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All Those Harmed by a Federal Financial Crime Are "Victims" Protected by the Crime Victims' Rights Act

Today the U.S. Court of Appeals for the Eleventh Circuit agreed with my argument that anyone who is injured as the result of a financial fraud is a "crime victim" protected by the Federal Crime Victims' Rights Act. The ruling, found here, could have major implications for the prosecution of financial fraud crimes in the future and will significantly expand restitution available for those crimes.

A bit of background: On December 2, 2008, Sarasota, Florida Attorney Alan E. Tannenbaum and I filed an emergency petition on behalf of Janis W. Stewart and 111 victims of a financial fraud committed by Philip William Coon. The petition challenged a ruling by U.S. District Judge Elizabeth A. Kovachevich on November 21, 2008, that these borrowers on loans from Coast Bank were not "crime victims" of Coon's criminal conspiracy because they were not specifically listed in the criminal charges against him. The petition contended that, because the borrowers suffered financial losses from the fraud, they were "crime victims" entitled to the protections of the federal Crime Victim's Rights Act, including the right to restitution. The petition cited documents showing that Coon received more than $1.1 million from his crime, which he used to buy overseas vacations, fine wine, expensive jewelry, a $20,000 piano, and other luxury items. The petition stated that "while Coon was enjoying the high life on his ill-gotten gains, the borrowers were all paying interest on the money financing it." The petition sought restitution for the borrowers.

The borrowers' petition arose out of scheme by Coon to "skim points" off of residential mortgage loans. On November 5, 2008, Coon pled guilty to the scheme in U.S. District Court in Tampa. One hundred and twelve borrowers of these loans then filed a motion with Judge Kovachevich to be recognized as "victims" of his crime of conspiracy because they had to pay extra on their mortgages because of the crime. Judge Kovachevich denied the motion because the government's charges only specifically listed Coast Bank, Coon's employer, as the victim of the crime.

In a ruling released today, the Eleventh Circuit held that borrowers were protected "victims" under the Crime Victims Rights Act (CVRA) because they suffered financial harms because the became legally obligated to pay the point that Coon skimmed off the loan and had to pay interest on the point. The Eleventh Circuit stated: "The CVRA does not limit the class of crime victims to those whose identity constitutes an element of the offense or who happen to be identified in the charging document. . . . Under the plain language of the statute, a party may qualify as a victim, even though [he] may not have been the target of the crime, as long as [he] suffers harm as a result of the crime's commission."

The ruling is an important victory for crime victims. It means that all those who have been harmed by a financial crime are entitled to be protected in the federal criminal justice system. As a result, all such victims will be entitled to confer with the prosecutor on the charges, to obtain restitution for the crime, and to make a statement at sentencing about the proper punishment for the crime.

My co-counsel, Alan Tannebaum, has laid out the next steps in the case: "We intend to go back into district court and seek restitution for the victims who have been harmed by this crime. The defendant lived the high life through this crime, and the victims should not be left bearing the financial burden."

Related Posts (on one page):

  1. All Those Harmed by a Federal Financial Crime Are "Victims" Protected by the Crime Victims' Rights Act
  2. Crime Victims Right Petition in the Eleventh Circuit
Curt Fischer:
Suppose that the judge had not granted the motion. Would the people who were fleeced by Coast Bank (presumably through their agent Coon) have reasonable chances at levying civil claims against the bank? (Or against Coon himself?)

If no civil claims were likely to prevail, then I agree that this motion is an important victory.

If civil claims would likely prevail, what is the argument for making restitutions through the criminal justices system?
12.19.2008 6:42pm
Dan Ball (mail):
So...let's see, how many cases of fraud were involved in the Mortgage mess, and can we who are now bearing the financial burden demand that prosecutors press charges?

Pretty Please??
12.19.2008 6:45pm
Sean M.:
Curt: I imagine the benefit is that the criminal restitution order cannot be discharged in bankruptcy and failing to make restitution payments is something that can be punished criminally, and thus has greater "bite" than a civil judgment against an insolvent defendant.

In addition, criminal restitution can be paid in small chunks for literally as long as the defendant is alive and the Court can place very tight controls on the defendant's ability to manage his finances. For instance, a typical restitution order will state that the defendant cannot open new lines or credit or liquidate any assets without the approval of the Probation Office unless it is in service of the restitution obligation.

My question for Judge Cassell is if he thinks his clients have a good chance of having restitution ordered. His clients' loss seems to be in the nature of "consequential damages" and not "direct damages." Every court to interpret the restitution statute, to my knowledge, has held that criminal restitution cannot be ordered for consequential damages.
12.19.2008 6:50pm
Soronel Haetir (mail):
I still fail to see how these folks were harmed in a way they could not have prevented. They presumably signed the loan documents obligating them to the loan terms. If the D happens to redirect funds, the borrowers haven't lost anything unless the bank is coming after them for the D's theft. Is that the case? If not I can't see them as victims of anything.
12.19.2008 6:56pm
Meg Garvin (mail) (www):
As ED of the National Crime Victim Law Institute I am thrilled with this outcome. It is a tremendous victory - helping clarify the definition of "victim" and also making clear that the failure to name a victim in a charging instrument does not control. While the dissent chose to address the standard of review, the majority did not. Thus left for another day is this critical issue which NCVLI briefed as amicus. I anticipate the issue will continue to arise and NCVLI will continue to have to argue (often in direct opposition to the Department of Justice) that the proper standard of review, evidenced by plain language and legislative history, is an appellate standard of review. Ah, but that is for another day.

For those who read a previous post regarding NCVLI, some clarification. NCVLI does work with a network of 8 pro bono legal clinics, which together have provided representation to more than 1,000 victims of crime in criminal cases nationwide. These are legally complex cases often involving issues of first impression -- a daunting task but one that is leading to critical precedent helping thousands more victims. We also actively encourage of pro bono legal representation of victims so that more victims can have assistance. If each attorney out there (even each attorney that reads this) would take 1 pro bono case as Professor Cassell has done, victims would be better off, and the speed with which the contours of victims' rights are defined would increase exponentially. NCVLI is happy to help for free any attorney willing to take a case for a victim! Just contact us!

I hope you'll keep us posted on the next steps in this case.
12.19.2008 7:05pm
GV:
Meg, could you please distinguish between an appellate standard of review and a non-appellate standard of review?

Curt, if these "victims" were not likely to prevail in a civil claim, then why should a judge in the criminal case award them money anyway?
12.19.2008 7:47pm
David Schwartz (mail):
If my bank raised the number of points it charges because of the reduced competition from his loans with fraudulently inflated points, am I victim too? If the mortgage contracts obligated the borrowers to pay the shaved points to the bank, why isn't the bank the sole victim?
12.19.2008 7:55pm
Curt Fischer:
GV: My basic sense of justice says that when someone defrauds a group of people of their hard-earned money, the money should be returned to the fraud victims if possible. I do not know what the law says on the matter, so if the law precludes the victims from any chance to collect back some of their losses, I guess the judge should follow the law, but acknowledge that the law is an ass.
12.19.2008 7:55pm
John (mail):
This seems on its face to be a crazy opinion. These borrowers agreed to pay a 2% fee. No one made them do it. The fact that others later defrauded the bank by taking some of that 2% for themselves has nothing to do with whether or not the borrowers were victims of anything. That is why this passage from the opinion seems disingenuous:

"As a consequence of the increase in the mortgage brokerage fee, therefore, petitioners became liable under their contract with the Bank for an extra one percent of their total loan, suffering direct and proximate harm."

As the court noted, "Under the plain language of the statute, a party may qualify as a victim, even though it may not have been the target of the crime, as long as it suffers harm as a result of the crime's commission." But the "victims" suffered no harm as a result of the crime, which was the diversion of the portion of the fee; their "harm" was being charged the fee, which is no harm at all if they agreed to it--which they did.
12.19.2008 8:06pm
Meg Garvin (mail) (www):
What I meant by that is that the split in the circuits right now is whether CVRA mandamus are reviewed under the historically high hurdle for all mandamus (clear and indisputable right) or if traditional appellate standards that don't require that showing apply to the writ. Our argument is that based on the design of the cvra, its intention and the legislative history victims don't have to meet the higher standard to get review. It's the words of Feinstein - this is a new use of an old device.
12.19.2008 8:08pm
Casper the Friendly Guest (mail):
There are very good reasons why prosecutors fight applying the CVRA to these sorts of financial crimes. First, because financial crimes often have hundreds or even thousands of victims, it will be significantly more burdensome to prosecute these cases. So that means fewer financial fraud cases will get prosecuted. Especially the kind that involve lots of victims for relatively little money.

Second, in many if not most instances, the victims in these cases fell victim first and foremost to their own greed, or at least their failure to recognize that when something sounds too good to be true, they need to walk away. In most cases that I've seen, prosecutors make defensible judgment calls about which victims should have a seat at the table. I'm disappointed that courts are willing to revoke their discretion on this important issue.
12.19.2008 8:14pm
David Schwartz (mail):
The Court's argument that the developer would have passed the increased closing fees onto the purchaser of the house is also bogus. All businesses that are victims of crimes pass on the costs of those crimes to their customers. This logic makes everyone who shops at a store a victim of an employee who steals from that store. The court seems to have completely ignored the "direct and proximate" requirement of the CVRA.
12.19.2008 8:28pm
Lior:
Since the so-called "victims" want to intervene in Mr. Coon's criminal trial, I take it that the trial court has yet to rule on whether a Federal Crime was ever committed and, if so, whether the crime was committed by Mr. Coon?

Under such circumstances, what makes these people "victims of a Federal crime"? More importantly, what makes them specifically victims of Mr. Coon (who should be presumed innocent of any crimes that might or might not have been committed)?

That the prosecutor chose to charge Mr. Coon with certain crimes cannot mean that people who assert they were harmed by whatever happened are automagically presumed to be "crime victims".

For example, to successfully intervene, the so-called "victims" surely have to produce evidence that they are, in fact, victims, and not random people off the street. For the court to decide whether that evidence proves that these people were in fact victims of Mr. Coon will, by definition, prejudice Mr. Coon's case beyond belief.
12.19.2008 8:59pm
Sean M.:
Lior,

This is a valid criticism in general perhaps, but not in this case. I am not sure if you had followed the link, but in this case the victims attempted to intervene at Coon's guilty plea. That is, Coon admitted his guilt. Indeed, he even waived indictment by the grand jury and pleaded guilty to a one-count information as opposed to an indictment.

So in this case, your criticism does not bear out. There was a crime committed because Coon admitted there had been a crime committed.
12.19.2008 9:19pm
Lior:
Sean: You're right; intervention at this stage is not as bad as intervention before guilt has been determined.

In this particular case, note that letting these people intervene will harm the interest of the real victim (Mr. Coon's employer). For example, consider the problem of remitting the proceeds of the crime back to the victims.

Some amount of money (the additional 1% fee) was paid by the unfortunate borrowers to the bank. Mr. Coon then misappropriated this very same money from the bank. The bank will certainly argue that their property has been taken by Mr. Coon and he should give it back. By declaring the borrowers "victims", the court implicitly recognizes that this 1% money is theirs. Shall Mr. Coon be forced to return this 1% to the borrowers, and also to return the very same money to the bank? If not, then the trial court will have to decide who gets the reimbursement.

There is a clear dispute between the bank and the borrowers regarding this money: did the bank unfairly extract it from the borrowers via its agent Mr. Coon (say under a "they should have supervised him better" theory), or did the borrowers voluntarily agree to higher fees on their loans, and the bank can hold them to the contract. This dispute should certainly be resolved by a court -- but that should be in civil litigation between the two parties, not by Mr. Coon's criminal trial court!

In short, allowing victims to intervene in the penalty phase creates problems when the interests of different victims are adverse to each other. Having a criminal trial court resolve legal disputes between non-parties to a case seems rather absurd.
12.19.2008 10:02pm
Sean M.:
Lior,

Again, that's not necessarily true. One can be a victim without being necessarily entitled to criminal restitution. Under CVRSA, a crime victim is anyone harmed as proximate cause of the criminal act, but only those who have suffered a loss of "property" are entitled to restitution.

In a simple case, say an assault, one can be a crime victim because he was hit, but not entitled to criminal restitution because he has no medical bills (which the CVRSA allows reimbursement for).

Being designated a crime victim allows certain procedural rights but does not guarantee restitution, though that is obviously what the victims here are seeking.

This all ties back to the question I asked up thread. Even if Prof. Cassel's clients are crime victims, I doubt they are entitled to restitution under CVRSA. Their losses are consequential damages, not direct damages, of the fraud, and CVRSA does not entitle the victims to recover consequential damages.
12.19.2008 10:46pm
Sean M.:
I should add, to get to Lior's deeper point: Who is entitled to restitution, the bank or the borrowers, is an important and contested question in the case. As my statements so far suggest, I think the bank, not the borrowers, are entitled to restitution.

But I don't think the question is as unusual as Lior thinks it is. In white collar crime prosecutions, my understanding is that "what the loss amount is" and "what the restitution amount is" (which can be widely different numbers for a variety of reasons) as well as "who is restitution owed to?" is a common question. Indeed, stipulations as to loss amount and restitution amount often become the main negotiating point between the U.S. Attorney's office and defense counsel.

So while Lior is right to say this is a tricky issue in the case, I don't think the issue is rare or outside the scope of what we ask sentencing courts to normally do.
12.19.2008 10:51pm
David Schwartz (mail):
Sean M: If you their damages are consequential, then it follows that this case was wrongly decided. The CVRA's standard is "direct and proximate". I shop at Costco, am I a victim of an employee who steals from the store?
12.20.2008 1:07am
Philistine (mail):
Does this ruling also mean--or at least suggest--that these 111 people are victims for purposes of USSG Guieline 2B1.1? This would result in a 4 point bump, which would be a very significant increase in sentence (every 6 points essentially doubles the sentence).
12.20.2008 8:16am
Public_Defender (mail):
This is really good news for the bank robbers, child pornographers, and gang leaders on this US Attorney's docket. The court of appeals has forced the prosecutor to allocate more of his time on this economic crime and less of it on the rest of the cases on his or her docket. Thanks Professor Cassell!

In reality, this decision will mean that defendants and AUSA's will have to be more careful in the charge bargaining process (which is how most federal cases are resolved). Crimes can be charged narrowly so as to minimize the number of "victims." It takes very little to get to very high punishments in the federal system, so it won't be too hard.
12.20.2008 8:19am
Casper the Friendly Guest (mail):
The other problem with applying the CVRA to victims of financial crimes is that these "victims" have a vested interest in having the defendant released from prison as quickly as possible so that he can go back to work and start paying restitution. So unlike traditional victims, who have a seat at the table in order to push for a higher sentence, these victims may actually fight the prosecutor's efforts to put white collar criminals behind bars. Professor Cassel's crusade is counter-productive.
12.20.2008 8:57am
Boblipton:
If, as a taxpayer, I am forced to bail out these people, am I not also a victim of these crimes? Come to think of it, if the value of my cash declines as a result of the Fed printing money to bail out these victims, doesn't that count too?

Bob
12.20.2008 10:01am
Bob from Ohio (mail):
What a terrible decision and bad statute.


It means that all those who have been harmed by a financial crime are entitled to be protected in the federal criminal justice system.


We have a system like that, its called the tort system.
12.20.2008 11:29am
RPB (mail):
Professor Cassel's victory reflects an appropriate holding and recognition of the rights of crime victims under federal law. Whether one agrees or disagrees with victims' rights, it is the rule of law and victims' rights must be honored. The 11th Circuit correctly analyzed 18 USC 3771 and they provided a remedy. It is important to note that the "Respondents" were the United States, the defendant, and the District Court. The victims have a property interest and it is in the economy of the judicial system to resolve the financial interest within the context of criminal restitution which also potentially avoids a civil trial and additional costs and delays of separate litigation. Even without a property interests, many victims have been granted liberty interests giving them due process rights to participate in criminal prosecutions.

Consider the perspective of the victim who has been given rights only to perceive that the prosecutor, defendant, and court conspire to deprive the victim of the victim's right. How about your being told that your rights were violated and their was no remedy and there was no remedy for the deprivation of your rights. Check out Hoile v. State . If the same analysis was provide to defendants as it is often to victims that defendants do not have remedies when their rights are violated, then our Bill of Rights would be meaningless.

Quite frankly, we need more academics and attorneys to write and litigate to develop the case law around victims' rights as well as courts like the 11th Circuit to act when rights are violated.

The lack of attorneys who can do what Professor Cassell did for the victims must be addressed. While there are many prosecutors and defense attorneys, how many of you can indicate the name of one attorney or case that you were involved where an attorney entered an appearance on behalf of a victim in a state or federal prosecution? Not many victims will have a highly respected former federal judge as their attorney. As we have victims rights as part of our federal and state laws, victims must have attorneys to ensure the rule of law applies to victims just as it applies to defendants.

If as a judge recently indicated regarding a victim's right to be present at any hearing where the defendant has a right to be present, if that what the law means - it goes too far. The prosecutor, defense attorney, and judge cared less of a disabled victim's right to be informed, present, and heard at a plea hearing regarding an attempted murder which left the victim paralyzed and incapacitated. One should in this country not ignore a law if you think it goes too far. Yet that is exactly what happens to many victims.

Many of us are proud of our justice system. In fact, we encourage others around the world to emulate our justice system. Perhaps many of those in the justice system ought to reevaluate their own beliefs regarding the rule of law to crime victims. The 11th Circuit opinion will perhaps start the reevaluation process for prosecutors, defense attorneys, and trial judges.

Thank you, Professor Cassell for your important leadership in this area.
12.20.2008 11:51am
Public_Defender (mail):

Consider the perspective of the victim who has been given rights only to perceive that the prosecutor, defendant, and court conspire to deprive the victim of the victim's right.

Nothing changes if prosecutors and defense attorneys are smart. You just have to charge bargain the case. Victims have no right to have criminal charges brought, so prosecutors can control the cases that way. That's not "conspiring," that's just smart practice.

Federal prosecutors already are very selective in the cases they choose to prosecute (they leave a lot of cases to state prosecutors to deal with under state law). Having a long list of lawyered-up victims might actually be a deterrent to taking a case. It could also encourage prosecutors to pick charges that have fewer victims.

That said, even though victims should not be parties, they need to be shown more courtesy in the criminal justice system. Many prosecutors use and abuse victims to try to win a case, and then forget about them. I've found that I can sometimes form respectful relationships with victims just by showing basic courtesy. It's weird when the victims rely more on defense counsel than on the prosecutor.

And as I said before, defense counsel for other defendants on this prosecutors docket owe Professor Cassell a debt of gratitude. They will get slightly better deals because their prosecutor is that much busier.
12.20.2008 12:10pm
Casper the Friendly Guest (mail):

And as I said before, defense counsel for other defendants on this prosecutors docket owe Professor Cassell a debt of gratitude. They will get slightly better deals because their prosecutor is that much busier.


Agreed. The real winners here are the white collar defendants who will now be undercharged (if they are charged at all) and, of course, Prof. Cassel, who seems to be having more success with this latest crusade than with his effort to overturn Miranda.
12.20.2008 1:20pm
Public_Defender (mail):

Quite frankly, we need more academics and attorneys to write and litigate to develop the case law around victims' rights as well as courts like the 11th Circuit to act when rights are violated.


Actually, we already do. They're called plaintiffs' lawyers. They're in the yellow pages everywhere. Cassell is no more or less noble than the plaintiff's lawyers suing businesses and other wrongdoers every day. He just has the government pick up part of the tab. And this is a libertarian blog?
12.20.2008 2:54pm

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