Opinion
Case No. 3:13-cr-91
08-05-2014
UNITED STATES OF AMERICA, Plaintiff, v. DIANE E. NIEHAUS, Defendant.
DECISION AND ENTRY SETTING DEFENDANT'S RESTITUTION OBLIGATION
This criminal case came before the Court for sentencing on May 8, 2014. At sentencing, the Court ordered Defendant to pay restitution but deferred the determinatio of the amount of restitution until on or before August 6, 2014, pursuant to 18 U.S.C. § 3664(d)(5). The parties filed memoranda on the issue of restitution as ordered by the Court (Docs. 45, 49) and the Court heard oral argument by telephone on July 28, 2014. The issue of restitution is now ripe for final determination.
Pursuant to a plea agreement, Defendant pled guilty to one count of embezzleme by a bank employee in violation of 18 U.S.C. § 656, one count of money laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(i), and one count of filing a false tax return in violation of 26 U.S.C. § 7206(1). In the statement of facts attached to the plea agreement, Defendant admitted that from at least 2007 through 2010 she served as the bank manager for Union Savings Bank ("USB") and used her position to embezzle thousands of dollars in funds from multiple USB customer accounts.
The Presentence Investigation Report ("PSR") determined that Defendant stole a total of $1,089,541.26 from six USB customer accounts. Defendant replaced the embezzled funds from four customer accounts during or after the offense and USB reimbursed the remaining two customers. The PSR recommended that Defendant pay $467,814.35 in restitution to USB for money reimbursed to the two customers' accounts. Specifically, $23,215.60 was attributable to the account of G.F. and $444,598.75 was attributable to the account of D.C. and J.C. The PSR determined that Defendant embezzled a total of $972,527.88 from the account of D.C. and J.C., but reduced this by $515,559.13 transferred in a civil settlement and $12,370 Defendant deposited into the account during the offense, leaving $444,598.75 in restitution owed.
Defendant objects to the entry of a restitution order and argues that USB is not a "victim" as defined in the Mandatory Victims Restitution Act ("MVRA"), 18 U.S.C. § 3663A(a)(2), because it was not proximately harmed by the commission of the offense. Alternatively, Defendant submits that a release in a settlement agreement between Defendant and USB as co-defendants in a state civil action precludes a restitution order.
The MVRA defines a "victim" as "a person directly and proximately harmed as a result of the commission of the offense. 18 U.S.C. § 3663A(a)(2). Defendant cites United States v. Speakman, 594 F.3d 1165 (10th Cir. 2010), for the proposition that USB's voluntary settlement agreement with Defendant is an intervening cause that breaks the causal chain. Alternatively, Defendant submits that USB committed volitional acts sufficient to preclude a finding that it is a "victim." Finally, Defendant argues that even if USB is a victim, a release contained in the settlement agreement prohibits the Court from entering a restitution order because USB and Defendant were co-defendants in the state civil action and USB initiated settlement discussions.
Defendant pled guilty to embezzlement by a bank employee, which applies when a bank employee "embezzles, abstracts, purloins or willfully misapplies . . . moneys, funds, assets or securities intrusted to the custody or care of such bank." 18 U.S.C. § 656. The bank, not its depositors, is the victim of embezzlement by a bank employee. United States v. Ragland, 72 F.3d 500, 502 & n.1 (6th Cir. 1996). In the Sixth Circuit, restitution is proper if the offense of conviction is "a direct and proximate cause of some or all of the victim's losses, even if it was not the sole cause." United States v. Sosebee, 419 F.3d 451, 459 (6th Cir. 2005). Moreover, the Supreme Court recently examined the definition of "victim" in § 3663A(a)(2) and declared "[t]he basic question that a proximate cause requirement presents is whether the harm alleged has a sufficiently close connection to the conduct at issue." Robers v. United States, 134 S. Ct. 1854, 1859 (2014). The harm alleged is the embezzlement of the money "intrusted to the custody or care" of USB.
The Court notes that the decision of the Tenth Circuit in Speakman does not bind this Court. Moreover, Speakman is readily distinguishable based on the charge of conviction. The defendant pled guilty to wire fraud for making unauthorized transfers from his wife's bank account at Merrill Lynch, where he worked. Speakman, 594 F.3d at 1167-68. His wife brought an arbitration proceeding against the defendant and Merrill Lynch, and the arbitration panel determined that Merrill Lynch was liable to the wife for the withdrawn funds. Id. at 1168-69. The issue before the Tenth Circuit was whether "Mr. Speakman's fraud against his wife proximately caused the loss to Merrill Lynch." Id. at 1171-72. The Court held that "an individual will be 'proximately harmed as a result of the defendant's crime if either there are no intervening causes, or, if there are any such causes, if those causes are directly related to the defendant's offense." Id. at 1172. Merrill Lynch's loss occurred when the arbitration panel concluded that it was liable to the wife and there were two potential intervening causes between the defendant's wire fraud and the loss. Id. at 1170. The first was the wife's initiation of the arbitration proceeding, which the Court concluded was "directly related to the offense conduct." Id. at 1172. The other potential intervening cause was the basis for Merrill Lynch's liability to the wife in the arbitration. Id. The record on appeal did not reveal why the arbitration panel imposed liability on Merrill Lynch, so the Court remanded the case for the district court to determine whether that basis constituted an intervening cause. Id. at 1173.
In the instant case, there is no intervening cause between Defendant's embezzlement and USB's harm. The offense occurred when Defendant embezzled the money "intrusted to the custody or care" of USB and that directly harmed USB. Even if the harm occurred at the settlement agreement, it was "directly related to the defendant's offense." See Speakman, 594 F.3d at 1172.
"[A] private settlement between a criminal wrongdoer and his victim releasing the wrongdoer from further liability does not preclude a district court from imposing a restitution order for the same underlying wrong." United States v. Bearden, 274 F.3d 1031, 1041 (6th Cir. 2001). "[R]estitution ordered as part of a criminal sentence is punitive rather than compensatory in nature." United States v. May, 500 F. App'x 458, 462 (6th Cir. 2012). The PSR properly reduced the restitution award by the value USB received in the settlement, see United States v. Elson, 577 F.3d 713, 734 (6th Cir. 2009), but as a matter of law the release does not prohibit this Court from imposing a restitution order for the remaining amount. The fact that USB was joined as a co-defendant in the state civil suit does not affect the principle that "private individuals should not be allowed to thwart the penal goals of the criminal justice system by entering into releases or settlements with wrongdoers." Bearden, 274 F.3d at 1041. Defendant provides no basis for the Court to conclude that the procedural designation of USB and Defendant as co-defendants in the state civil action overrides these ideals. Finally, the Court observes that the wife in Speakman instituted the arbitration proceeding against both Merrill Lynch and the defendant. Speakman, 594 F.3d at 1168.
The Court concludes that the Government has shown by a preponderance of the evidence that USB is a victim and $467,814.35 is the proper amount of restitution. See 18 U.S.C. § 3664(e). Accordingly, the Court ORDERS that Defendant pay restitution to USB in the total amount of $467,814.35.
IT IS SO ORDERED. Date: 8/5/14
s/ Timothy S. Black
Timothy S. Black
United States District Judge