State v. Kristi L. Hurles

IN THE COURT OF APPEALS OF THE STATE OF IDAHO
Docket No. 39219
STATE OF IDAHO, ) 2014 Opinion No.: 3
)
Plaintiff-Respondent, ) Filed: January 17, 2014
)
v. ) Stephen W. Kenyon, Clerk
)
KRISTI L. HURLES, )
)
Defendant-Appellant. )
)
Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada
County. Hon. Darla S. Williamson, District Judge.
Order of restitution reversed in part and affirmed in part, and case remanded.
Sara B. Thomas, State Appellate Public Defender; Shawn F. Wilkerson, Deputy
Appellate Public Defender, Boise, for appellant. Shawn F. Wilkerson argued.
Hon. Lawrence G. Wasden, Attorney General; Jessica M. Lorello, Deputy
Attorney General, Boise, for respondent. Jessica M. Lorello argued.
________________________________________________
GUTIERREZ, Chief Judge
Kristi L. Hurles appeals from the judgment of conviction 1 entered upon her guilty plea to
one count of grand theft, in violation of Idaho Code §§ 18-2403(2)(b) and 18-2407(1)(b). After
holding restitution hearings, the district court ordered Hurles to pay $204,174.61 in restitution,
under Idaho Code § 19-5304, for embezzlement 2 losses and the victim’s attorney fees. Hurles
argues the district court erred by determining that the holders of the accountant-client privilege
1
Although Hurles appeals from the judgment of conviction, this appeal primarily
challenges the restitution order accompanying the judgment of conviction.
2
Embezzlement and theft are used interchangeably throughout this opinion. In Idaho, theft
is a single offense superseding the separate theft offenses, such as embezzlement. Idaho Code
§ 18-2401. Prior to being repealed, and traditionally, embezzlement referred to theft of personal
property by a person who was entrusted with the property by the owner of the property, such as
an employee. See Sparrow v. State, 102 Idaho 60, 62, 625 P.2d 414, 416 (1981) (quoting
since-repealed Idaho Code § 18-2413 defining the crime of embezzlement).
1
did not impliedly consent to waive the privilege. Hurles also contends the district court abused
its discretion by awarding restitution for the alleged embezzlement that occurred outside of the
time period of the theft Hurles pled guilty to. Furthermore, Hurles claims the restitution award
for the embezzlement losses is not based on substantial evidence. As for the attorney fees
restitution award, Hurles maintains that the district court abused its discretion by awarding
attorney fees incurred by the victim for civil cases. For the reasons that follow, we reverse the
restitution order in part, affirm in part, and remand the case to the district court.
I.
FACTS AND PROCEDURE
The evidence adduced at the restitution hearings reveals that Hurles worked for a Boise
bar and grille (the business and victim) for a total of twenty years. She was a trusted employee
and most recently served as the business’s bookkeeper. Hurles also served as a bartender. One
of Hurles’ duties as a bartender was to sell Idaho State Lottery pull-tabs and to pay out on the
winning pull-tabs. As the bookkeeper, Hurles was one of two employees, besides the owners,
authorized to stock the on-site ATM with petty cash; Hurles, though, was primarily responsible
for stocking the ATM. Hurles would also often make the daily deposit at the bank.
After noticing that the business was not receiving the expected commissions from the
pull-tab operation, the owners of the business contacted the Idaho State Lottery. The Idaho State
Lottery conducted an investigation and determined that Hurles had inflated the pay-out amounts
of winning pull-tabs, keeping the excess amounts for herself. In a letter to the Ada County
Prosecutor, the Idaho State Lottery Enforcement Division informed the prosecutor of its
determination that Hurles had embezzled approximately $10,000 via inflated lottery pull-tab
payouts.
The business owners also contacted the Boise Police Department because they were made
aware of a discrepancy involving petty cash replenishment checks. An on-site ATM was owned
by a third party, but operated by the business. The business was responsible for placing cash in
the ATM. The ATM owner would reimburse the business for amounts withdrawn from the
ATM and pay the business a portion of the fee collected on each transaction. When the ATM
needed to be refilled, a process was implemented to replenish the ATM with cash from the petty
cash safe and to track the replenishment of the petty cash through an “IOU” marker and a
2
replenishment check. 3 The petty cash replenishment check was to be deposited in the business’s
bank account with the other daily receipts; the amount of petty cash originally removed to
replenish the ATM, as written on the replenishment check, was to be replaced with the daily cash
receipts. The goal of the process was to maintain a steady balance of petty cash in the petty cash
safe and to keep track of the amount of money placed in the ATM. After the Boise Police
Department began their investigation, Hurles admitted to the police that she had taken money
from the business; she estimated she had taken around $20,000 to $50,000. There is no dispute
that Hurles was cashing checks and retaining monies she was supposed to deposit into the
business’s bank account.
As a result, Hurles was charged by information with two counts of grand theft, each
occurring “on or between the 30th day of December, 2008 and the 31st day of December, 2009.”
(for simplicity, this is referred to as the December 2008 to December 2009 time period). One
count related to the lottery pull-tab commissions; the other count related to the petty cash
replenishment checks. Hurles and the prosecutor reached a plea agreement wherein Hurles
agreed to plead guilty to the count relating to the petty cash replenishment checks and the State
agreed to dismiss the other count. The plea agreement was not reduced to writing, but was
instead offered into the record orally by the prosecutor at the plea hearing. Following the plea
hearing, the district court scheduled a restitution hearing and requested a presentence
investigation (PSI) report be prepared.
At the first restitution hearing, the State presented testimony from three witnesses: an
Idaho State Lottery investigator; a paralegal, employed by the law firm retained by the business,
who prepared a spreadsheet of losses related to the petty cash replenishment checks; and one of
3
The detailed process of replenishing the ATM with cash was as follows: (1) Hurles
would check the ATM and note that the ATM was low on funds; (2) Hurles would remove petty
cash from the petty cash safe and place the money in the ATM; (3) Hurles would place an “IOU”
marker in the petty cash safe with a notation written for the amount of cash removed from the
petty cash safe; (4) an owner would write a check in the amount of the IOU marker and replace
the IOU marker in the petty cash safe with the replenishment check--the petty cash
replenishment check was to have “ATM” written in the memorandum line; (5) Hurles would
collect the daily cash receipts from the previous day in a bank bag; (6) Hurles would “sell” the
replenishment check to the daily cash receipts bag--that is, Hurles would take the check out of
the petty cash safe, place the check in the bank bag, and remove the amount of the replenishment
check in cash from the bank bag and place the cash in the petty cash safe; and (7) Hurles would
deposit the daily receipts bank bag, including the replenishment checks, at the business’s bank.
3
the owners of the business. The lottery investigator testified to the steps she used in determining
that the business was short $10,000 from the lottery pull-tab commissions. The paralegal
testified that she reviewed copies of checks provided by the owners and then constructed a
spreadsheet based on her review of the checks. The spreadsheet was entered into evidence. The
spreadsheet contained “a small portion of the universe of checks” the paralegal reviewed because
it contained only the checks that were cashed.
The paralegal testified she reached a total of $153,920 in petty cash replenishment check
losses from 2005 through 2010. This total was based on the sum of cashed checks that were:
(1) stamped “for deposit only,” but endorsed by Hurles (totaling $7,200); (2) unstamped, but
endorsed by Hurles (totaling $27,760); (3) stamped “for deposit only,” but with the stamp
stricken and endorsed by Hurles (totaling $4,300); and (4) stamped “for deposit only,” but not
endorsed (totaling $114,660). Excluded from the restitution total, according to the paralegal,
were cashed checks that were: (1) stamped “for deposit only,” but endorsed by someone other
than Hurles (totaling $11,100); (2) unstamped and not endorsed (totaling $99,110);
(3) unstamped, but endorsed by someone other than Hurles (totaling $5,400); (4) unstamped, but
signed by an unauthorized signatory (totaling $4,100); (5) stamped with the business’s typical
deposit stamp, but not stamped “for deposit only” (totaling $500); and (6) stamped “for deposit
only,” but with the stamp stricken and endorsed by someone other than Hurles (totaling $6,600).
One of the owners of the business testified and was cross-examined by Hurles’ defense
attorney. Following this witness, Hurles’ defense attorney informed the district court that he
wished to call the business’s accountant. The district court then scheduled a second restitution
hearing.
At the second restitution hearing, Hurles’ defense attorney called the business’s
accountant to testify. The accountant testified to his employment and confirmed the business
was a client. Hurles’ defense attorney asked the accountant if the accountant was familiar with
the ATM balance problem, to which the accountant said yes. The defense attorney then asked
the accountant to describe the nature of the ATM balance problem. At that point, the prosecutor
informed the court that the owners of the business wished to assert their accountant-client
privilege. After discussion between the court, Hurles’ defense attorney and the prosecutor, the
court excused the accountant from the stand. Also during the second restitution hearing, the
prosecutor offered a revised total embezzlement loss of $155,440, including both the lottery and
4
petty cash replenishment check losses, after correcting some errors discovered during and in the
period following the first hearing. 4 The court continued the hearing.
At the third restitution hearing and sentencing, Hurles’ defense attorney informed the
court that the defense had no other witnesses. Hurles’ defense attorney, the prosecutor, and the
court then began a discussion concerning the accountant and whether the accountant-client
privilege had been waived. Following the discussion, the court moved forward with sentencing
and heard statements from the owners, arguments from the prosecutor and defense attorney, and
heard a statement from Hurles. The district court then sentenced Hurles to a unified term of
fourteen years, with two years determinate, and ordered restitution in favor of the business in the
amounts of $155,440 for embezzlement losses 5 and $48,734.61 for attorney fees for civil cases.
Hurles appeals.
II.
ANALYSIS
Hurles argues four points on appeal: (1) the district court erred by determining that the
owners of the business did not impliedly consent to waive their accountant-client privilege;
(2) the district court abused its discretion by awarding restitution for the alleged embezzlement
that occurred outside of the time period of theft Hurles pled guilty to; (3) the restitution award
for the embezzlement losses is not based on substantial evidence; 6 and (4) the district court
abused its discretion by awarding attorney fees incurred by the business for civil cases.
A. The Accountant-Client Privilege
Hurles argues the district court erred by determining that the business owners did not
impliedly consent to waive their accountant-client privilege. Hurles maintains that the owners
4
At the first restitution hearing, the initial claimed total embezzlement loss was $163,920,
including the $10,000 Idaho State Lottery pull tab loss and the $153,920 petty cash
replenishment check loss. We infer, based on the record, that the petty cash replenishment check
loss was reduced to $145,440.
5
Part of the embezzlement losses included theft related to an Idaho State Lottery pull tab
operation. This portion of the restitution award, in the amount of $10,000, is not challenged on
appeal.
6
Because we reverse as to the award of restitution for the embezzlement losses and
remand the case for proceedings consistent with this opinion, we need not address whether the
restitution award for the embezzlement losses is based on substantial evidence.
5
relied on the accountant’s documents to calculate the amount of restitution and injected the issue
of the accountant’s work. Additionally, Hurles contends the testifying owner waived the
privilege because the owner disclosed communications between herself and the accountant, and
Hurles contends both owners waived the privilege when they had Hurles’ defense attorney speak
with the accountant about the amount of restitution. Hurles claims the accountant’s testimony is
needed to obtain an accurate restitution estimate and to impeach the owner who testified. The
State argues Hurles abandoned her claim below because Hurles never allowed the district court
to make an adverse ruling. Alternatively, the State contends the owners did not impliedly waive
their accountant-client privilege. Ultimately the issue is whether, in ruling on the
accountant-client privilege, the district court improperly excluded testimony from the accountant.
Under Idaho Rule of Evidence 515(b), 7 an accountant’s client “has a privilege to refuse
to disclose and to prevent any other person from disclosing confidential communications made
for the purpose of facilitating the rendition of professional accounting services to the client”
made in certain circumstances. The client can be a person, a corporation, or an association.
I.R.E. 515(a)(1). Confidential communications include those “not intended to be disclosed to
third persons other than those to whom disclosure is made in furtherance of the rendition of
professional accounting services to the client or those reasonably necessary for the transmission
of the communication.” I.R.E. 515(a)(5).
We review the district court’s decision to admit evidence under an abuse of discretion
standard. State v. Thorngren, 149 Idaho 729, 731, 240 P.3d 575, 577 (2010). The same standard
applies in reviewing a district court’s application of a privilege. E.g., United States v. Mejia, 655
F.3d 126, 131 (2d Cir. 2011) (stating the court has repeatedly held that rulings on claims of
attorney-client privilege are reviewed for an abuse of discretion). When a trial court’s
discretionary decision is reviewed on appeal, the appellate court conducts a multi-tiered inquiry
to determine: (1) whether the lower court correctly perceived the issue as one of discretion;
(2) whether the lower court acted within the boundaries of such discretion and consistently with
any legal standards applicable to the specific choices before it; and (3) whether the lower court
7
The accountant-client privilege is codified at Idaho Code § 9-203A. We refer to Idaho
Rule of Evidence 515, as the evidentiary rule supersedes the statute in any potential conflict with
the statutory section. I.R.E. 1102.
6
reached its decision by an exercise of reason. State v. Hedger, 115 Idaho 598, 600, 768 P.2d
1331, 1333 (1989).
We initially address the State’s contention that Hurles abandoned her claim concerning
the waiver of the accountant-client privilege. According to the State, Hurles cannot properly
raise the issue on appeal because the district court was not given the opportunity to make a ruling
on whether the privilege had been waived. The State cites to State v. Barnes, 133 Idaho 378, 987
P.2d 290 (1999), where the Idaho Supreme Court stated, “This Court will not ‘review a trial
court’s alleged error on appeal unless the record discloses an adverse ruling which forms the
basis for the assignment of error.’” Barnes, 133 Idaho at 384, 987 P.2d at 296 (quoting State v.
Fisher, 123 Idaho 481, 485, 849 P.2d 942, 946 (1993)). At the second restitution hearing, Hurles
called the accountant as an adverse witness. After laying a foundation, Hurles’ defense attorney
inquired of the accountant the nature of the ATM discrepancy. At this point, the prosecutor
informed the court that the owners wished to exercise their accountant-client privilege. 8 The
court, after additional discussion with the attorneys, recognized the privilege and excused the
witness. The court’s application of the privilege and exclusion of the accountant creates the
adverse ruling that Hurles can appeal from. Cf. State v. Iwakiri, 106 Idaho 618, 621, 682 P.2d
571, 574 (1984) (reviewing, on appeal, the trial court’s ruling that the attorney-client privilege
was waived, which allowed the attorney to testify at trial). The fact that Hurles’ defense attorney
did not file a motion to reconsider, as suggested by the trial court, does not translate to
abandonment of the privilege waiver claim. The State’s argument to the contrary cites no legal
authority for its position that Hurles was required to move the district court to reconsider its
8
At the second restitution hearing, after Hurles’ defense attorney asked a few foundational
questions of the accountant, the following exchange occurred:
[Defense Attorney]: And at some point, did it come to your knowledge that there was a
controversy or a problem with the ATM balance at the [business]?
[Accountant]: Yes.
[Defense Attorney]: Could you just describe to the court what the nature of that was?
[Accountant]: The ATM machine--the nature of the accounting was that checks
would be written--
[Prosecutor]: Your Honor, just for the record--I apologize--[the owners of the
business] would be interested in asserting their privilege to the
attorney client privilege under Idaho--
[The Court]: Is he an attorney?
[Prosecutor]: I mean, accountant client privilege.
7
decision to exclude the accountant in order to preserve the issue for appeal. Without legal
authority, the State has waived the argument, and we need not consider it. Idaho Appellate
Rule 35; State v. Zichko, 129 Idaho 259, 263, 923 P.2d 966, 970 (1996). Moreover, there is
nothing in the Idaho Supreme Court’s rules requiring such a post-trial motion to preserve an
issue for appeal. In consequence, Hurles has not abandoned the privilege waiver issue.
At the point the privilege was asserted, the question by defense counsel inquired of the
accountant’s understanding of the problem with the ATM balance. As the PSI report reveals, the
accountant had discussed the ATM balance problem with police during the police investigation.
A Boise Police Department report, included in the PSI report, states that the accountant
explained to the police how he determined the losses relating to the replenishment check
embezzlement. Moreover, the same police report references documents originating from the
accountant’s firm that were included in the PSI report. These communications--which were
made to a third party, the Boise Police Department--are not covered by Idaho Rule of
Evidence 515. See Farr v. Mischler, 129 Idaho 201, 207, 923 P.2d 446, 452 (1996) (“To be a
confidential communication the communication must ‘not be intended to be disclosed to third
persons.’ I.R.E. 502(a)(5). Farr’s argument fails because he did not act in a manner indicating
that the communication was to be confidential.”). Considering that the accountant’s information
recited to the police directly dealt with the embezzlement losses, we must reverse the restitution
order as to the award of restitution for embezzlement losses and remand to the district court so
that Hurles may pursue the accountant’s testimony. On remand, the district court may have to
address the applicability of the accountant-client privilege to other testimony by the accountant,
an issue on which we do not express an opinion.
B. The Restitution Award
In addition to the accountant-client privilege issue, we address two specific challenges
raised by Hurles attacking the embezzlement losses and attorney fees in the restitution award.
Under the statutory scheme of Idaho Code § 19-5304, a district court must order restitution,
unless inappropriate or undesirable, if the district court finds the defendant guilty of a crime that
resulted in economic loss to the victim and the victim actually suffers the loss. I.C.
§ 19-5304(2). Economic loss is based on a preponderance of evidence submitted by the
prosecutor, defendant, victim, and presentence investigator. I.C. § 19-5304(6). The court may
consider hearsay in the PSI report. Id.; I.R.E. 101(d)(7). In determining the amount of
8
restitution, the court must consider factors enumerated in section 19-5304(7). The restitution
amount awarded under section 19-5304(2) must be causally related to the crime--both actual and
proximate cause must be satisfied. State v. Corbus, 150 Idaho 599, 602, 249 P.3d 398, 401
(2011). In addition, “The court may, with the consent of the parties, order restitution to victims
and/or any other person or entity, for economic loss or injury for crimes which are not
adjudicated or are not before the court.” I.C. § 19-5304(9); accord State v. Hargis, 126 Idaho
727, 730, 889 P.2d 1117, 1120 (Ct. App. 1995). That is, even if the losses are not causally
related to the crime, a defendant may consent to pay restitution.
On appeal, we review the decision to order restitution and the amount of restitution for an
abuse of discretion, guided by the consideration of the factors enumerated in section 19-5304(7).
Corbus, 150 Idaho at 602, 249 P.3d at 401. When a trial court’s discretionary decision is
reviewed on appeal, the appellate court conducts a multi-tiered inquiry to determine: (1) whether
the lower court correctly perceived the issue as one of discretion; (2) whether the lower court
acted within the boundaries of such discretion and consistently with any legal standards
applicable to the specific choices before it; and (3) whether the lower court reached its decision
by an exercise of reason. Hedger, 115 Idaho at 600, 768 P.2d at 1333.
1. Embezzlement loses
Hurles argues the district court abused its discretion when it included restitution for
checks that were cashed between 2005 and November 2008 and January 2009 through 2010.
The testimony of the paralegal presented the sum of embezzlement losses from 2005 through
2010. Hurles was charged by information with grand theft during the December 2008 to
December 2009 time period. The crime to which Hurles pled guilty was grand theft during the
December 2008 to December 2009 time period. Therefore, under section 19-5304(2), the district
court was allowed to award restitution for losses suffered by the business during the December
2008 to December 2009 time period, as long as the losses were causally related to the crime
charged. See State v. Schultz, 148 Idaho 884, 886-87, 231 P.3d 529, 530-31 (Ct. App. 2008).
The district court may award restitution for losses not caused by the adjudicated crime
with the consent of the parties. I.C. § 19-5304(9). Generally, consent to pay restitution beyond
the adjudicated crime is found in the plea agreement in cases where the defendant pleads guilty
via a plea agreement. E.g., State v. Shafer, 144 Idaho 370, 161 P.3d 689 (Ct. App. 2007)
(determining that restitution could not be awarded under section 19-5304(2), but restitution could
9
be awarded under section 19-5304(9) because the defendant agreed in the plea agreement to pay
restitution in an “amount to be determined”).
When a plea is offered pursuant to a plea agreement, “the court shall, on the record,
require the disclosure of the agreement in open court or, on a showing of good cause, in camera,
at the time the plea is offered.” Idaho Criminal Rule 11(f)(2). Full disclosure of the plea
agreement on the record is necessary because, among other reasons, “[i]t is impossible for a trial
judge to properly administer a plea agreement if it consists of secret terms known only to the
parties.” Baker v. United States, 781 F.2d 85, 90 (6th Cir. 1986). If a plea agreement has not
been reduced to writing, “it is incumbent upon the attorneys to state the agreement in its entirety
on the record, and in a clear and coherent manner.” State v. Banuelos, 124 Idaho 569, 575, 861
P.2d 1234, 1240 (Ct. App. 1993); accord State v. Rutherford, 107 Idaho 910, 914, 693 P.2d
1112, 1116 (Ct. App. 1985).
Plea agreements are contractual in nature and generally are examined by courts in
accordance with contract law standards. State v. Allen, 143 Idaho 267, 272, 141 P.3d 1136, 1141
(Ct. App. 2006). “As with other contracts, provisions of plea agreements are occasionally
ambiguous; the government ‘ordinarily must bear responsibility for any lack of clarity.’” State v.
Peterson, 148 Idaho 593, 596, 226 P.3d 535, 538 (2010) (quoting United States v. De la Fuente,
8 F.3d 1333, 1338 (9th Cir. 1993)). “[A]mbiguities are construed in favor of the defendant.
Focusing on the defendant’s reasonable understanding also reflects the proper constitutional
focus on what induced the defendant to plead guilty.” Id. (quoting De la Fuente, 8 F.3d at 1337
n.7) (alteration in original). See also State v. Fuhriman, 137 Idaho 741, 745, 52 P.3d 886, 890
(Ct. App. 2002); State v. Cole, 135 Idaho 269, 272, 16 P.3d 945, 948 (Ct. App. 2000). The
determination that a plea agreement is ambiguous is a question of law; however, interpretation of
an ambiguous term is a question of fact. Allen, 143 Idaho at 272, 141 P.3d at 1141. Factual
determinations made by a trial court will not be set aside on review unless they are clearly
erroneous. Peterson, 148 Idaho at 595, 226 P.3d at 537.
In State v. Nienburg, 153 Idaho 491, 283 P.3d 808 (Ct. App. 2012), Nienburg entered into
a plea agreement that provided, “Restitution is not to exceed $1,156.98.” Id. at 493, 283 P.3d at
810 (emphasis added). Nienburg contended that $1088.98 for vehicle repairs, resulting from
damage to a police vehicle caused by Nienburg’s dog that escaped when Nienburg fled, was not
10
allowed as part of the restitution for the crime Nienburg pled to, driving under the influence. On
appeal we determined the plea agreement was unambiguous:
The words of the agreement include no expression of consent by Nienburg to pay
any amount of restitution or to pay for any specified economic loss. They also do
not express any consent by Nienburg to pay for restitution that was not
proximately caused by his DUI, the offense to which he pleaded guilty. The
stated agreement was a cap on the amount of restitution to which Nienburg could
be subjected, and nothing more.
Id. at 497, 283 P.3d at 814. Accordingly, we concluded:
[E]xcept for setting a cap on the amount that may be awarded, the plea agreement
did not alter the operation of the Idaho restitution statutes. It did not relieve the
State of its burden to prove any amount of restitution claimed, nor did it subject
Nienburg to payment of restitution not proximately caused by the offense to
which he pleaded guilty.
Id. at 497-98, 283 P.3d at 814-15.
In this case, the plea agreement’s provision concerning restitution was not reduced to
writing, but was instead orally offered into the record by the prosecution. The prosecutor stated:
Your Honor, the state’s going to recommend a unified sentence of 14
years, 2 years fixed with 12 indeterminate. The state is going to seek restitution
on all DRs that were disclosed in discovery. I have a list of those right here, but I
think defense counsel understands the ones we’re talking about.
(Emphasis added.) There are two issues with this plea agreement. First, the plea agreement only
notes that the State would “seek restitution.” (Emphasis added.) The words of the agreement
include no expression of consent by Hurles to pay any amount of restitution or to pay for any
specified economic loss beyond the crime charged. The words of the agreement only inform the
court of what the State would try to recover; “It did not relieve the State of its burden to prove
any amount of restitution claimed . . . .” Id. Therefore, under the limitations of section 19-5304,
restitution is limited to losses caused by the crime: embezzlement during the December 2008 to
December 2009 time period. Second, even if this Court were to stretch the reading of the plea
agreement to include consent, the plain language of the plea agreement does not express what
Hurles consented to pay restitution for. To the extent that the plea agreement expressed consent
to pay restitution “on all DRs,” the record does not reveal what “DRs” are and if the “DRs” refer
to some time period outside of the time period charged. The ambiguity as to what (if anything)
Hurles agreed to pay restitution for or what “DRs” means, must be resolved in favor of the
11
defendant. Therefore, restitution is awardable only for embezzlement losses within the
December 2008 to December 2009 time period.
The State suggests that Hurles consented to pay restitution at the third restitution hearing
and sentencing nearly six months after Hurles agreed to the plea agreement and entered a guilty
plea in reliance on the agreement. At the third restitution hearing, the district court addressed
restitution as part of the sentencing:
[The Court]: All right. Let’s go ahead and go forward with
sentencing. So the restitution . . . the court does order at
this time [is] $204,174.
Ms. Hurles, you previously appeared in court, and
you pled guilty to grand theft, Count II; and Count I was
dismissed. The state is going to recommend an underlying
sentence of two years fixed plus 12 indeterminate for a total
of 14 years. You are to pay restitution on all incidences,
not simply the one grand theft charge, but the entire time
that you were there working for the employer and any
thefts that may have occurred. So restitution was to cover
all of that. The state is going to ask for imposition, that you
go to the penitentiary, and you’re free to argue for
something different.
Is that your understanding of the prior proceedings,
Ms. Hurles?
[Hurles]: Yes, ma’am.
(Emphasis added.)
We are not convinced that Hurles’ statement to the court is consent to pay restitution.
Instead, the statement merely offers Hurles’ acquiescence to the court’s description of what had
happened in prior proceedings. Moreover, a defendant’s acquiescence to a district court’s error
in recalling what the plea agreement was does not pollute the waters upstream. As we
recognized in Nienburg, the district court’s error applying the restitution statute or recalling the
restitution terms does not obliterate the plea agreement that the defendant and the State agreed to,
nor is the State’s statutory burden changed. What is more, if we accept the State’s contention, it
would be quite perplexing for a district court to announce that it is ordering restitution and then
seek consent when section 19-5304(9) mandates the court to first have “the consent of the
parties” in order to award restitution outside of section 19-5304(2).
In sum, the record reveals that Hurles pled guilty to embezzlement during the December
2008 to December 2009 time period. Hurles’ plea agreement does not express Hurles’ consent to
12
pay restitution; in contrast, it reflects that the State would “seek” restitution. The record does not
reflect that Hurles consented to pay restitution for unadjudicated crimes at the sentencing hearing
held more than six months after the plea agreement was entered into the record. On remand, in
accordance with section 19-5304, restitution is awardable for embezzlement losses during the
December 2008 to December 2009 time period, the time period of theft that Hurles pled guilty
to.
2. Attorney fees
Hurles also contends the district court abused its discretion by awarding restitution for
attorney fees incurred by the business for civil cases. Included in the attorney fees were fees for
six expenditure categories: (1) attorney fees for a possible complaint against the business’s
accountant and the accountant’s firm; (2) fees paid to a law firm for an accountant’s review in
preparation of filing a complaint against the business’s accountant and the accountant’s firm;
(3) attorney fees associated with the actual complaint against the business’s accountant and the
accountant’s firm; (4) attorney fees associated with a complaint against the business’s bank;
(5) attorney fees associated with filing an adversary complaint in Hurles’ bankruptcy; and
(6) attorney fees associated with Hurles’ restitution hearing.
At the first restitution hearing, in response to a question from the district court, the
testifying owner of the business stated that she incurred attorney fees. The district court then
stated that it needed to be apprised of the amounts the owners were spending “on attorneys and
accountants and other people to figure out what’s been stolen.” Immediately after the district
court made this statement, Hurles’ defense attorney objected, and the district court stated:
You can object to it. But if you [the testifying owner] would provide that
information to me at the final restitution hearing, I’d like to know that to know
what all the victim is out as a result of the theft that occurred to the victim. The
victim is entitled to be paid for compensation for what they are out as a result of
the theft.
Hurles argues that under the analysis of State v. Parker, 143 Idaho 165, 139 P.3d 767 (Ct.
App. 2006), attorney fees for civil cases are noneconomic damages and cannot be awarded via
restitution. Specifically, Hurles contends the fees associated with a complaint against the
accountant and the accountant’s firm are based on the accountant’s breach of duty and are
against a third party. Hurles notes that the basis for the lawsuit against the bank is unclear and
that the lawsuit is against a third party. As to the fees related to the bankruptcy, Hurles asserts
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the preparation of the bankruptcy adversary complaint was a move to prevent future harm and is
not compensable under Parker. Hurles further argues the amount of the attorney fees associated
with Hurles’ restitution hearing is unreasonable because it represents the amount spent for a
paralegal to prepare a spreadsheet.
In Parker, we analyzed whether certain attorney fees were a direct economic loss as a
result of criminal conduct. Parker was a bookkeeper at a business when she forged ten business
checks and deposited them into her own account. Parker pled guilty to one count of forgery. A
provision in the restitution order required Parker to pay attorney fees in the victim’s civil case
against Parker. We looked to prior cases and determined that economic loss awardable as
restitution included “necessary expenses or losses that the victim incurred in order to address the
consequences of the criminal conduct.” Id. at 167, 139 P.3d at 769. We also noted that an
expense to prevent future harm was not compensable as restitution. Id. (citing State v.
Waidelich, 140 Idaho 622, 624, 97 P.3d 489, 491 (Ct. App. 2004)). The principal question in
assessing the restitution award for attorney fees in Parker was whether the attorney fees for
filing the civil lawsuit were an expense that was necessary in order for the victim to recover the
losses caused by Parker’s forgeries. Id. at 168, 139 P.3d at 770. The victim’s civil complaint,
although including a claim for the amount of forged checks, also included claims for damages for
overpayment of wages and for conspiracy and unjust enrichment related to two other defendants.
Id. The lawsuit and attorney fees “were unnecessary to recover the victim’s direct loss caused by
the forgeries, for that loss was entirely compensable through the restitution order in the criminal
case.” Id. Thus, we held the attorney fees in the Parker lawsuit were not an economic loss
under section 19-5304(1)(a). Parker, 143 Idaho at 168, 139 P.3d at 770.
a. Attorney fees concerning the accountant and the accountant’s firm
and the bank
Of the six expenditure categories of attorney fees awarded, three concern a legal action
against the business’s accountant and the accountant’s firm, and one concerns a legal action
against the business’s bank. As both parties acknowledge, the record contains only a scintilla of
information concerning the purpose behind the lawsuits. Indeed, the State acknowledges that
“the record does not include much detail regarding the lawsuits filed by the [owners of the
business] against their accountant and bank,” but the State suggests “the lawsuits were
undoubtedly filed as the result of Hurles’ thefts.” Before determining whether the attorney fees
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were caused by the crime, we must determine if the attorney fees are a direct economic loss
under Parker.
For the attorney fees to be considered a direct economic loss, they must be necessary for
the business to recover the losses caused by Hurles’ embezzlement. Parker, 143 Idaho at 167,
139 P.3d at 769. We cannot say that the attorney fees associated with an action against the
accountant and the accountant’s firm are necessary to recover the losses from Hurles’ crime.
Accordingly, the attorney fees for the legal action concerning the accountant and the
accountant’s firm are not awardable as restitution. The same is true with the attorney fees for an
action against the business’s bank, as they are not necessary to recover losses that were
embezzled by Hurles.
b. Attorney fees concerning the bankruptcy proceedings
The business also incurred attorney fees for the preparation and filing of an adversary
complaint in Hurles’ bankruptcy. As the PSI investigator noted, Hurles and her husband filed for
bankruptcy in December 2010. When a bankruptcy proceeding is pending, “[Federal Rule of
Bankruptcy Procedure] 7001 sets forth ten matters that must be brought as adversary
proceedings, including, with exceptions not relevant in this case, a proceeding to recover money
or property.” In re Dean, 359 B.R. 218, 221 (Bankr. C.D. Ill. 2006). “Adversary proceedings
have been described as ‘full blown federal lawsuits within the larger bankruptcy case.’” Id.
(quoting In re Wood and Locker, Inc., 868 F.2d 139, 142 (5th Cir. 1989)). Once Hurles filed for
bankruptcy, it became necessary for the business to incur attorney fees to prepare and file an
adversary complaint to recover losses caused by Hurles’ embezzlement. Thus, the attorney fees
related to the bankruptcy adversary complaint are an economic loss under Parker. Contrary to
Hurles’ assertion that the fees are to prevent a future harm and not compensable, the fees are not
meant to prevent future harm as referenced in Waidelich, 140 Idaho at 624, 97 P.3d at 491. In
Waidelich, Waidelich had attempted to break into the victim’s home and steal a puppy. The
owner sought restitution for boarding the puppies “out of concern that Waidelich or his
accomplices would return to steal the puppies.” Id. at 623, 97 P.3d at 490. Because the
puppy-boarding expenses were an attempt to prevent a future harm, we determined they were
“not a proper item of restitution under Idaho Code § 19-5304.” Id. at 624, 97 P.3d at 491. Here,
the attorney fees for preparation of an adversary complaint in the bankruptcy proceeding were
necessary in order for the business to protect the right to recover the losses already directly
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caused by Hurles’ embezzlement. Otherwise, the business’s claim against Hurles might have
been discharged in bankruptcy. Accordingly, the district court did not abuse its discretion by
awarding attorney fees concerning an adversary complaint made necessary as a result of Hurles’
bankruptcy.
c. Attorney Fees Concerning the Restitution Hearing
The business further incurred attorney fees by having a law firm represent it during the
restitution hearing, including fees associated with the preparation of the embezzlement loss
spreadsheet prepared and presented by the paralegal. Attorney fees spent determining the
amount of restitution for the defendant’s crime are allowed under Parker, as they are necessary
to recover the losses related to a defendant’s crime. Parker, 143 Idaho at 167, 139 P.3d at 769.
Here, the award included restitution for the attorney fees incurred in preparing a spreadsheet
showing embezzlement losses from 2005 through 2010. However, the restitution statute limits
the discretion of the court in awarding restitution to the crime charged. In this case, that time
frame is limited to the December 2008 to December 2009 time period, and on remand the
attorney fees awarded should be adjusted accordingly. Because we reverse the restitution order
as to the award of attorney fees concerning the restitution hearings and remand the case, we do
not address Hurles’ contention that these fees are unreasonable.
III.
CONCLUSION
We reverse the restitution order as to the award of restitution for embezzlement losses
and remand the case for proceedings consistent with this opinion. At the time the
accountant-client privilege was asserted, the accountant was not asked to disclose information
protected by the privilege. We further conclude that the district court, on remand, may only
award restitution for the December 2008 to December 2009 time period.
We reverse the award of restitution for attorney fees concerning the accountant and the
accountant’s firm and concerning the bank. Attorney fees for a legal action against the
accountant, the accountant’s firm, and the business’s bank are not awardable as restitution.
We reverse the award of restitution for attorney fees concerning the restitution hearing
and remand the case for proceedings consistent with this opinion. The attorney fees concerning
the restitution hearing were necessary to recover the embezzlement. However, such restitution is
limited to the December 2008 to December 2009 time period.
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We affirm the award of restitution for attorney fees concerning the bankruptcy
proceeding. The district court did not abuse its discretion by awarding attorney fees concerning
an adversary complaint made necessary as a result of Hurles’ bankruptcy.
As such, the restitution order is reversed in part and affirmed in part. We remand the
case for further proceedings consistent with this opinion.
Judge LANSING and Judge MELANSON CONCUR.
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