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Pay the Piper: Restitution Payment to Victims Does Not Offset Mandatory Forfeiture to Government

In United States v. Bodouva, 16-3937 (March 22, 2017) (Katzmann, C.J., Pooler and Lynch, J.), the Court held in a per curiam order that a defendant convicted of embezzlement must forfeit the full amount of her illicit gains to the government even after paying restitution to victims.  The ostensibly “duplicative” financial penalty entered against the defendant was not only permissible, but in fact required by statute.  The district court thus appropriately ruled at sentencing that it lacked discretion to modify the forfeiture amount.  With this decision, the Second Circuit joined several other circuits in holding that restitution and forfeiture serve distinct purposes and, absent clear statutory authority to the contrary, may not offset each other.

The Defendant in this matter, Christine Bodouva, was convicted of embezzling funds from an employee retirement fund, in violation of 18 U.S.C. §§ 2 and § 664.  In a separate summary order available here, the Court resolved several challenges raised by Bodouva to the conviction itself.  In this precedential order, the Court addressed only Bodouva’s challenge to the forfeiture order.

The Court explained that restitution and forfeiture derive from separate statutes, and serve distinct purposes.  Whereas restitution compensates victims for losses they suffered and is intended to return “the victim and the perpetrator to the status quo,” forfeiture is a “form of punishment” imposed against the Defendant.  Because forfeiture serves a purpose beyond just taking away ill-gotten gains, it may (and in some cases must) be imposed even if a Defendant has already returned those funds to his or her victims.

According to the Court, the statutory language compels this result.  Pursuant to 28 U.S.C. § 2461(c), a “court shall order the forfeiture of the property” (emphasis added) if a defendant is convicted of a crime for which forfeiture is authorized and the indictment included notice thereof.  The indictment here included such notice, and 18 U.S.C. § 981 authorizes forfeiture for violations of 18 U.S.C. § 664 (among several other statutes).  Restitution flows from a separate statute, 18 U.S.C. § 3663A (titled “Mandatory restitution to victims of certain crimes”), which similarly provides that for violations of § 664 a “court shall order, in addition to, or in the case of a misdemeanor, in addition to or in lieu of, any other penalty authorized by law, that the defendant make restitution to the victim of the offense.”  18 U.S.C. § 3663A(a)(1) (emphasis added); see id. § 3663A(c)(1)(A)(ii).

The Court observed that § 981 permits a forfeiture award to be offset by other amounts in certain situations not applicable to this case—which further counseled against finding an offset outside that statutory language.  See § 981(a)(2)(B)-(C).  (The Court swiftly rejected Defendant’s claim that § 981(a)(2)(B)—which governs “cases involving lawful goods or lawful services”—applied here, reasoning that “there is simply no way to lawfully embezzle funds.”)

Accordingly, the Court affirmed a forfeiture order of $127,854.22 entered at sentencing, although Bodouva had previously returned roughly the same amount to the retirement fund as restitution.

This decision reaffirms that Congress has broad authority to authorize—and even mandate—monetary fines for criminal conduct, even to the extent certain amounts may be drawn twice from the same pocket.  The ruling is consistent with the statutory language and with the law in several other Circuits. 

Given the apparent clarity of the law, the Circuit had no need to answer a different question:  Is it fair for a defendant to be required to pay twice for his or her ill-gotten gains—once as restitution to victims and once as asset forfeiture to the government?  To be sure, justice is not served by a result in which a defendant is allowed to keep the proceeds of his or her crime.  Is the unstated rationale that taking back only the stolen money does not create a sufficient deterrent, as it leaves the defendant no worse off financially than he or she was before the crime?  Or is the rationale that a crime victimizes both society and the individual, and both should be allowed to recover a financial penalty?  Whatever the rationale, the rule is mandatory and it makes no exception for ability to pay (which must be taken into account when deciding whether to impose a fine) or other mitigating circumstances, leaving open the possibility for disproportionate results in particular cases.

-By Jason Vitullo and Harry Sandick