Can Fraud Convictions Lead to Restitution?

In cases involving white collar crimes, it is not uncommon for a state or federal court to require a convicted defendant to pay restitution to his or her victims–in addition, of course, to any prison sentence. Under federal law, specifically the Mandatory Victims Restitution Act (MVRA), a judge may order restitution to compensate victims of crimes “committed by fraud or deceit” for their “actual losses” arising from the defendant’s actions. As with any criminal prosecution, the burden is on the government to prove the amount of any such losses.

Dallas-area Man Ordered to Pay $3.5M for Filing Fraudulent Tax Returns

But a judge may “infer” the amount of losses from the evidence presented even if the prosecution cannot directly link the defendant to a specific criminal act. This was the message sent by the U.S. Fifth Circuit Court of Appeals in a recent computer crimes case from here in Texas. The defendant in this case entered into a plea agreement where he agreed to pay restitution for losses arising from “relevant conduct” beyond the scope of his guilty plea. This agreement ended up costing the defendant more than he bargained for–but the Fifth Circuit said that was his tough luck.

Oddly enough, this case began as something much simpler than a case of complex fraud. Two local police officers in Dallas County smelled marijuana smoke coming from a local hotel room. The defendant answered the door and, without being prompted, admitted he was smoking marijuana.

Inspecting the defendant’s hotel room, the officers discovered “five thumb drives, two laptops, a wireless hotspot device, debit cards in the names of various people, two blank debit cards,” and “personal identifying information for the people on the debit cards.” The police turned this evidence over to the Internal Revenue Service, whose investigators subsequently discovered the defendant was operating a tax fraud scheme. Basically, the defendant improperly used IRS professional tax preparer identification numbers to file false income tax returns. The “refunds” from said returns were then loaded onto prepaid debit cards, such as the one found in the defendant’s hotel room.

The defendant pleaded guilty to one count of “fraud and related activity in connection with access devices.” As noted above, the plea agreement required the defendant to pay restitution to the IRS based on “all relevant conduct.” The defendant also waived his rights to appeal.

Based on IRS calculations, the judge ordered the defendant to pay over $3.5 million in restitution. Notwithstanding the waiver, the defendant appealed this part of his sentence. He maintained the government could not prove that all of the returns filed using the stolen tax-preparer ID numbers could be directly attributed to him. Indeed, he argued the IRS could not prove he filed any fraudulent returns, and it was possible someone else used the same stolen identification numbers to carry out a separate scheme.

The judge didn’t buy this argument, and neither did the Fifth Circuit. As the appeals court explained, the government presented “sufficient evidence from which the district court could infer that the losses alleged” by the IRS were the result of the defendant’s “relevant conduct.” The Fifth Circuit also credited the testimony of an IRS investigator, who said that based on her professional experience it was “unlikely that completely unassociated fraudsters would be using the same combinations” of stolen tax identification numbers to file false returns.

Remain Silent and Call a Galveston White Collar Crimes Defense Lawyer

The defendant in this case probably sealed his fate when he admitted smoking marijuana and inviting the police into his hotel room without a warrant. Do not make the same mistakes. If you are suspected of any kind of white collar crime, keep your mouth shut and contact an experienced Houston criminal defense attorney. Call the Law Offices of Tad Nelson & Associates today if you need immediate assistance.