New York Federal Criminal Practice Blog
October 22, 2007

SDNY Judge Denies Restitution Application Brought Under Crime Victims Rights Act by Defrauded Individuals

The Crime Victims Rights Act (CVRA), effective October 30, 2004, has not yet generated the kind of litigation one might have expected from a statute giving sweeping rights to crime victims, including the right to timely notice of proceedings in the criminal case, the right to be heard at key stages, the right to confer with the prosecutor, the right to restitution "as provided by law," and a unique, preferential enforcement mechanism: the right to file a petition of mandamus challenging the district court's denial of any right, which must be decided within 72 hours of filing the petition.  See 18 U.S.C. § 3771. 

Still, contrary to expectations, there has only been one Second Circuit decision and a handful of district court decisions in this circuit interpreting and applying the CVRA.  The reason may have something to do with the fact that while the CVRA is generous with process, it is short on more tangible benefits, like damages, as demonstrated in a recent decision by Judge McKenna, United States v. McQuilan, 2007 WL 2827850 (S.D.N.Y. September 27, 2007). 

In McQuilan, a securities fraud prosecution, the court denied the application brought by two investors under the CVRA, asserting they had been harmed by the defendant's stock manipulation and seeking criminal restitution with attorneys' fees.  While acknowledging that the CVRA entitles crime victims to "full and timely restitution as provided by law" (my emphasis) the court went on to point out that the restitution statute, 18 U.S.C. § 3663A, provides that restitution may not be ordered in cases where the determination of the victim's losses would unduly complicate or prolong the sentencing process.  Here, the investors' application presented "complex issues of fact," including whether they were "directly and proximately harmed as a result of the commssion of the offense," and the extent to which other factors, such as prevailing economic conditions or the applicants' contributory negligence, affected the causation question.  An additional factor was the complexity of locating other similarly situated victims so that they could get a pro rata share of any restitution awarded.  The situation was not helped by the fact that the government had agreed with the defendant that the amount of loss directly attributable to the defendant's conduct could not be reasonably determined. 

In light of these factors, the court held that the need to provide restitution to the applicants "was outweighed by the burden on the sentencing process," and they would therefore have to make do with their civil action for damages against the defendant pending simultaneously before the court.

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