Opinion
4:98CR3069
June 27, 2002
MEMORANDUM AND ORDER ON PETITIONER'S MOTION UNDER 28 U.S.C. § 2255
This case is now before me on the petitioner Thomas J. Bernard's Motion Under 28 U.S.C. § 2255 to Vacate, Set Aside, or Correct Sentence by a Person in Federal Custody. See filing 215. In this motion, the petitioner challenges only the restitution portion of his sentence. See Mem. in Supp. of Mot. for Modification of Sentence [hereinafter Petitioner's Brief] at 3. After reviewing the record, I find that the petitioner's request for an evidentiary hearing will be granted.
I. Background
On August 19, 1998, a thirty-one count indictment was filed in the District of Nebraska naming Thomas J. Bernard, John H. Wise, a/k/a Jack Wise, and Richard A. McDonald as the defendants. A Superseding Indictment, Second Superseding Indictment, and Third Superseding Indictment followed. The fifty-count Third Superseding Indictment, which named the same three individuals as defendants, included allegations of bank fraud, money laundering, and conspiracy to commit bank fraud. After initially tendering pleas of not guilty as to all counts, the petitioner Bernard entered into a plea agreement with the government. Pursuant to this written agreement, the petitioner pleaded guilty to two counts of bank fraud (Counts XXXIII and XXXIV of the Third Superseding Indictment). I accepted the petitioner's plea and ordered a presentence investigation.
The probation office completed a presentence investigation report (hereinafter PSI report), and the petitioner Bernard filed an objection. In this objection, Bernard challenged, inter alia, the probation officer's loss calculations. In its Sentencing Statement, filing 181, the government agreed that the probation officer's $41,000,000 loss figure was high. The parties then filed a stipulation, agreeing that "the Court should assess the loss attributable to the defendant at a range between $20 million and $40 million dollars [sic]." Joint Stipulation as to Loss ¶ 5 (filing 189). The parties also stipulated that "Paragraph 91 of the Second Revised Presentence Report reflects that the total amount of restitution sought by victims in this matter is $27,534,980.04." Id. ¶ 4.
On December 4, 2000, I sentenced the petitioner to fifty-four months in prison, followed by five years of supervised release, as to each count, to run concurrently. I also ordered the petitioner to pay restitution in the amount of $27,534,980.03, and a special assessment in the amount of $200. Although a fine of $15,000 to $2,000,000 was authorized by the guidelines, I waived a fine "because of the defendant's inability to pay." Judgment in a Criminal Case at 8 (filing 191).
The petitioner filed his § 2255 motion in December 2001, raising the following three grounds for relief: (1) I failed to make evidentiary findings as to restitution in violation of his due process rights; (2) I applied the wrong restitution provision in violation of the Ex Post Facto Clause of the United States Constitution; and (3) the petitioner's counsel were ineffective in that they failed to raise the ex post facto issue during the sentencing hearing. See Mot. Under 28 U.S.C. § 2255 at 5 (filing 215); Petitioner's Brief at 3-6. In terms of relief, the petitioner requests that I vacate the restitution portion of his sentence, and, "[i]f the Government or the Court is inclined to impose restitution," that I grant an evidentiary hearing regarding his ability to pay. Petitioner's Brief at 6. The petitioner's motion, his memorandum in support thereof, the government's response, and the petitioner's reply are now before me for review.
The petitioner also requested that I appoint counsel to assist him in prosecuting his motion. I granted the petitioner's request, and the petitioner's counsel has now filed an Entry of Appearance, filing 232.
II. Analysis
Section 2255 of Title 28 of the United States Code provides individuals in federal custody with a means to collaterally attack a sentence imposed after a conviction. Recognizing "`the basic distinction between direct review and collateral review,'" Congress has narrowly limited the grounds for post-conviction attacks. See United States v. Frady, 456 U.S. 152, 165 (1982) (quoting United States v. Addonizio, 442 U.S. 178, 184 (1979)). Thus, section 2255 specifically sets forth the following grounds for relief: (1) the sentence was imposed in violation of the Constitution or laws of the United States, (2) the court was without jurisdiction to impose the sentence, (3) the sentence was in excess of the maximum authorized by law, and (4) the sentence is otherwise subject to collateral attack. 28 U.S.C. § 2255 ¶ 1.
As noted above, the petitioner in this case raises three constitutional challenges: a due process claim, an ex post facto claim, and an ineffective — assistance-of-counsel claim. All three of these claims relate to the restitution portion of his sentence. With respect to his due process allegation, the petitioner notes that the Victim and Witness Protection Act (hereinafter VWPA) was in effect at the time he committed his crimes. The VWPA authorized, but did not compel, district courts to order restitution. See 18 U.S.C. § 3663(a)(1) (1994). The VWPA also provided as follows:
The court, in determining whether to order restitution . . . and the amount of such restitution, shall consider the amount of the loss sustained by any victim as a result of the offense, the financial resources of the defendant, the financial needs and earning ability of the defendant and the defendant's dependents, and such other factors as the court deems appropriate.18 U.S.C. § 3664(a) (1994). According to the petitioner, however, "[t]here was neither questions asked, nor evidence taken [at the sentencing hearing] as to [his] ability . . . to pay any amount [of restitution] at all." Petitioner's Brief at 4. In fact, the petitioner continues, the transcript from this hearing has "only two references to [his] ability and the likelihood of actual recovery of [r]estitution." Id. These references apparently include my observation that there was only a "dim hope" that restitution would ever be paid, and the probation officer's statement that he did not know what might "transpire in the years to come" regarding the petitioner's ability to pay any amount. Id. The petitioner contends that these stray comments are not the type of inquiry envisioned by the VWPA. Thus, the petitioner concludes, I erred in failing to (1) consider the factors outlined above, and (2) make specific findings regarding such factors.
The transcript of this hearing has not been made a part of the record. The government, however, does not challenge the petitioner's summary of comments made during the hearing relating to his ability to pay restitution.
In the alternative, the petitioner contends that I erroneously applied the Mandatory Victims Restitution Act of 1996 (hereinafter MVRA) in calculating restitution. Under the MVRA, restitution is mandatory for certain crimes, including an offense committed by fraud. See 18 U.S.C. § 3663A(a)(1), (c)(1)(A)(ii). In such cases, the MVRA requires courts to order restitution "to each victim in the full amount of each victim's losses . . . and without consideration of the economic circumstances of the defendant." Id. § 3664(f)(1)(A). As the petitioner notes in his brief, the Eighth Circuit has recognized that "an order of restitution under the MVRA is punishment for Ex Post Facto Clause purposes." United States v. Williams, 128 F.3d 1239, 1241 (8th Cir. 1997) (citations omitted). Thus, the petitioner concludes, because I applied the MVRA retrospectively, the restitution order I entered violates the ex post facto prohibition. See id. ("`To fall within the ex post facto prohibition, a law must be retrospective — that is "it must apply to events occurring before its enactment" — and it "must disadvantage the offender affected by it" by altering the definition of criminal conduct or increasing the punishment for the crime.'" (quoting Lynce v. Mathis, 519 U.S. 433, 441 (1997); Weaver v. Graham, 450 U.S. 24, 29 (1981)).
In response, the government directs me to its plea agreement with the petitioner, its stipulation with the petitioner, and the PSI report. First, the government cites the following language from the plea agreement:
[The petitioner] agree[s] that the Court may, but is not required to, order restitution to the victims for both charged and uncharged conduct for which the United States knows of at the present time or should become aware of prior to sentencing. The parties acknowledge that there may be a dispute with [the] amount of the loss that will need to be addressed by the Court. However, the parties agree that the Court will be free to look at all relevant conduct related to both charged and uncharged conduct in determining the appropriate base offense level and restitution.
Plea Agreement at 2 (filing 166). Noting that the Eighth Circuit "[has] held several times that a defendant's agreement to pay the restitution that a district court orders is binding," the government contends that the above language forecloses the petitioner's claims. United States v. Lester, 200 F.3d 1179, 1179 (8th Cir. 2000) (citing Williams, 128 F.3d at 1240; United States v. Marsh, 932 F.2d 710, 713 (8th Cir. 1991)); see also 18 U.S.C. § 3663(a)(3) (1994) ("The court may also order restitution in any criminal case to the extent agreed to by the parties in a plea agreement."); 18 U.S.C. § 3663(a)(3) (2000) (same). I disagree. In the plea agreement, the petitioner did not "specifically undert[ake] `to pay any restitution ordered by the District Court.'" Lester, 200 F.3d at 1179. Nor did the petitioner "specifically agree that `the court may impose restitution up to the full loss suffered by the victims. . . .'". Marsh, 932 F.2d at 713; see also Williams, 128 F.3d at 1240 ("The plea agreement also said the district court `will have the power to order [Williams] to pay full restitution to any victims of his offense conduct from January 1, 1994 to May 30, 1996,' and Williams acknowledges that `under the plea agreement the [district] [c]ourt had authority to order full restitution.'" (brackets in original)). Instead, the petitioner merely agreed that I could consider both charged and uncharged conduct in calculating restitution. Thus, I am not persuaded that the plea agreement bars the petitioner's claims.
Next, the government directs me to its stipulation with the petitioner. According to the government, "the parties stipulated as to the amount of loss for purposes of the base offense level and restitution in an amount determined by the United States Probation Office." Resp. of the United States [hereinafter Government's Brief] at 1. The stipulation's only reference to restitution is found in paragraph four, which provides as follows: "The parties stipulate that Paragraph 91 of the Second Revised Presentence Report reflects that the total amount of restitution sought by victims in this matter is $27,534,980.04." Joint Stipulation as to Loss ¶ 4 (filing 189). This language does not indicate that the petitioner agreed to pay this amount in restitution; instead, such language merely recognizes that this was the amount sought by various creditors. Thus, I fail to see how the stipulation forecloses the petitioner's claims.
Finally, the government refers me to the PSI report. The government contends that "[the petitioner's] ability to make payments was specifically set forth in [this] report." Government's Brief at 2. Thus, the government concludes, "in adopting the presentence report [I] did make specific factual findings" regarding the petitioner's ability to pay restitution. Id. Again, I disagree.
The Eighth Circuit "encourage[s] sentencing courts, when ordering restitution under the VWPA, to make specific findings of fact about the defendant's financial resources, financial needs and earning ability and the defendant's financial obligation to his or her dependents, if any." United States v. Owens, 901 F.2d 1457, 1459 (8th Cir. 1990); see also United States v. Berndt, 86 F.3d 803, 808-09 (8th Cir. 1996) ("Courts are encouraged to make specific findings of fact regarding these factors, especially in reference to the defendant's ability to pay a restitution order." (citing Owens, 901 F.2d at 1459-60)). According to the VWPA, courts "may order the probation service . . . to obtain information pertaining to the factors [above]," and may direct the probation service to include such information in the PSI report. See 18 U.S.C. § 3664(b) (1994). In this case, the petitioner's PSI report includes information relating to his net worth and net monthly cash flow, his vehicles, his interests in various real estate entities, his wife's interests in such entities, and his income tax information for the years 1995-1998. See Second Revised Presentence Investigation Report ¶¶ 145-149 (filing 190); see also id. ¶¶ 128-143 (pertaining to the petitioner's family, his physical condition, his mental and emotional health, his education, and his employment history). In analyzing the above information, the probation officer who completed the report commented that "[t]he defendant has a history of high earnings," as well as "assets that can be liquidated and should be applied toward the payment of restitution." Id. ¶ 150. The judgment entered with respect to the petitioner indicates that I reviewed the PSI report and "adopt[ed] the report and the facts set forth therein as [my] findings of fact for the purposes of sentencing." Judgment at 8 (filing 191). This statement does tend to suggest that I considered the petitioner's financial condition before calculating restitution. However, the PSI report also states that, in accordance with 18 U.S.C. § 3663A, "[t]he Court shall order restitution." Second Revised Presentence Investigation Report ¶ 162 (emphasis supplied); see also id. ¶ 163 ("The Court shall order restitution for the full amount of the victim's loss." (citing U.S.S.G. § 5E1.1(a)(1)). At no time did I clarify that this portion of the report was inaccurate. Given this statement in the PSI report and the absence of any meaningful discussion during the petitioner's sentencing hearing regarding his ability to pay restitution, I cannot conclude that I properly took into account the factors outlined in § 3664(a) of the VWPA. In short, the petitioner has persuaded me that I erred in calculating restitution. It therefore seems to me that I should afford the petitioner an evidentiary hearing on the questions of whether restitution should have been ordered and, if so, the amount of such restitution.
Before doing so, however, I turn to a procedural matter. Generally, a claim that is not properly preserved at trial or on direct appeal is procedurally defaulted and cannot be reached in a § 2255 proceeding. United States v. Ward, 55 F.3d 412, 413 (8th Cir. 1995); see also United States v. Frady, 456 U.S. 152, 165 (1982) ("[W]e have long and consistently affirmed that a collateral challenge may not do service for an appeal." (citations omitted)). A movant may avoid this procedural bar if he can show cause for the default and resulting prejudice, or if he can show that the alleged error was a "fundamental miscarriage of justice." Anderson v. United States, 25 F.3d 704, 706 (8th Cir. 1994).
As noted above, the petitioner makes clear that he is challenging only the restitution portion of his sentence. Several circuits have apparently concluded that § 2255 "may not be utilized for the sole purpose of attacking fines and orders of restitution." Blaik v. United States, 161 F.3d 1341, 1342-43 (11th Cir. 1998) (citing Barnickel v. United States, 113 F.3d 704, 706 (7th Cir. 1997); Smullen v. United States, 94 F.3d 20, 25-26 (1st Cir. 1996); United States v. Watroba, 56 F.3d 28, 29 (6th Cir. 1995); United States v. Segler, 37 F.3d 1131, 1136-37 (5th Cir. 1994); United States v. Michaud, 901 F.2d 5, 7 (1st Cir. 1990)); see also id. at 1343 ("[W]e hold that § 2255 cannot be utilized by a federal prisoner who challenges only the restitution portion of his sentence because § 2255 affords relief only to those prisoners who `claim the right to be released' from custody." (quoting 28 U.S.C. § 2255)); United States v. Kramer, 195 F.3d 1129, 1130 (9th Cir. 1999) ("We agree with our sister circuits and join them in holding that by its plain terms, § 2255 is available only to defendants who are in custody and claiming the right to be released. It cannot be used solely to challenge a restitution order."). But see Weinberger v. United States, 268 F.3d 346, 352 n. 1 (6th Cir. 2001), cert. dismissed, 122 S.Ct. 1433 (2002) ("In a citation updating its brief, the government relies upon United States v. Kramer . . . for the proposition that a petitioner cannot challenge a restitution order in a § 2255 petition because such a challenge does not claim a right to be released from custody. This circuit has not come to the same conclusion."). While I have not located any Eighth Circuit decisions directly on point, at least one district court in this circuit has reached the same conclusion. See Covey v. United States, 109 F. Supp.2d 1135, 1143 (D.S.D. 2000) ("The Court . . . is persuaded by the above cited circuit decisions that movant may not challenge the fine, restitution or special assessment imposed as part of his criminal sentence in this § 2255 proceeding."). The government, however, does not raise this issue in its response, and I therefore shall not attempt to resolve the question here.
In this case, the petitioner did not raise his restitution claims at sentencing or on direct appeal. The government, however, does not mention this in its response. There is authority suggesting that when the government fails to advance a procedural default argument, the argument is waived. See, e.g., United States v. Mooring, 287 F.3d 725, 727 (8th Cir. 2002) ("Although [the petitioner] raises his § 851 argument for the first time in this § 2255 motion, the Government does not contend the argument is procedurally defaulted, so we need not determine whether cause and prejudice excuse the default before deciding the merits." (citations omitted)); Robinson v. Crist, 278 F.3d 862, 865 (8th Cir. 2002) (arising in the context of a § 2254 motion) ("[W]e agree with the district court that because the state failed to advance a procedural default argument, such argument is waived." (citations omitted)). Nevertheless, even if the argument has not been waived, the default may be excused. The United States Supreme Court has recognized that errors by counsel may constitute cause for a procedural default, provided that such errors rise to the level of constitutionally ineffective assistance of counsel, as defined by Strickland v. Washington, 466 U.S. 668 (1984). See Murray v. Carrier, 477 U.S. 478, 488 (1986); see also McCleskey v. Zant, 499 U.S. 467, 494 (1991) ("Attorney error short of ineffective assistance of counsel, however, does not constitute cause and will not excuse a procedural default." (citation omitted)). To establish ineffective assistance of counsel under Strickland, the movant must demonstrate the following: (1) counsel's representation was deficient in that it "fell below an objective standard of reasonableness," and (2) counsel's deficient performance prejudiced him in that "there is a reasonable probability that, but for counsel's unprofessional errors, the result of the proceeding would have been different." Strickland, 466 U.S. at 687, 688, 694. In his motion, the petitioner contends that his counsel was "ineffective in failing to recognize and to bring to the court's attention the mistake of law." Petitioner's Brief at 6. The government responds that "[c]ounsels' failure to raise the issue was specifically justified by the defendant's agreement in the plea agreement that all conduct would be considered for purposes of restitution and in the stipulation the defendant agreed to at the time of sentencing." Government's Brief at 3. For the reasons outlined above, I do not agree with the government's interpretation of the plea agreement and stipulation. Thus, I am inclined to agree with the petitioner that his counsel should have challenged the restitution order at the time of sentencing. With respect to the prejudice prong of Strickland, however, I am not prepared at this point to determine whether the petitioner's restitution order would have been less, had his counsel raised the ex post facto issue. See Strickland, 466 U.S. at 694. This question is better left for the evidentiary hearing, at which time I will receive evidence relating to the factors outlined in § 3664(a) of the VWPA and then decide whether the restitution portion of the petitioner's sentence should be vacated.
IT IS ORDERED that the petitioner's request is granted for an evidentiary hearing as to whether restitution should be ordered; if so, the amount; the petitioner's ability to pay restitution; and how it should be paid is granted. Counsel for both parties will be contacted regarding the scheduling of this hearing.