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Congratulations! You and your investigative team did all the hard work over many months and your client company has obtained a conviction of the bad guy. What happens next? The restitution phase of your examination, of course! Client’s counsel has probably already told you (if you didn’t know it before) that the primary goal of a criminal statute is punishment of the convicted defendant, and for the most part criminal procedure does not concern itself with compensation or reparation of your client, the defendant’s victim. However, there are some opportunities to pursue recovery of losses caused by criminal conduct after the defendant’s conviction of which you should be aware. So, according to the ACFE, what are some of the main issues involved with restitution?
Where the court suspends part or all of the defendant’s jail time and substitutes instead a term of probation, the court has the authority – either by statute or by its inherent powers – to specify the conditions of that probation, including an order to make restitution to the victim or otherwise to cooperate in the victim’s efforts to recover money or property. Restitution as a condition of probation can be ordered against both individual and corporate defendants, and may include a provision for installment payments over time to the victim. Usually the court will take the defendant’s ability to pay into account in ordering restitution, so that the defendant has a reasonable chance of meeting the restitution condition. These and all terms of probation are supervised by the defendant’s probation officer who reports any failure of the defendant to obey or comply with probation conditions to the court. Restitution and other probationary terms are enforced by the threat of withdrawing probation and returning the defendant to jail to serve out his sentence if he fails to comply with one or more conditions of probation.
The court-designated probation officer usually makes sentencing recommendations – including any special probationary terms – to the court, so you should present any request to include a term of restitution to the probation officer as early in the pre-sentence investigation/evaluation process as possible. A request from the prosecuting attorney to include restitution as a term of probation also carries weight with the probation officer and with the court, so try to cultivate the prosecutor and familiarize her with your claim and supporting evidence. Cooperation with the prosecutor and police during the criminal prosecution can pay dividends in their willingness after conviction to persuade the court to impose a term of probation with an order of restitution.
Federal law (18 USC §§3663A and 3664) and an increasing number of state statutes direct or permit judges to order convicted defendants to make restitution to victims of their crimes as part of their punishment after conviction. These restitution orders are in addition to any other penalties provided by law for the defendant’s crimes. Unlike Victim’s Compensation Funds, these statutes apply to all crimes, including purely economic crimes. They also apply to defendants who do not receive probation as part of their sentence. Typically, statutory criminal restitution orders direct the return of the victim’s property, or its monetary equivalent if the property cannot be returned. Value may be calculated as of the date of loss or the date of sentencing, whichever is greater, according to some statutes. They also may direct the return of the fruits of the crime or the victim’s actual out-of-pocket expense caused by the crime.
A criminal restitution order may not apply, or be available, for a loss for which the victim has received, or will receive, compensation from another source, e.g. insurance (although the insurer may become subrogated to the victim’s rights and a court may enter the restitution order in favor of the insurer or other representative of the victim). Some statutes set a limit to the amount of restitution that can be ordered against a defendant who did not receive probation (although the limit usually does not apply to an order to return the victim’s property or its equivalent value) and/or direct the judge to take the defendant’s ability to pay into account. The federal statute and other state statutes direct that full restitution be ordered, although the court may take the defendant’s ability to pay into consideration in creating a payment schedule.
Unlike restitution that is ordered as a condition of conditional release (probation), a criminal restitution order can be enforced against the defendant even after his discharge from probation or his release from prison. The federal statute (and some state statutes) provide that a criminal restitution order may be enforced as a civil judgment by the victim against the defendant. Restitution orders also typically survive the death of the victim and may be enforced by his heirs or representatives. Criminal restitution orders are cumulative remedies and do not preclude the victim’s separate civil lawsuit against the defendant for the same conduct for which he was criminally convicted. However, any property or money received by the victim under a criminal restitution order will be credited against any civil judgment or restitution order.
The federal courts, and an increasing number of state courts, use legislatively mandated sentencing guidelines for convicted defendants. Besides the crime itself, and attendant facts and circumstances, these guidelines consider other factors that would allow a court to depart from the guidelines to enhance or reduce a sentence. One such factor is the defendant’s voluntary restitution before trial of the fruits of the crime or other compensation of the victim(s). This is not so much a remedy for the victim as encouragement for the wrongdoer to voluntarily make restitution before trial. Keep this fact in mind when negotiating with a criminal defendant for his cooperation during your fraud recovery effort.
Finally, be aware that many states maintain funds for the compensation of crime victims. These usually are funded, in part, by surcharges or fines assessed against the criminally convicted defendants. However, by the statutory terms and definitions, these funds typically are available only for crime victims who suffer physical injury or death from the defendant’s crime. However, it never hurts to look up the law in the relevant jurisdiction to see if reimbursement in whole or part for financial loss from fraudulent criminal conduct is available.