United States District Court, D. Nebraska
FINAL RESTITUTION FINDINGS
M. Gerrard Chief United States District Judge
matter is before the Court for a final determination of the
amount of restitution to be awarded pursuant to the Mandatory
Victims Restitution Act (MVRA), 18 U.S.C. §§ 3613A,
3663A. Previously, the Court preliminarily found that that
restitution would be ordered to the victim, Westgate Bank, in
the amount of $258, 023.87. See filing 66. But the
Court held another hearing, and the Court's view changed
in light of the evidence adduced at that hearing. The Court
will order restitution in the amount of $10, 800.
Court recognizes that this has been a long time in coming. I
apologize for that. This has been a very difficult case
because my sense of the "right" result here-the
just result-cannot be reconciled with the principles
of causation explained below. The defendant should
be paying more than this. But when that instinct comes up
against the cold, hard math, those calculations demand a
Court previously set forth a narrative of the facts of the
case, see filing 66, and that need not be repeated.
It is, however, worth revisiting the legal framework that the
Court explained. 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 must reasonably
estimate the loss when the amount lost through fraud is
difficult to estimate, United States v. Adejumo, 848
F.3d 868, 870 (8th Cir. 2017); see United States v.
Smith, 929 F.3d 545, 548 (8th Cir. 2019). 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.
Lundstrom, 880 F.3d 423, 446 (8th Cir. 2018); United
States v. Chaika, 695 F.3d 741, 748 (8th Cir. 2012).
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 United States v. Gammell, 932 F.3d
1175, 1180 (8th Cir. 2019); Adejumo, 848 F.3d at
870. 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
recover restitution only to the extent sufficient evidence
has proven its ultimate loss. Adejumo, 848 F.3d at
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 Robers v.
United States, 572 U.S. 639, 640-41 (2014); 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, 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 United States v. Ruff, 420 F.3d 772,
775 (8th Cir. 2005) (remanding for trial court to determine
if defendant could establish right to offset);
see also, Robers, 572 U.S. at 649
(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).
the Court found the evidence sufficient to prove a loss of
$258, 023.87. Filing 66 at 5. The Court noted, however, that
"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
which would warrant restitution-but, the Court found, there
was no evidence "specifically showing how some of the
properties' eventual market value was the product of
improvements made to the properties by fraudulently obtained
funds." Filing 66 at 5. That changed at the June 16,
2017 hearing: the Court now finds that the defendant has
carried his burden of establishing an offset against the
Bank's losses for amounts that were obtained by fraud,
but spent on improvements to the subject properties.
the defendant testified that with the exception of some
amounts set aside for personal living expenses, all of the
funds obtained by fraudulent checks were spent on other
properties that were also securing the Bank's loans. The
Court finds that testimony credible. It was, in fact, clear
from the testimony of both the defendant and Bank president
Carl Sjulin that the losses the Bank sustained on these
properties were primarily attributable not to fraud, but to
poor business practices.
those poor business practices were, admittedly, the
defendant's. But the issue here is criminal restitution
for losses caused by fraud, not civil liability for repayment
of a loan. The evidence is that the defendant and his brother
were poor businessmen who made bad business decisions-
underbidding contracts, mismanaging subcontractors, and
(according to Sjulin) doing substandard work as well. But
none of that is illegal. And the Bank is also responsible for
its business decisions-for extending credit to the Rindones
in the first place, and allowing them to overdraft their
account and exceed borrowing limitations.
defendant committed fraud by drawing on Bank loans tied to
specific projects and spending the funds on other projects,
in an effort to keep the business afloat by completing homes
for sale-but there is no reason to be believe (except for
funds diverted to personal expenses) that the Bank did not
recover as much of that value from the properties it
eventually sold as would have been recovered had the money
actually gone to the projects it was supposed to. In sum, the
evidence suggests that these were bad business deals, and
that the Bank lost money primarily because it loaned money to
a business venture that failed-not due to fraud.
said, some of the funds obtained were, by the defendant's
admission, diverted to personal use. The precise amount
cannot be determined from the defendant's testimony, but
the Court need not calculate the net loss precisely, so long
as it can be reasonably estimated. Adejumo, 848 F.3d
at 870; see Smith, 929 F.3d at 548. Because the
defendant has the burden of proving entitlement to an offset,
the Court's calculation of the amount diverted for
personal use takes the defendant's testimony in the light
most favorable to the Bank. The defendant estimated that the
amount taken for personal expenses was between $300 and $600
per month. The Court will assume the higher figure, and
assume that both Jeffrey and Scott Rindone ...