s
now-infamous exploitation of his political power in Ukraine.
See Lazarenko, 564 F.3d 1026 (main criminal appeal); United
States v. Lazarenko (Liquidators), 476 F.3d 642 (9th Cir.
2007) (interlocutory appeal concerning forfeited funds);
United States v. $1,379,879.09 Seized from Bank of Am., 374
F. App’x 709 (9th Cir. 2010) (unpublished decision) (appeal
from award of attorney fees in civil-forfeiture action); Univer-
sal Trading & Inv. Co. v. Lazarenko, 352 F. App’x 210 (9th
Cir. 2009) (unpublished decision) (civil appeal involving
challenges to forfeited funds); Universal Trading & Inv. Co.
v. Kiritchenko, 346 F. App’x 232 (9th Cir. 2009) (unpublished
decision) (same), cert. denied, 130 S. Ct. 3504 (2010). The
United States indicted Lazarenko on 53 counts, including one
count of conspiracy to commit money laundering and seven
UNITED STATES v. LAZARENKO 19143
money-laundering counts. The district court dismissed many
of the counts, but the jury convicted Lazarenko on all remain-
ing counts and, on appeal, we overturned all convictions
except the eight related to money laundering. Lazarenko, 564
F.3d at 1047.
In a proceeding separate from the main sentencing proceed-
ing, Kiritchenko sought restitution under the Mandatory Vic-
tims Restitution Act of 1996 (“MVRA”), 18 U.S.C. § 3663A,
and the Victim and Witness Protection Act of 1982
(“VWPA”), 18 U.S.C. § 3663 (collectively, “restitution stat-
utes”).1 Lazarenko opposed restitution. The government
appeared at the proceedings but repeatedly declined to pro-
vide input. As noted by the district court, the government
“neither endorse[d] nor object[ed] to Kiritchenko’s request for
restitution.”
The district court held that Kiritchenko was a “victim”
under the MVRA and VWPA and therefore was entitled to
restitution. The court ordered Lazarenko to pay Kiritchenko
more than $19 million in restitution. Lazarenko timely
appeals. On appeal, the government now opposes restitution.
STANDARDS OF REVIEW
“A restitution order is reviewed for an abuse of discretion,
provided that it is within the bounds of the statutory frame-
work. Factual findings supporting an order of restitution are
reviewed for clear error. The legality of an order of restitution
is reviewed de novo.” United States v. Marks, 530 F.3d 799,
811 (9th Cir. 2008) (internal quotation marks omitted). We
review de novo the district court’s conclusion that a person is
a victim for purposes of the restitution statutes. United States
v. Sanga, 967 F.2d 1332, 1334 (9th Cir. 1992).
1
There are other restitution statutes, including the Crime Victims’
Rights Act, 18 U.S.C. § 3771. Except where otherwise noted, we use the
term “restitution statutes” to refer to the MVRA and the VWPA only.
19144 UNITED STATES v. LAZARENKO
DISCUSSION
[1] The MVRA provides that, “when sentencing a defen-
dant convicted of an offense described in subsection (c), the
court shall order, in addition to . . . any other penalty autho-
rized by law, that the defendant make restitution to the victim
of the offense.” 18 U.S.C. § 3663A(a)(1).2 Subsection (c)
describes, among other crimes, “an offense against property
under this title, . . . including any offense committed by fraud
or deceit.” Id. § 3663A(c)(1)(A)(ii). The parties (and we) all
agree that Lazarenko’s convictions qualify as an offense
against property. The question, then, is whether Kiritchenko
qualifies as a “victim.”
[2] Kiritchenko’s relationship to Lazarenko’s criminal
activity is somewhat complex. According to the government,
Lazarenko used his political power to crush Kiritchenko’s
business competition. In exchange, Kiritchenko paid
Lazarenko kickbacks from his enormous profits. Both profited
handsomely from the arrangement. The government’s indict-
ment charged Lazarenko with conspiring to launder money
with Kiritchenko, and the jury found the existence of that con-
spiracy.3 As part of the proof of money laundering, however,
the government was required to prove that Lazarenko
obtained the money through some specified unlawful conduct.
The government alleged, and the jury found, that Lazarenko
obtained the money illegally by means of extortion:
2
The VWPA uses similar text but, instead of the mandatory phrase
“shall order . . . restitution,” 18 U.S.C. § 3663A, the VWPA instructs that
the court “may order . . . restitution,” 18 U.S.C. § 3663. The definition of
the term “victim” is the same for both statutes. United States v. Brock-
Davis, 504 F.3d 991, 999 n.4 (9th Cir. 2007). Because, for purposes of this
case, there is no material difference between the two statutes other than
the mandatory nature of the MVRA, we analyze the issue under the
MVRA. The analysis applies equally to the VWPA.
3
The government filed an information against Kiritchenko. As part of
a plea deal, he testified for the government at Lazarenko’s trial.
UNITED STATES v. LAZARENKO 19145
Lazarenko extorted money from Kiritchenko.4 In sum, in the
money-laundering scheme, Kiritchenko was both a victim and
a participant.
[3] This situation is exceedingly rare. With most crimes, a
person is plainly either a victim or a co-conspirator (or nei-
ther). It is only in the most unusual circumstances that a per-
son can be considered to be both at the same time. We turn,
then, to the bizarre question whether Kiritchenko—a co-
conspirator in the crimes of conviction—is nevertheless also
a “victim” under the restitution statutes.
[4] Perhaps because the situation is so unusual, the restitu-
tion statutes do not speak to this issue. The MVRA defines the
term “victim” as follows:
For the purposes of this section, the term “victim”
means 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 per-
son directly harmed by the defendant’s criminal con-
duct in the course of the scheme, conspiracy, or
pattern.
18 U.S.C. § 3663A(a)(2).5 That definition looks only to
whether the person was harmed; it does not consider whether
4
The district court found that Kiritchenko was not a willing participant
in the extortion, and that factual finding is not clearly erroneous.
5
Lazarenko argues that money laundering generally is considered a vic-
timless crime but, even if that assertion is true in some sense, the restitu-
tion statutes define “victim” broadly. See Brock-Davis, 504 F.3d at 998-99(explaining the history of this definition and describing its breadth). As
part of the conspiracy to launder money, Lazarenko extorted money from
Kiritchenko. Accordingly, Kiritchenko qualifies as a “victim” under the
plain text of the restitution statutes. See 18 U.S.C. § 3663A(a)(2); Brock-
Davis, 504 F.3d at 999.
19146 UNITED STATES v. LAZARENKO
the person also was a co-conspirator. Under the plain text of
the MVRA and VWPA, therefore, co-conspirators have just
as much right to restitution as do innocent victims.
[5] But courts have recognized that Congress could not
have intended that result. Otherwise, the federal courts would
be involved in redistributing funds among wholly guilty co-
conspirators, where one or more co-conspirators may have
cheated their comrades. Indeed, the Second Circuit has held
that an order of restitution from one co-conspirator to another
was “an error so fundamental and so adversely reflecting on
the public reputation of the judicial proceedings that we may,
and do, deal with it sua sponte.” United States v. Reifler, 446
F.3d 65, 127 (2d Cir. 2006); see also United States v. Weir,
861 F.2d 542, 546 (9th Cir. 1988) (suggesting that it would
be improper to consider a participant to a crime as a victim
of the crime for purposes of restitution). In other words,
because a literal application of the plain text leads to absurd
results, the plain text does not control.6 United States v. King,
244 F.3d 736, 740 (9th Cir. 2001).
[6] The question, then, is the scope of restitution to a co-
conspirator. Guided by our decision in Sanga, 967 F.2d at
1334-35, we hold that, in the absence of exceptional circum-
stances, a co-conspirator cannot recover restitution for crimes
in which he or she participates.
6
Kiritchenko points out that the VWPA limits restitution for victims of
certain drug crimes with the following clause: “in no case shall a partici-
pant in an offense under such sections be considered a victim of such
offense under this section.” 18 U.S.C. § 3663(a)(1)(A). There is no con-
flict between that clause and Lazarenko’s interpretation of the statute as
generally barring restitution for participants of crimes, except in rare cir-
cumstances. The quoted clause means that, for those specified drug
crimes, there is no exception for rare circumstances: All participants, even
minor participants, are barred from restitution. The quoted clause is not
superfluous and does not change the (undisputed) fact that the plain text
of the MVRA leads to the absurd result that federal courts would redistrib-
ute funds among co-conspirators.
UNITED STATES v. LAZARENKO 19147
In Sanga, the defendant was convicted of a conspiracy to
smuggle aliens from the Philippines to Guam. Id. The district
court ordered restitution to one of the aliens whom the defen-
dant had smuggled, named Quinlob, and the defendant
appealed. Id. at 1333-34. After Quinlob arrived in Guam, the
defendant instructed her that she would be his live-in maid.
Id. at 1334. When she said that she wished to return to the
Philippines instead, he took away her passport and airline
ticket and threatened to kill her. Id. at 1334-35. After two
years of servitude, “working approximately fourteen hours a
day, seven days a week,” the defendant “forced her to have
sex with him” so that, in exchange, she could work elsewhere.
Id. at 1335.
The defendant argued that, as co-conspirator to the alien
smuggling, Quinlob was not entitled to restitution. Id. at
1333-34. We agreed that Quinlob was a very limited co-
conspirator, having agreed to, and having acted to facilitate,
her own smuggling into Guam. Id. at 1334-35. But we found
that, considering all the facts of that case, Quinlob was not
barred from recovery simply by virtue of having been a co-
conspirator initially. We noted that “Quinlob was not named
as a conspirator in the indictment.” Id. at 1334. And we held
that “[a]ny criminal complicity in the conspiracy which Quin-
lob might bear stopped at the point at which she became the
object of, rather than a participant in[,] the criminal goals of
the conspirators.” Id. at 1335. Because Quinlob “did not will-
ingly participate in the criminal behavior by which she was
victimized,” we distinguished the dicta in Weir, 861 F.2d at
546, in which we had suggested that it might be improper to
consider a participant in a crime as also a victim of that crime.
Sanga, 967 F.2d at 1335 n.1.
Kiritchenko latches onto our statement that Quinlob could
receive restitution because she “did not willingly participate
in the criminal behavior by which she was victimized.” Id.Kiritchenko argues that, because he did not willingly partici-
pate in Lazarenko’s extortion (of Kiritchenko), then he is enti-
19148 UNITED STATES v. LAZARENKO
tled to restitution, just as Quinlob was entitled to restitution
for the defendant’s post-smuggling mistreatment of her. More
generally, Kiritchenko argues that we should adopt the rule
that a co-conspirator/victim is entitled to restitution whenever
the harm arose from criminal conduct in which he or she did
not participate. We disagree.
Our decision in Sanga did not hinge solely on Quinlob’s
non-participation in the victimizing behavior. Our analysis
was informed by the fact that Quinlob was not named as a co-
conspirator in the indictment; that she had a very minor role
in the conspiracy; and that her persecution began after the
completion of her small part of the conspiracy. Although she
was technically a co-conspirator, her very small role was
unconnected to the overall conspiracy; indeed, had she known
the full extent of the conspiracy—that she would be forced to
be a slave and rape victim—she would not have entered the
conspiracy.
[7] Here, by contrast, the government named Kiritchenko
as the primary co-conspirator in the indictment. Kiritchenko
willingly participated in most of the conspiracy, unlike in
Sanga. Indeed, Kiritchenko knowingly participated in the
conspiracy even though he knew that his own past “victimiza-
tion” was the basis of the laundered money, unlike in Sanga,
where Quinlob immediately sought to withdraw from the con-
spiracy and return to the Philippines once she discovered the
true purpose of the conspiracy. And Kiritchenko, unlike Quin-
lob, profited greatly from the overall criminal enterprise. Cf.
United States v. Hunter, 618 F.3d 1062, 1064 (9th Cir. 2010)
(“The purpose of restitution under the MVRA . . . is not to
punish the defendant, but to make the victim whole again by
restoring to him or her the value of the losses suffered as a
result of the defendant’s crime.” (alteration and internal quo-
tation marks omitted)). In short, Kiritchenko’s deep and will-
ing complicity in the heart of the conspiracy, following his
initial victimization, sharply distinguishes this case from
Sanga.
UNITED STATES v. LAZARENKO 19149
We agree with the Second Circuit that, as a general rule, an
order of restitution to a co-conspirator is a “fundamental”
error that “adversely reflect[s] on the public reputation of the
judicial proceedings.” Reifler, 446 F.3d at 127. Indeed, we
suggested the same in Weir, 861 F.2d at 546. Only in excep-
tional circumstances would Congress have intended that a co-
conspirator to a crime be entitled to restitution. We addressed
just such a case in Sanga, of course. But the extreme facts of
that case and our mode of analysis demonstrate that it was an
exceptional case that proved the general rule.
[8] We hold that, as a general rule, a participant in a crime
cannot recover restitution. The circumstances here do not con-
stitute exceptional circumstances warranting departure from
that general rule. Accordingly, we reverse the district court’s
decision to the contrary, and we vacate the restitution order.
REVERSED; restitution order VACATED.