Opinion
Criminal No. 09-279.
October 24, 2011
ORDER
AND NOW, this 24th day of October, 2011, the Court hereby makes the following findings regarding restitution in the above-captioned case:
Defendant pled guilty to one count of mail fraud, in violation of 18 U.S.C. §§ 1341 and 2, at Criminal No. 09-279, one count of income tax evasion, in violation of 26 U.S.C. § 7201, at Criminal No. 09-278, and one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h), at Criminal No. 11-37. On October 20, 2011, he was sentenced at all three counts, and, at the sentencing hearing, the Court advised the parties that it would issue written findings and a written order regarding restitution as to Criminal No. 09-279.
In regard to restitution, the government presented two spreadsheets setting forth numerous victims to the defendant's offense at CR09-279 and their respective loss amounts. The defendant challenges only the inclusion of Wachovia Bank, N.A. ("Wachovia") as a victim and argues that the claim of $258,837,115.19 should be deducted from the restitution amount. He argues that the government's evidence as to the victims and loss amounts is based almost entirely on claims made in the related LeNature's, Inc. bankruptcy proceedings. He asserts that Wachovia not only withdrew its bankruptcy claim, it agreed to pay $38,000,000.00 to the bankruptcy trustee as settlement of claims by the trustee against Wachovia. He argues that, absent a bankruptcy claim, the government has no evidence as to whether Wachovia is a victim and, if so, what its loss was.
However, the defendant's argument does not take into account that Wachovia was not acting solely in its own capacity in regard to the $258,837,115.19 claim, but rather, as the administrative agent for a lending syndicate involved in a September 1, 2006 credit instrument. Accordingly, not all of the $258,837,115.19 claim involves losses claimed by Wachovia. The government presented credible evidence that Wachovia did not withdraw the entire claim, but only its portion of the claim, $23,200,000.00, by way of an October 17, 2011 letter from Robert W. Fuller, who represented Wachovia in the bankruptcy settlement. See Govt. Ex. 2. The settlement agreement provided by the defendant seems to corroborate this, as it states that "the Wachovia Parties, on behalf of themselves (but not on behalf of other lenders who were participants in or signatories to the Credit Agreement) ," are withdrawing all bankruptcy claims. See Deft. Ex. A at 5 (emphasis added).
Nonetheless, Wachovia has indeed withdrawn its own claim and settled bankruptcy claims pending against it. This makes it unclear whether Wachovia itself was a victim and, if so, what losses it incurred. Although the government has presented other evidence it claims supports a finding that Wachovia is a victim, this evidence is insufficient to establish the precise nature of Wachovia's relationship to the defendant's fraudulent scheme or its losses. Simply put, in the absence of Wachovia's claim, the Court cannot determine what, if any, losses Wachovia suffered as a result of the defendant's criminal behavior. Therefore, the Court finds that no restitution will be ordered in regard to Wachovia's $23,200,000.00 claim. As to the other members of the syndicate, though, there is no evidence rebutting the government's showing as to their status as victims and as to their losses.
Accordingly, the Court finds that the government has proved, by a preponderance of the evidence, that the victims set forth in exhibits 1 and 2 hereto did indeed suffer compensable losses in the amounts set forth, with the exception that the loss for the syndicate to which Wachovia is the administrative agent suffered a compensable loss of $235,637,115.19. The total loss is, therefore, $661,324,329.81. Any argument by the defendant that restitution should be reduced based on settlement of claims of victims in the bankruptcy proceedings is without merit. As the Court explained in its tentative findings and rulings, restitution can be reduced based on the value of any part of the property that is returned. See 18 U.S.C. § 3663A(b)(1); United States v. Bryant, 2011 WL 3715811, at *17 (3d Cir. Aug. 25, 2011). However, the burden is on the defendant to prove any offsets. See Bryant, supra, at *17. While the defendant has argued that various victims have settled claims in the bankruptcy proceedings relating to the losses they have sustained, he has not established that he himself has made restitution to the victims of his crimes. The fact that a third party may have made payments to a victim does not relieve the defendant of his duty to make payment. See 18 U.S.C. § 3664(f)(b). In such cases, payment is to be made by the defendant to the party responsible for payment to the victim.
Since Wachovia is still functioning as the administrative agent, payments to the syndicate shall still be made to Wachovia until notice that Wachovia is no longer functioning in that role.
As discussed above, Wachovia did not settle its claim against the trustee; it withdrew its claim. The settlement was for claims against Wachovia by the trustee.
Likewise, the fact that the bankruptcy trustee has recovered assets in the amount of $31,852,058.35 does not alter the defendant's responsibility regarding restitution. First, it is not clear how, if, or to what extent victims will receive compensation for losses caused by the defendant from these assets. Moreover, as discussed above, any payment to a victim by the trustee would entitle the trustee to recover from the defendant directly.
Therefore, the Court finds that the victims sustained the losses set forth in exhibits 1 and 2 hereto, with the exception regarding the syndicate discussed above, and that these loss amounts represent the amount lost by each victim as a result of the fraudulent activity of the defendant. The victims and their losses shall be identified in the judgment and commitment order.
Accordingly, the Court orders the defendant to make restitution in the amount of $661,324,329.81. The defendant shall be jointly and severally liable for this restitution along with any other persons or entities found to be responsible for the victims' losses, including, but not limited to, co-defendants Andrew J. Murin, Jr., Robert B. Lynn, Jonathan E. Podlucky, and Donald K. Pollinger, as well as Tammy Andreycak, convicted at Criminal No. 08-153. All restitution payments are to be made to the Clerk for the United States District Court for the Western District of Pennsylvania to be divided and forwarded to the victims in an amount proportional to each victim's share of the total loss. To the extent that all victims have been paid in full for their unreimbursed losses, restitution shall then be paid to any third party that has provided compensation to any victim for the victim's loss.
The Court finds that the defendant does not have the ability to pay interest on the restitution, and therefore, interest is waived pursuant to 18 U.S.C. § 3612(f)(3)(a).
The Court orders the defendant to make restitution payments in the following manner:
The defendant shall, while incarcerated, participate in the United States Bureau of Prisons' Inmate Financial Responsibility Program. The Court further orders that 50 percent of all funds obtained by the defendant while incarcerated shall be applied toward restitution.
The defendant shall pay any restitution balance upon his release in monthly installments of not less than 20 percent of his gross monthly income, with the first payment due 30 days after his release from the Bureau of Prisons.
COURT EXHIBIT 1
Claimant Attention Address City, State, Zip Restitution Amount SEE ATTACHED SPREADSHEET $684,524,329.81
Ameritech Credit Corporation c/o O'Rourke Katten Moody, Attn: dba SBC Capital Services Michael C. Moody 161 N. Clark St Suite 2230 Chicago IL 60601 $1,661,292.60 CIT Communications Finance dba Avaya Financial Services Attn: Bankruptcy Department 1 CIT Drive Suite 4104A Liningston NJ 07039 $85,800.74 CIT Group/Equipment Financing Inc., The Attn: Brad Boyd 305 Fellowship Road Suite 300 Mt. Laurel NJ 08054 $112,000,000.00 Citicapital Commercial Leasing c/o Thomas E. Riley, P.C. 2025 Greentree Road Pittsburgh PA 15220 $1,800,000.00 De Lage Landen Financial Services, Inc. 1111 Old eagle School Road Wayne PA 19087 $153,613.17 Delaware Group Adviser Funds o/b/o Delaware Diversified c/o Delaware Investments Attn: Philadelphia PA Income Fund Jerel Hopkins 2005 Market St, 29th Floor 19103 $1,350,000.00 Delaware Group Equity Funds I c/o Delaware Investments Attn: Philadelphia PA o/b/o Delaware Balanced Fund Jerel Hopkins 2005 Market St, 29th Floor 19103 $10,000.00 Delaware Group Income Funds c/o Delaware Investments Attn: Philadelphia PA o/b/o various funds Jerel Hopkins 2005 Market St, 29th Floor 19103 $1,735,000.00 Delaware Investment Dividend c/o Delaware Investments Attn: Philadelphia PA Income Funds Jerel Hopkins 2005 Market St, 29th Floor 19103 $935,000.00 Delaware Investment Global c/o Delaware Investments Attn: Philadelphia PA Dividend Income Funds, Inc. Jerel Hopkins 2005 Market St., 29th Floor 19103 $65,000.00 Delaware Pooled Trust High c/o Delaware Investments Attn: Philadelphia PA Yield Bond Portfolio Jerel Hopkins 2005 Market St, 29th Floor 19103 $30,000.00 c/o Delaware Investments Attn: Philadelphia PA Delaware VIP Trust o/b/o Jerel Hopkins 2005 Market St, 29th Floor 19103 $1,590,000.00 Farm Credit Leasing Services c/o Gislason Hunter Attn: Michael S. Corporation Dove P.O. Box 458 New Ulm MN 56073 $512,436.96 c/o Babst, Calland, Clements Zomir FirstMerit Bank, N.A. Attn: Mark A. Lindsay Two Gateway Center 8th Floor Pittsburgh PA 15222 $1,750,000.00 General Electric Capital Corporation c/o Thomas E. Riley, P.C. 2025 Greentree Road Pittsburgh PA 15220 $166,405.47 George K. Baum Capital Kansas City MO Partners, L.P. Attn: William D. Thomas 4801 Main St, Suite 540 64112 $12,403,669.72 George K. Baum Employee Kansas City MO Equity Fund, LP. Attn: William D. Thomas 4801 Main St, Suite 540 64112 $596,330.29 Hewlett-Packard Financial Services Attn: Steve Kopitskie 420 Mountain Ave. Murray Hil NJ 07974 $17,353,994.77 c/o Weltman Weinberg Reis, Attn: Huntington National Bank James Valecko 436 Seventh Ave. Pittsburgh PA 15219 $26,161.09 ICX Corporation dba RBS Asset c/o Buchanan Ingersoll Rooney, Attn: Finance Christopher Schueller 301 Grant Street 20th Floor Pittsburgh PA 15219 $1,900,000.00 IKON Financial Services Attn: Bankruptcy Administrator P.O. Box 13708 Macon GA 31208 $45,000.00 Lasalle National Leasing c/o Ober Kaler Grimes Shriver Attn: Corporation Randall L Hagan 120 E. Baltimore St Baltimore MD 21202 $703,600.94 M I Marshall Isley Bank c/o Owen Katz P.O. Box 7826 Pittsburgh PA 15215 $337,885.98 c/o Pietragallo Bosick Gordon Attn: Mainsail Funding LLC Robert J. Manahan 301 Grant Street, 38th Floor Pittsburgh PA 15219 $194,661.19 Manufacturers Traders Trust c/o Hodgson Russ LLP, Attn: Garry Company, as Indenture Trustee Graber and Julia Kreher Onew M T Plaza Suite 2000 Buffalo NY 14203 $155,666,666.67 c/o Shermata Adams Von Allmen, Mercedes-Benz Credit Attn: Deborah Banfill P.O. Box 80908 Rochester MI 48308 $58,995.04 Merrill Lynch Capital c/o Latham Watkins, Attn: David Hiler 233 South Wacker Drive Chicago IL 60606 $17,112,735.00 National City Commercial c/o Lamm Rubenstone Lesavoy Butz Capital Company LLC David Attn: Sherry D. Lowe 3600 Horizon Blvd Suite 200 Teevose PA 19053 $1,858,163.92 c/o Burr Forman, Attn: David ORIX Financial Services Houston, IV 3102 West End Ave., Suite 700 Nasville TN 37203 $13,641,478.01 People's Capital and Leasing c/o Lamm Rubenstone Lesavoy Butz Corp. David Attn: Sherry D. Lowe 3600 Horizon Blvd Suite 200 Teevose PA 19053 $450,605.00 Phoenix Plant Indiviual Investors (TIC and Unit) $13,628,000.00 Salt Lake City UT Sentry Financial Corporation Attn: Scott F. Young 201 South Main St, Suite 1400 84111 $800,000.00 Sun Trust Leasing Corp./ c/o Vedder Price Kaufman Kammholz 222 North LaSalle Street, Suite EntreCap Financial LLC P.C. Attn: Douglas Lipke 2600 Chicago IL 60601 $10,582,671.00 c/o Smith Whiley Co., Attn: Venita E. SW Pelham Fund, LP. Fields 1007 Church St. Suite 400 Evanston IL 60201 $15,000,091.86 TCF Leasing c/o Paul R. Rennie 125 First Ave. Pittsburgh PA 15222 $21,885.53 Technology Investment 40950 woodward Avenue Suite Bloomfield Hills MI Partners LLC Attn: Stacey L. Farmer 201 48304 $274,910.38 USA 615 North 48th St. c/o Buchanan Ingersoll Rooney, Attn: Management LLC James Newell One Oxford Center 20th Floor Pittsburgh PA 15219 $20,000,000.00 Wachovia Bank N.A. as 301 South College Street NC Administrative Agent Attn: Katherine Harkness 0537 Charlotte NC 28288 $258,837,115.19 Wells Fargo Bank Northwest c/o AIG Commercial Equipment 5700 Granite Parkway Suite N.A. Finance, Inc.,Attn: Dan Rouse 850 Plano TX 75024 $16,500,000.00 Wells Fargo Equipment Finance c/o Reimer Braunstein, Attn: Guy Inc. Moss and Mark Scott Three Center Plaza Boston MA 02108 $478,268.34 Wells Fargo Equipment Finance c/o Reimer Braunstein, Attn: Guy Inc. Moss and Mark Scott Three Center Plaza Boston MA 02108 $1,297,822.01 Young Electric Sign Company 6725 W. Chicago St. Chandler AZ 85226 $909,068.94