UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
February 2, 2010
UNITED STATES OF AMERICA, PLAINTIFF,
IRA ITSKOWITZ (1), DANIEL WILLIAM REARICK (2), MICHAEL ERMERSON LOPUSZYNSKI (3) JOSEPH JOHN WIDMER (7) (CRIMINAL CASE NO. 99CR2080 BTM) JAMES CHARLES QUINN SLATON (8) MARK VICTOR NACHAMKIN (9) PAUL EVAN PERELMAN (10), AND MICHAEL WILHELM ENGELHARDT (16), DEFENDANTS.
UNITED STATES OF AMERICA, (CRIMINAL CASE NO. 99CR2147 BTM) PLAINTIFF,
IRA ITSKOWITZ (1) DANIEL WILLIAM REARICK (2), AND MICHAEL EMERSON LOPUSZYNSKI (3), DEFENDANTS.
UNITED STATES OF AMERICA, (CRIMINAL CASE NO. 99CR0352 BTM) PLAINTIFF,
LINDSAY WELLMAN, DEFENDANT.
UNITED STATES OF AMERICA, (CRIMINAL CASE NO. 01CR0796 BTM) PLAINTIFF,
TIMOTHY DAVID GRAYSON, DEFENDANT.
UNITED STATES OF AMERICA, PLAINTIFF, (CRIMINAL CASE NO. 01CR1415 BTM)
MARC DAVID LEVINE (1), JONATHAN EDWARD SHOUCAIR (2), ROBERT TERRANCE HART (5), EUGENE DONALD EVANGELIST, JR. (7) KENT BOLLENBACH (8), BRENT DOUGLAS MORRIS (9)J JOSEPH ANTHONY MARFOGLIA (11), SYLVAN MORGAN METOYER, III (12), DAVID ZEIDEL DIAMAND (14), JAMES THOMAS RISSMILLER (15), ANDREW MATTHEW CASTRIOTTA (16), MARK ALLEN JACONSKI (17), AND RICHARD YORK (20), DEFENDANTS.
The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge
ORDER GRANTING IN PART AND DENYING IN PART EX PARTE APPLICATION FOR ORDER CORRECTING RESTITUTION PORTION OF JUDGMENTS
The United States has filed an Ex Parte Application for Order Correcting the Restitution Portion of Judgments. For the reasons discussed below, the United States' motion is GRANTED IN PART and DENIED IN PART.
During the period between July 20, 1999 and January 24, 2003, the defendants in these related cases were convicted of various charges arising out of a telemarketing organization, described as "The Enterprise" in charging instruments. The Enterprise, which marketed a series of "high-tech" telecommunications-related securities, defrauded thousands of victims of $49,050,378.
Between July 13, 2001 and June 24, 2007, the Court sentenced the defendants. As to each of the above-captioned defendants, the Court ordered restitution to be paid to the victim investors. The government identified the victims by investment offering in stipulations or declarations that were attached to the individual defendants' judgments.
The Clerk's Office has collected slightly over $500,000 in restitution but has been unable to disburse the money due to unresolved issues regarding the proper allocation of these funds. According to the Clerk's Office, the primary reason it has been unable to disburse restitution to the victims is because, for most of the defendants, the amount of restitution ordered on the Judgment and Commitment does not match the amount of victims' losses specified on the attachment to the Judgment.
The United States seeks to clarify how the restitution should be allocated by amending the final judgments. As discussed below, although the Court will clarify how the Clerk's office should disburse recovered restitution, the Court declines to adopt the United States' suggested method for doing so.
A court has "very broad discretion in setting the terms of the restitution order." United States v. Padgett, 892 F.2d 445, 449 (6th Cir. 1989). Here, the Court's use of broad discretion is especially justified given the complexity of the case. Cf. 18 U.S.C. § 3663A(c)(3)(A) (providing that a court need not even order restitution if "the number of identifiable victims is so large as to make restitution impracticable.")
The United States proposes that for each defendant, the Clerk's office allocate any payment by that defendant to the specific offerings that defendant participated in, using percentages specified in the government's Exhibit A. For each "offerings pot," the Clerk's office would then consult a list of victims for that offering and disburse the funds accordingly.
The United States' proposal is impractical given that there are 23 defendants who have been ordered to pay restitution, 12 different schemes, and 2,403 identified victims. Under the government's proposed method, to disburse the amount on hand, the Clerk's Office would have to issue close to 30,000 checks. This number is more than double the total number of checks the Clerk's Office processed for all of fiscal year 2008 (during which 14,726 checks were issued). The relatively small amount of the recovery (approximately 1% of the total loss) does not justify the labor and expense of this undertaking.
Instead, the Court directs the use of a simpler and more efficient way of disbursing the funds. Under the Court's system, all of the restitution amounts recovered from the various defendants shall be treated as one fund of money that will be divided among all of the identified victims who can be located. If a victim cannot be located, what would have been his or her share, shall be included in the fund for distribution to the other victims. Attached to this Order is Exhibit A, which lists the amount of each victim's total loss. Based on this information, the Clerk's office shall calculate, for each victim, the percentage of his or her loss of the amount that equals the total losscaused by the Enterprise minus the loss suffered by unidentified victims and victims who cannot be located. These percentages shall be used to determine each victim's pro rata share of the recovered funds.
Previously, $24,900.78 was disbursed among defendant Perelman's 82 victims. The amounts already received by Perelman's victims shall be credited against any amounts that they are owed in connection with the initial distribution of the restitution funds and any future distributions. Perelman's victims shall not receive any payment in connection with a distribution of restitution funds if their calculated pro rata share is equal to or less than the amount they have already received.
Although this system is not perfect, it provides clarity and will facilitate payment to the victims. The amount that each defendant must pay in restitution and the amount of restitution that each victim is due remains unchanged. The victims still have a judgment against the defendant(s) liable to them until they are paid in full. Any differences between the government's proposed method and the Court's method with respect to the order of recovery, the precise allocation of the amounts, and/or the amounts of individual recovery are insignificant given that only 1% of the total loss has been recovered thus far. The likelihood of recovering even 3% of the total loss is slim. Thus, the desirability of creating the perfect system as if full restitution were possible is outweighed by the cost, inefficiency, and complexity of such an undertaking. Furthermore, the Court's method is equitable given that the enterprise was an evolving conspiracy - earlier offerings paved the way for later ones, and defendants who became involved in the Enterprise later in the game benefitted from the suffering of victims of the Enterprise's entire course of fraud.
The United States requests that the Court amend the judgments to recite that each defendant is jointly and severally liable with any other defendant in the related cases who was ordered to pay restitution for the same loss. The Court denies this request without prejudice. Joint and several liability is simply not at issue in light of the fact that only 1% of the loss has been recovered. There is no imminent danger that any victim will receive more than he or she is due. No defendant has moved to modify his judgment. If any defendant makes such an application, the Court will consider it at that time.
After the initial distribution, distribution of restitution funds shall take place every two years.
Pursuant to 18 U.S.C. § 3612(f)(3)(A), the Court waives the requirement that the defendants pay interest on the restitution because the defendants do not have the ability to pay such interest.
The Clerk's Office shall notify the victims of the Court's proposed clarification regarding the disbursement of recovered restitution. The notice shall include a copy of this Order and shall inform the victims that they have 60 days from the date of the letter to object to the Court's proposal. The Clerk's Office shall also publish a legal notice in the San Diego Union Tribune, once a week for three weeks.
The Court will order the distribution to be made 30 days after the resolution of any objections.
[Editor's Note: Exhibit A is not available.]
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