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The People v. Eneliko Sean Smith


July 19, 2011


(Super. Ct. No. S08CRF0243)

The opinion of the court was delivered by: Butz , J.

P. v. Smith



California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

Defendant Eneliko Sean Smith entered a negotiated plea of no contest to embezzling transient occupancy taxes while acting as an agent of the City of South Lake Tahoe (the City), in exchange for dismissal of another count and a grant of probation. The trial court immediately suspended imposition of sentence and granted probation (imposing a jail term equal to time already served--one day--and 320 hours of community service as conditions).

At the restitution hearing, the trial court found that the City was a direct victim of the embezzlement of the transient occupancy taxes. It awarded the amount of the tax delinquency with interest (along with an unpaid tax under the Bus. & Prof. Code for an operating certificate). The court ruled, however, that "investigative costs incurred by governmental agencies are not recoverable as restitution under the Penal Code."

The People appeal from the probation order. (Pen. Code, § 1238, subd. (a)(5); People v. Hamilton (2003) 114 Cal.App.4th 932, 938 [order relating to restitution made after sentencing affects substantial right of the People and thus appealable].) They contend the trial court erred in failing to allow the City to recover its labor costs expended in investigating the extent of defendant's embezzlement. We shall affirm the order granting probation.


In light of the issue, we do not provide more than a brief statement of facts. The parties failed to stipulate to a factual basis for the plea at the time of its entry,*fn1 but the preliminary hearing transcript showed that defendant, who owned and managed a motel located in South Lake Tahoe, had collected occupancy taxes from guests in 2007 and 2008 that the City imposed on his room rates, but did not turn them over to the City until the City performed an audit of his seized records that demonstrated a shortfall of over $100,000. Under the City's ordinance (South Lake Tahoe City Code, § 28A-18), defendant was required to hold these funds in trust for the City and remit them within 15 days of the end of the month following their collection.

A city accountant provided a spreadsheet detailing the tax delinquency and other items for the restitution hearing. After setting forth the underlying amount of tax with interest and penalties, the spreadsheet added "Additional Expenses" of nearly $13,000 for "extraordinary work performed to collect the debt (i.e.: Letters, subpoenas, lines [sic], court appearances, title searches, Hearing to Revoke Tax Certificate and close business, meetings with the Police Dept., Legal, Building and Fire Staff)." The amount was based on the total number of hours of work that six city employees (including the city accountant) spent on the matter, at various hourly rates representing the actual labor cost to the City for their work.

At the restitution hearing, the city accountant stated these figures were "the sum of all of the staff time . . . to bring this case to where it is at now. All of the 'above and beyond' expenses." These labor costs did not represent overtime (because all staff involved were exempt employees) or any outside workers, but she characterized the work on the case as above and beyond the "normal course" or "normal scope" of their jobs. She admitted that her job ordinarily required her to perform ongoing audits of motels to keep track of the occupancy taxes and seek restitution, but "[w]e've never had one that has taken it to this extreme" in which she had to come to court and testify, which she claimed was not among her ordinary job duties.


Where a victim has suffered economic losses as a result of a defendant's actions, a trial court must require the defendant to make restitution. (People v. Phu (2009) 179 Cal.App.4th 280, 283.) We give the right to restitution a broad and liberal construction. (Ibid.) The trial court may consider almost any kind of information in calculating restitution, and we review the court's resulting order for an abuse of discretion. (Id. at pp. 283-284.) An order based on an error of law would constitute an abuse of discretion. (People v. Jennings (2005) 128 Cal.App.4th 42, 49.)

In claiming the trial court's order denying investigative costs was premised on an error of law, the People assert that the City was entitled to recover the cost of employee time that was diverted to defendant's case from other work. They derive this argument from the reasoning of In re Johnny M. (2002) 100 Cal.App.4th 1128, in which the minor damaged school property in the course of two burglaries. (Id. at pp. 1129-1130.) The school district sought restitution for the work salaried school district employees performed in making the classrooms operational; their ordinary duties did not include dealing with the aftermath of a burglary. (Id. at pp. 1130-1131.) Relying on cases involving criminal restitution because the statutory provisions were in parallel (Johnny M., at p. 1132, cited with approval in People v. Martinez (2005) 36 Cal.4th 384, 394, fn. 2), Johnny M. concluded the school district was entitled to recover for the loss of employee work product even if this was not an out-of-pocket expense in connection with salaried employees because they were diverted from their ordinary duties. (Johnny M., at p. 1134.)

In arguing that Johnny M. authorizes reimbursement of labor costs as restitution in the present case, the People rely on the testimony of the city accountant that the work associated with defendant's embezzlement of the taxes was "above and beyond" the "normal scope" of their auditing function. However, we agree with the trial court, which focused not on the degree of the increment of work performed but on the kind.

The trial court cited People v. Ozkan (2004) 124 Cal.App.4th 1072 (Ozkan), involving roughly analogous circumstances. There, the defendant failed to remit the full amount of sales taxes due on gasoline sold at his stations. (Id. at p. 1074.) An auditor working for the State Board of Equalization (SBE) reviewed delivery invoices and sales tax returns to determine the total misappropriations. (Id. at p. 1075.) Ozkan concluded that a government agency could recover restitution as a direct victim only for the costs of unusual expenses resulting from a defendant's actions, and therefore the SBE could not recover its labor costs in the course of enforcing the tax laws.*fn2 (Id. at p. 1077.)

Ozkan contrasted Torres, which noted restitution would be inappropriate for a law enforcement agency's expenditures on a controlled buy of contraband, as this is an ordinary "cost of its doing its job" (People v. Torres (1997) 59 Cal.App.4th 1, 3) and Rugamas, which upheld a general condition of probation for the reimbursement of police payment of a hospital bill for injuries the defendant sustained in the course of brandishing a weapon to avoid arrest because it was an unusual expense. (Ozkan, supra, 124 Cal.App.4th at pp. 1076-1077, citing Torres, supra, 59 Cal.App.4th at p. 3 [conduct that is subject of agency's ordinary investigative function does not make agency a direct victim] & People v. Rugamas (2001) 93 Cal.App.4th 518, 521-522, 523 [distinguishing Torres as involving general costs of performing regular duties as opposed to unusual expense of hospital bill].)

Therefore, the trial court did not commit an error of law in following this distinction between the ordinary costs of an agency performing its function and extraordinary expenses not within the agency's function. Johnny M. is not of any aid, because the salaried school employees did not ordinarily respond to remedying damages from a burglary, whereas in the present case the City's employees ordinarily audited motels and recovered tax delinquencies. To the extent an agency might recover labor costs for a profound disruption of its ordinary functions (an issue we do not decide), as perhaps where all of its resources are diverted from regular work, we do not find any abuse of discretion in the trial court's apparent conclusion that that level had not been reached in this case.


The order granting probation is affirmed.

We concur: RAYE , P. J. HOCH , J.

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