United States District Court, D. Nebraska
PRELIMINARY RESTITUTION FINDINGS
M. Gerrard United States District Judge.
matter is before the Court for a preliminary assessment of
the amount of restitution to be awarded pursuant to the
Mandatory Victims Restitution Act (MVRA), 18 U.S.C.
§§ 3613A, 3663A. The Court's preliminary
finding, for the reasons explained below, is that restitution
shall be ordered in the amount of $258, 023.87.
victim of the offense is Westgate Bank, which was in the
business of providing residential construction loans. A
builder proposing to build a home would obtain a loan for
each residential property. The Bank would set up a line of
credit, and create a budget spreadsheet detailing the line
items and different areas of work to be completed on the
house. Then, as the house was built, the builder would
provide the Bank invoices from the subcontractors who had
performed work on the house or, if the builder had already
paid the subcontractor, an invoice and a copy of the check
paid by the contractor. The Bank would review the invoice
against the spreadsheet to make sure that the house
wasn't over budget, then approve a draw on the line of
credit. A check for the draw would be cut to the title
company, who would then issue individual checks to the
subcontractors. In other words, the draw requests were for
work already done or materials already purchased, not for
work yet to be performed or materials yet to be acquired.
defendant, Jeff Rindone, and his brother Scott Rindone, had a
number of construction loans with the Bank during 2012 and
2013. But sometime around April 2013, the Rindones began
writing checks to subcontractors that overdrew their Westgate
bank account. For a time, the Bank permitted payment on those
overdrafts; the check would be paid, the title company would
issue a check to the Rindones to reimburse them for the
payments made to subcontractors, and the Rindones would
deposit those funds into their Westgate account to bring it
back into the black. Then, at some point in 2013, the Bank
become concerned that some of the Rindones'
subcontractors weren't getting paid. Subcontractors began
filing liens against the properties. In July 2013, the Bank
decided to stop paying the Rindones' overdrafts. And
finally, in early 2014, the Bank stopped lending the Rindones
money and took over the properties.
to the Bank, the Rindones had been drawing on their lines of
credit with phony checks, presenting them to Westgate as
proof of payment to subcontractors who had, in fact, not been
paid with those checks. It was revealed that the Rindones
were engaged in a shell game, presenting false claims to the
Bank so they could draw on the line of credit for one
property to obtain funds they could use for other purposes.
(The defendant told the probation officer that they underbid
on several homes.) The phony checks add up to $258, 023.87.
question, then, is what the Bank's actual losses are, for
purposes of assessing restitution. Although the government
bears the burden of proving the restitution amount by a
preponderance of the evidence, 18 U.S.C. § 3664(e), the
Court is charged with reasonably estimating the loss when the
amount lost through fraud is difficult to estimate,
United States v. Adejumo, 848 F.3d 868, 2017 WL
629291, at *2 (8th Cir. Feb. 16, 2017). Restitution is
compensatory, not punitive, and in a fraud case, it is
limited to the actual loss directly caused by the
defendant's criminal conduct in the course of the scheme
alleged in the indictment. United States v. Chaika,
695 F.3d 741, 748 (8th Cir. 2012). Restitution may only be
awarded for the loss caused by the specific conduct that is
the basis of the offense of the conviction. United States
v. DeRosier, 501 F.3d 888, 896 (8th Cir. 2007). The
amount of restitution cannot exceed the actual, provable loss
realized by the victims. United States v. Martinez,
690 F.3d 1083, 1088 (8th Cir. 2012); see Adejumo,
2017 WL 629291, at *1. And the causal connection between the
defendant's acts and the victim's losses must not be
unreasonably extended. United States v. Spencer, 700
F.3d 317, 323 (8th Cir. 2012). Restitution for funds not
actually lost by a victim would be an impermissible windfall,
so a bank may therefore recover restitution only to the
extent sufficient evidence has proven its ultimate loss.
Adejumo, 2017 WL 629291, at *1.
government's argument is straightforward: based on
fraudulent representations, the Bank provided the Rindones
with $258, 023.87 that, but for the fraud, it would not have.
So, the government says, that's the amount of restitution
which should be awarded. See filing 63 at 5. But, as
the defendant points out, the situation is a little more
complicated, because the money was paid out on lines of
credit that were secured by the property, and that
collateral was eventually sold to recover some of the money
the Bank loaned the Rindones. Complicating matters is the
fact that in the end, after completing and selling the
properties, the Bank lost nearly $370, 000 on the
Rindones' loans-meaning that some of those losses must
have been attributable to something besides
fraud. See Exhibit 6.
transactions stopped with the approval of the Rindones'
fraudulently obtained draws, the situation would be as simple
as the government makes it out to be. But, instead, the Bank
took over the properties and sold them. Some, it even
completed construction on. The question is, should some of
those proceeds be offset against the amount the Rindones
obtained by fraud? The Supreme Court's decision in
Robers v. United States suggests that the Court must
at least consider that question. 134 S.Ct. 1854 (2014).
Robers, the defendant was convicted of fraud after
he submitted fraudulent loan applications to two banks and
obtained about $470, 000. Id. at 1856. He defaulted
and the banks foreclosed, but in a falling real estate
market, the banks were only able to sell the houses for about
$280, 000. Id. The Supreme Court noted that the MVRA
requires offenders to restore property lost as a result of
crime, and when return is impractical or inadequate,
"the offender must pay the victim an amount equal to the
value of the property less the value (as of the date the
property is returned) of any part of the property that is
returned." Id. at 1856 (citing §
3663A(b)(1)(B)) (quotations omitted). And the Court held that
when collateral is sold to recover money lent as the result
of a fraudulently obtained loan, "a sentencing court
must reduce the restitution amount by the amount of money the
victim received in selling the collateral." Id.
basic principle, it is clear from Robers (and,
indeed, from the statute itself) that any of the fraudulently
obtained funds that were actually recovered by the Bank from
its later sale of collateral should be offset against the
Bank's initial loss. See, id.;
United States v. Oladimeji, 463 F.3d 152, 160 (2d
Cir. 2006); United States v. Shepard, 269 F.3d 884,
887-88 (7th Cir. 2001). But unlike Robers, this case
presents an apportionment problem: the loans themselves were
not obtained fraudulently, only some of the draws. Some of
that money may have been spent on improvements to other
properties and recovered, eventually, by sale of the
collateral. But, how much? The defendant says that we
don't have the information we need to figure that out-so,
he says, the Court should deny restitution altogether.
Seefiling 64 at 11.
result, the Court cannot accept. The MVRA is intended to
assure that victims of a crime receive full restitution.
See Dolan v. United States, 560 U.S. 605,
612 (2010). And the Court need not calculate the net loss
precisely, so long as it can be reasonably estimated.
Adejumo, 2017 WL 629291, at *2. Nor does the burden
of proof necessarily run against the government: "[t]he
MVRA does not stipulate which party bears the burden of
proving entitlement to an offset." United States v.
Ruff, 420 F.3d 772, 775 (8th Cir. 2005). The initial
burden of demonstrating the amount of the loss is on the
government, but "[o]n other matters, the burden
'shall be upon the party designated by the court as
justice requires.'" Id. at 775-76 (quoting
other words, while the government bears the burden of
demonstrating the amount of the loss sustained as a result of
the offense, the defendant bears the burden of establishing
entitlement to an offset against that loss. United States
v. Miell, 744 F.Supp.2d 961, 965 n.8 (N.D. Iowa 2010);
see Ruff, 420 F.3d at 775 (remanding for trial court
to determine if defendant could establish right to
offset); see also, Robers, 134 S.Ct. at
1861 (Sotomayor, J., concurring); United States v.
Malone, 747 F.3d 481, 486 (7th Cir. 2014); United
States v. Bane, 720 F.3d 818, 828 (11th Cir. 2013);
United States v. Bryant, 655 F.3d 232, 254 (3d Cir.
2011); United States v. Elson, 577 F.3d 713, 734
(6th Cir. 2009); United States v. Serawop, 505 F.3d
1112, 1127 (10th Cir. 2007); United States v. Karam,
201 F.3d 320, 326 (4th Cir. 2000); United States v.
Parsons, 141 F.3d 386, 393 (1st Cir. 1998); United
States v. Sheinbaum, 136 F.3d 443, 449 (5th Cir. 1998);
cf., United States v. Boccagna, 450 F.3d
107, 120 n.9 (2d Cir. 2006); United States v. Pugh,
445 F.3d 1066, 1068 (8th Cir. 2006) (burden is on defendant
to show payment of restitution debt); United States v.
Crawford, 169 F.3d 590, 593 (9th Cir. 1999). In this
case, while it seems possible, or even likely, that some of
the Bank's loss was made up in the end from selling the
properties, there is no evidence to prove that, much less
evidence of how much.
clear, though, that the Bank did pay out $258, 023.87 to the
Rindones that it would not have, absent fraud. Exhibit 1.
And, the Supreme Court has explained, "[t]he traditional
way to prove that one event was a factual cause of another is
to show that the latter would not have occurred 'but
for' the former." Paroline v. United
States, 134 S.Ct. 1710, 1722 (2014). So,
Paroline, in a comparable statutory context, the
Court explained that a showing of but-for causation was
sufficient to prove proximate cause for purposes of
the fraud, the Bank ended up spending a total of $2, 479,
992.95 on the properties (between the amount spent by the
Rindones and the amount it spent after it seized the
properties). Exhibit 6. Then, the Bank sold the properties
for a total of $2, 110, 100, resulting in a net loss of $369,
892.95. Exhibit 6. The losses beyond those attributable to
fraud could have been caused by any number of things,
including underbid contracts, mismanagement, or market
conditions; none of those warrant restitution. But in the
absence of any evidence specifically showing how some of the
properties' eventual market value was the product of
improvements made to the properties by fraudulently obtained
funds, the Court is left with this conclusion: the
fraudulently obtained funds would not have been paid to the