Fifth Circuit: BP Not Entitled to “Restitution” for Its Costs in Helping FBI Catch Rogue Employee

April 29th, 2020 by Tad Nelson in White Collar, White Collar Crime

When a person is convicted of certain federal crimes, they can be ordered to pay restitution–i.e., compensation–to their victims. This goes for white-collar crimes as well as violent offenses. That said, the law does restrict the types of restitution that the government may seek to recoup on behalf of a victim.

Restitution Law Meant to Cover Individual’s Costs for “Missing Work,” Not 44-Person Digital Security Team

A recent decision from the U.S. Fifth Circuit Court of Appeals, United States v. Koutsostamatis, illustrates one such limit. The defendant, in this case, pleaded guilty to one count of wire fraud in Houston federal court. Federal prosecutors sought restitution on behalf of the victim of that fraud in the amount of $552,651. Although the trial judge granted the government’s request, the Fifth Circuit held the award could not be justified under the law.

Now, the victim, in this case, was BP, the London-based multinational energy company. The defendant actually worked for BP as an economist in its Chicago office. But as the Fifth Circuit described it, the defendant “broke bad” by misappropriating “information and personally identifiable information about hundreds of BP employees from BP’s network.” The defendant used this information to essentially pose as a “hacker,” sending a series of emails to BP management demanding a ransom in the form of Bitcoin–otherwise, he would release the information.

After receiving the defendant’s initial email, BP contacted the FBI. Given the size and complexity of BP’s computer network, the FBI requested the company’s assistance in conducting its investigation. This eventually led BP to incur the $552,651 in expenses mentioned above, much of it related to its own 44-person digital security team.

Once the defendant was identified as the “hacker,” he was arrested and later agreed to plead guilty to wire fraud. While he did not challenge the amount that BP had spent in helping the FBI catch him, the defendant did argue that the company could not recover these costs as restitution. The specific language of the law states that a victim in “any case” is entitled to restitution “for lost income and necessary child care, transportation, and other expenses incurred during participation in the investigation or prosecution of the offense or attendance at proceedings related to the offense.” The defendant insisted BP’s expenses did not fall under any of these categories.

The Fifth Circuit agreed with the defendant and reversed that part of his restitution order. As the appeals court noted, the language above is clearly meant to reimburse individual victims for “the kind of expenses that a victim would be likely to incur when he or she … misses work.” It was not meant to compensate large companies for their in-house expenses related to assisting an FBI investigation. “Think about it,” the Court said “The costs of a babysitter, a tank of gas, a parking meter—and a 44-person digital security team. One of these things is not like the others.”

Speak with a Houston White Collar Criminal Defense Lawyer Today

Even when a person is found guilty of a white-collar crime, they still have certain legal and procedural rights that prosecutors and judges must respect. A guilty plea is not a license to impose whatever punishment the government demands without question. So if you have been charged with fraud or a similar crime and need representation from an experienced criminal defense attorney, contact the Law Offices of Tad Nelson & Associates in Houston, Galveston or League City today. Call 281-280-0100. 

 

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