Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-15-01180/USCOURTS-ca7-15-01180-0/pdf.json

Parties Involved:
Yihao Pu
Appellant
United States of America
Appellee

Document Text:

In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 15-1180

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

YIHAO PU,

Defendant-Appellant.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division

No. 11 CR 00699 — Charles R. Norgle, Judge

____________________

ARGUED MAY 26, 2015 — DECIDED FEBRUARY 24, 2016

____________________

Before BAUER, KANNE, and WILLIAMS, Circuit Judges.

WILLIAMS, Circuit Judge. Yihao Pu worked for two companies, “Company A1” and Citadel, which are financial institutions that traded stocks and other assets on behalf of clients. 

While working at each company, Pu copied computer files 

 1 The parties’ briefs refer to the organization as “Company A,” so we 

will do the same.

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from his employer’s system to personal storage devices. The 

files were part of each company’s proprietary software that 

allowed them to execute strategic trades at high speeds. The 

files were company trade secrets, and Pu’s copying of the files 

was a significant data breach. 

Normally, crimes involving the theft of computer data 

trade secrets lead to the sale of the data to, or the thief being 

hired by, a company that will use the data. But here, Pu used 

the data to conduct computerized stock market trades for 

himself and lost approximately $40,000.

Pu was indicted and pleaded guilty to one count of unlawful possession of a trade secret belonging to Company A, and 

one count of unlawful transmission of a trade secret belonging to Citadel. The district court sentenced him to 36 months 

in prison and ordered him to pay over $750,000 in restitution. 

Pu appeals, arguing that the district court’s factual findings 

did not support its conclusion that Pu intended to cause a loss 

to the companies of approximately $12 million. We agree. Pu 

also challenges the district court’s failure to require the government to provide a complete accounting of the loss caused 

by his offense before it determined the amount of restitution 

owed. We also agree that the district court erred by awarding 

restitution without evidence that reflected a complete accounting of the victims’ investigation costs.

I. BACKGROUND

Yihao Pu is a twenty-eight-year-old quantitative finance 

(“QF”) professional.2 Pu worked as a QF analyst at Company 

 2 QF professionals apply mathematical concepts and techniques to financial markets.

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No. 15-1180 3

A from July 2009 to March 2010 and as a QF engineer at Citadel from May 2010 to August 2011.

Company A and Citadel, the victims in this case, are financial firms that engage in high frequency trading (“HFT”). HFT 

is the rapid buying and selling of publicly traded stocks. Both 

companies developed proprietary computer programs, which 

we will call HFT platforms, that perform the tasks necessary 

to execute trades at lightning fast speeds when certain market 

events occur. Company A and Citadel’s HFT platforms are 

valuable trade secrets. Both companies use their HFT platforms to conduct trades for themselves or their clients. Company A also developed infrastructure software, which is sold 

to customers and allows them to execute their own high frequency trades using Company A’s technology.

Each company put substantial money and time into creating its unique HFT platform. For their respective entities, 

Company A and Citadel employees developed and implemented HFT strategies by analyzing and utilizing mathematical and statistical models of investment instruments and 

market activities. The HFT strategies identified short-term investment opportunities in the stock market or other asset markets. This information was then translated into algorithms. 

The algorithms were basically computerized instructions for 

when to order a trade. They were incorporated into the computer source code that ran the HFT platforms or Company A’s 

infrastructure software. Citadel’s algorithms also generated 

outputs that were expressed as numerical values, which Citadel called alpha data. The algorithms also contained alpha 

terms, which generated numerical values, which Citadel 

called alpha term data. Both alpha data and alpha term data 

are component parts of Citadel algorithms and not algorithms

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or source code themselves. The numerical value derived from 

this application reflects a specific moment in time. Lastly, Citadel’s trade secrets also included program files in the “R” and 

“C” programming languages (“R/C files”) that are not algorithms themselves, but are used to test and optimize an algorithm’s effectiveness.

While working at Company A and then Citadel, Pu illegally copied files that were trade secrets belonging to each 

company and transferred the files to personal electronic storage devices. Specifically, he copied Files 1 and 2 from Company A’s HFT platform and infrastructure source code. Pu 

copied Files 3–9 of alpha and alpha term data owned by Citadel. Files 3–6 were alpha data owned by Citadel. Files 3–4 also 

included alpha term data. Files 7–9 were R/C files owned by 

Citadel. Suspicious of the activity on Pu’s work computer, 

Citadel questioned Pu and conducted an internal investigation to figure out the extent of the data breach related to Pu’s 

criminal activity.

The grand jury charged Pu with nine counts of wire fraud, 

18 U.S.C. § 1343, four counts of unlawful transmission of 

trade secrets, 18 U.S.C. § 1832(a)(2), six counts of unlawful 

possession of trade secrets, 18 U.S.C. § 1832(a)(3), three counts 

of unauthorized access of a protected computer, 18 U.S.C. 

§ 1030(a)(2)(C), and one count of obstruction of justice, 18 

U.S.C. § 1519. Pursuant to a written plea agreement, Pu

pleaded guilty to one count of unlawful possession of a trade 

secret belonging to Company A and one count of unlawful 

transmission of a trade secret belonging to Citadel.

At sentencing, the district court adopted the Presentence 

Investigation Report (“PSR”) and its findings for sentencing

purposes. The parties agreed, and the district court found, 

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that there was no actual monetary loss. Pu objected to the 

PSR’s loss calculation with respect to the intended loss 

amount arguing that there was no intended loss. However, 

the district court disagreed. Relying on the government’s calculation and the findings in the PSR, the district court found 

that total development costs of the algorithms or source code 

was the appropriate metric to value the files Pu stole. From 

the evidence, the district court concluded that Files 1 and 2 

cost Company A $2,192,250 to develop and Files 3–9 cost Citadel $10,102,647 to develop. Ten million dollars was attributed to Files 3–6 and $102,647 was attributed to Files 7–9. 

These figures essentially represent how much money the 

companies paid their respective employees to develop the algorithms or source code, excluding overhead. The district 

court added these totals and found that the intended loss 

amount was $12,294,897.

In calculating Pu’s advisory guidelines sentence under 

U.S.S.G. § 2B1.1 (2014), the district court determined that Pu’s 

base offense level was a six. The court imposed a two-level 

increase for each of the following: (a) use of a specialized skill, 

(b) sophisticated means, and (c) obstruction of justice. This 

brought his offense level to 12. As stated above, the district 

court found that the government had met its burden to prove 

intended loss and held that the combined intended loss to 

both victims was approximately $12,000,000. This loss calculation resulted in an additional twenty-level increase. After 

factoring in a two-level decrease for acceptance of responsibility and one-level decrease for a timely guilty plea, the sentencing judge reduced Pu’s offense level to 29. Because he has 

a criminal history category I, his guideline-recommended 

sentence was 87–108 months. 

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While examining the sentencing factors under 18 U.S.C. 

§ 3553, the district court found that although there was evidence that hinted that Pu had a larger scheme to use the stolen 

files, the only criminal conduct here that was proven was that 

Pu copied the files onto his personal electronic storage device,

and the government had not presented sufficient evidence of 

a greater plan than what Pu actually achieved. Noting Pu’s 

youth, his family ties, and his lack of prior criminal history,

and balancing this information with the seriousness of the 

crime, the district court determined that the guidelines sentence overstated the seriousness of the offense and departed 

downward, sentencing Pu to 36 months’ incarceration. The 

district court also sentenced Pu to three years of supervised 

release.

The district court found that although there was no actual 

loss for guidelines purposes, Citadel incurred an actual loss 

for restitution purposes. Citadel spent money on computer forensic analysts and attorneys during its internal investigation 

after the initial discovery of Pu’s criminal activity, which is 

recoverable as restitution. Because Citadel also has ongoing 

civil litigation against Pu and the lack of detail in the government’s letter from Citadel regarding restitution, Pu argued 

that Citadel had included in its restitution figure analysts and 

attorneys’ fees associated with the civil litigation and objected 

to the restitution figure. The district court overruled the objection, relying on a letter from Citadel that stated that the restitution amount requested did “not include the amount that 

Citadel paid other outside legal counsel to represent Citadel 

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in its civil suit against Pu.” The district court then held Pu liable for restitution to Citadel in the amount of $759,649.55.3

Pu appeals his sentence challenging the loss calculation and 

the restitution amount.

II. ANALYSIS

Pu challenges the district court’s intended loss calculation 

of $12,000,000, which resulted in a twenty-point enhancement. Pu makes many arguments to support his challenge, 

but generally, he contends that the district court’s findings do 

not support its loss calculation. We agree. 

We review de novo the district court’s definition of loss, the 

method it uses to measure the loss, and the sentencing procedure. United States v. Domnenko, 763 F.3d 768, 775 (7th Cir. 

2014). We review the district court’s loss calculation for clear 

error. Id. When evaluating the district court’s sentencing procedure, we look to see if the district court properly calculated 

the guidelines range, treated the guidelines as advisory, selected a sentence based on facts that were not clearly erroneous, and adequately explained the chosen sentence. See Gall v. 

United States, 552 U.S. 38, 51 (2007). 

We have often stated that “[t]he district court must say 

enough to ‘satisfy the appellate court that it has considered 

the parties’ arguments and has a reasoned basis for exercising 

its own legal decisionmaking authority.’” United States v. 

Marin-Castano, 688 F.3d 899, 902 (7th Cir. 2012) (quoting Rita

v. United States, 551 U.S. 338, 356 (2007)). The district court 

 3 There was a co-defendant in this case, Sahil Uppal, who worked 

with Pu at each company. Uppal is not relevant to the appeal, but we 

acknowledge that the district court held Pu and Uppal jointly and severally liable for the restitution amount.

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must address “a defendant’s principal arguments that are ‘not 

so weak as to not merit discussion.’” United States v. Howard, 

729 F.3d 655, 664 (7th Cir. 2013) (quoting United States v. Cunningham, 429 F.3d 673, 679 (7th Cir. 2005)). This is an important procedural rule. United States v. Lockwood, 789 F.3d 

773, 783 (7th Cir. 2015) (quoting Gall, 552 U.S. at 50).

A. District Court’s Intended Loss Calculation Was 

Clearly Erroneous.

At the sentencing hearing, the parties agreed that there 

was no actual loss, and the district court entered a finding of 

no actual loss. The parties disputed the intended loss amount. 

Pu objected to the PSR’s loss calculation, specifically arguing 

that the cost to Citadel of developing the source code that produced the outputs Pu stole should not be imputed wholesale 

to the value of the stolen data because the outputs of the 

source code are not the same, or as valuable, as the source 

code that was developed by Citadel employees. He also argued that the intended loss amount should be zero, or at most 

$2,000, because the government failed to prove that Pu intended to copy the source code or do more than use the outputs to conduct personal trades. For both these reasons, Pu 

argued, the underlying conduct was not tied to the PSR’s loss 

calculation.

The general rule is that the district court determines the 

greater of actual or intended loss. U.S.S.G. § 2B1.1 n.3(A)

(2014). The guidelines define intended loss as “the pecuniary 

harm that was intended to result from the offense,” which “includes intended pecuniary harm that would have been impossible or unlikely to occur.” See id. at n.3(A)(ii). Pecuniary 

harm is monetary harm or a harm that is readily measurable 

in money; it does not include non-economic harm. Id. at 

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n.3(A)(iii). “Intended loss analysis, as the name suggests, 

turns upon how much loss the defendant actually intended to 

impose” on the victim, regardless of whether the loss actually 

materialized or was even possible. United States v. Higgins, 270 

F.3d 1070, 1075 (7th Cir. 2001); see also United States v. Middlebrook, 553 F.3d 572, 578 (7th Cir. 2009) (“[T]he true measure of 

intended loss [is] in the mind of the defendant.”). 4 The 

phrase “result from” imposes a requirement of but-for causation. See Burrage v. United States, 134 S. Ct. 881, 886–88, 891

(2014) (finding when a statute does not define the phrase “result from,” the court should give it its ordinary meaning, 

which is actual or but-for causation). Finally, if a loss occurred 

but the sentencing court cannot reasonably determine the 

amount of the loss, it may use the gain that resulted from the 

offense as an alternative measure to estimate the loss amount. 

See U.S.S.G. § 2B1.1 n.3(B). 

The district court need only make a reasonable estimate of 

the loss amount. Id. at n.3(C). As relevant here, 

The estimate of the loss shall be based on available information, taking into account, as appropriate and practicable under the circumstances, factors such as the following:

(i) The fair market value of the property unlawfully taken, 

copied, or destroyed; or, if the fair market value is impracticable to determine or inadequately measures the harm, 

the cost to the victim of replacing that property.

 4 The current version of the guidelines seems to incorporate this principle into the notes, defining intended loss as “the pecuniary harm that the 

defendant purposely sought to inflict.” See U.S.S.G. § 2B1.1 n.3(A)(ii) 

(2015).

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(ii) In the case of proprietary information (e.g., trade secrets), the cost of developing that information or the reduction in the value of that information that resulted from 

the offense.

Id. at n.3(C)(i)–(ii). And “[t]he government must show the loss 

amount caused by the conduct of conviction and other relevant unlawful conduct by a preponderance of the evidence.” 

United States v. Khan, 771 F.3d 367, 379–80 (7th Cir. 2014).

The probation officer explained the PSR’s intended loss 

calculation relied on the guidelines statement that the sentencing judge may estimate the loss amount by considering 

“[i]n the case of proprietary information (e.g., trade secrets),

the cost of developing that information or the reduction in the 

value of that information that resulted from the offense.”

U.S.S.G. § 2B.1. n.3(C)(ii); see also Sent’g Hr’g Tr. 31. She further explained that “the total amount of loss is based on the 

figure that was provided by Citadel, that their cost for research and development to build that information that was 

stolen was approximately the 10.1 million, and that [Company A] ... provided a figure of approximately 2.6.” Sent’g 

Hr’g Tr. 31.

The government explained the $12 million slightly differently, labeling its calculation as “intended loss” but seemingly 

describing Pu’s gain, stating:

[T]he intended loss is calculated in terms of the amount 

of work and effort that went into creating the trade secrets. That’s where this $12 million figure comes from. ... 

Citadel didn’t lose the value of its employees’ salaries or 

wages or costs. It just goes into the Court’s determination 

of whether he was intending to obtain this product from 

Citadel unlawfully, and the costs that basically he 

avoided by stealing these things rather than creating 

them on his own.

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Id. at 19–20. 

In making the loss determination, the district court found 

that:

[T]he government‘s version [of the loss amount] states 

that the intended loss that should be applied to Defendant Pu’s participation in the instan[t] offense is approximately $12,745,796. This includes approximately 

$10,102,647 in research and development costs Citadel 

spent; approximately $2,643,149 [Company A] spent; for 

the trade secrets Defendant Pu stole from both companies.

It is Defendant Pu’s position that the loss attributable to 

his participation in the instant offense is zero?

And I have already said that the Court would adopt the 

findings of the probation department, and cited numerous cases to support that position. And a defendant who 

wishes to challenge a factual finding in the PSR must do 

so with evidence, and not with simple denials. 

I think there is enough certainly from the government’s 

standpoint—and as established by the probation officer’s 

determination—that the loss here, foreseeable loss is $12 

million.

Id. at 31–32.

Later, when looking at the 18 U.S.C. § 3553 factors the district court stated that:

The evidence is not quite clear on whether you might 

have gone beyond what you did in this case had you not 

been interrupted; had your employers and others not discovered what you had been doing. One view might be 

that this was embryonic and there was more to come. But 

there is no solid evidence to indicate that you would have 

used these secrets to try to help yourself to improve your 

financial situation. There is no evidence before the Court 

to suggest that there was some grander scheme or some 

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grand plan or design to what you were doing. There are 

suggestions or hints of it, but not enough for the Court to 

say that this was just the beginning of a greater endeavor 

on your part. And so it appears that it did begin and end 

with what you did in the case.

Id. at 79–80.

We do not doubt that the cost of development of the trade 

secrets was an easy figure to use when making the intended 

loss calculation. The guidelines suggest that the cost of development is the metric to use to estimate loss in a trade secrets 

case. See U.S.S.G. § 2B1.1 n.3(C)(ii). But the real question is 

whether the government proved by a preponderance of the 

evidence that the cost of development of the trade secrets was 

the correct loss figure. See United States v. Berheide, 421 F.3d 

538, 541 (7th Cir. 2005). To answer this, we must determine

whether the record supports a finding that it was more likely 

than not that Pu intended to cause a loss to the victims that 

equaled the cost of development. See id. We conclude that it 

does not. There is no direct evidence of how much of a loss Pu 

intended Company A and Citadel to suffer. There is also no 

evidence from which we can infer how much of a loss Pu intended the victims to suffer. The evidence shows that the cost 

of development was $12 million.5 By finding a $12 million intended loss amount, the district court determined that the 

 5 It is arguable whether the figure for the cost of development of Citadel Files 3–6 was correct since these files were only component parts of 

an algorithm. The government presented evidence of the cost of development for the algorithms that generated the component parts, Files 3–6, that 

Pu stole. Is the cost of development of the algorithms that generated the 

component parts stolen the same as the cost of development of the component parts only? The record does not answer this question. And the district court did not address Pu’s argument that raised this concern. See infra 

§ II.B. Since we do not need to answer it to determine whether there was 

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government proved by a preponderance of the evidence that 

Pu intended to cause the victims to suffer a $12 million loss. 

However, evidence of Pu’s intent to cause the victims any loss 

is not in the record. Because the record does not support the 

district court’s conclusion, we find it to be clearly erroneous. 

The record does not provide enough information for us to 

determine what the correct intended loss amount is. 

It seems that the probation officer and the district court 

simply looked at the evidence and determined that an intended loss amount was required because there was no actual 

loss. Then, because the guidelines state that the court may estimate loss in a trade secrets case by considering the value of 

the trade secrets, they simply stated the trade secrets’ purported value was the intended loss amount without any analysis about whether that metric worked with the circumstances of Pu’s case. The guidelines state that in a trade secrets

case, the cost of developing the information should be a factor 

taken into account to estimate the loss amount when the factor is “appropriate and practicable under the circumstances.” 

U.S.S.G. § 2B1.1 n.3(C). Without evidence of Pu’s intent to 

cause the victims to suffer a loss equal to the cost of development, the district court’s use of the cost of development to determine the intended loss amount was not appropriate.

Moreover, as a practical matter, the district court’s intended loss calculation conflicts with its finding that there 

was insufficient evidence of a grander scheme that was interrupted. Intended loss is often used to capture the loss the victim would or could have suffered had the offender been able 

 

an error, we assume, for purposes of this appeal, that the $12 million figure 

accurately represented the cost of development.

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to complete his interrupted criminal scheme. Here, the district 

court found that the government did not prove that Pu was 

interrupted before completing a criminal act. His conduct was 

merely what was charged. The district court did not explain 

how Pu intended to cause a $12 million loss through his conduct, whether by considering charged conduct or relevant 

conduct. Usually, we can clearly see how the loss would have 

come about. For example, say, a defendant stole a credit card 

with a $20,000 limit. There was evidence that he intended to 

make enough purchases with the credit card to reach the 

credit limit, but he was caught and charged with stealing the 

credit card before he had the opportunity to use it. Cf. United 

States v. Mei, 315 F.3d 788, 791–93 (7th Cir. 2003). Like Pu’s 

case, there would be no actual loss to the owner of the credit 

card. Unlike Pu’s case, however, we could clearly see that an 

intended loss amount of $20,000 would be proper because 

there was evidence that he intended to purchase items until 

he reached the credit limit of the credit card. Here, the district 

court’s only finding regarding Pu’s intent further suggests 

that the intended loss finding was erroneous.

“Where a district court selects a guidelines range by relying on a clearly erroneous factual finding, ‘we are obliged to 

remand for resentencing unless, reviewing the record as a 

whole, we can conclude that the error was harmless, i.e., that 

the error did not affect the district court’s selection of the sentence imposed.’” United States v. McMath, 559 F.3d 657, 670 

(7th Cir. 2009) (quoting United States v. Hollis, 230 F.3d 955, 

958 (7th Cir. 2000)). It appears that the erroneous loss calculation affected the sentence. Without a correct intended loss 

finding there is no basis for the twenty-point offense level increase. Although the district court departed downward, it 

may have sentenced Pu differently had it been departing from 

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a different guideline range. We must vacate and remand for 

resentencing. See Berheide, 421 F.3d at 541–42 (holding that the 

district court’s erroneous factual finding as to the intended 

loss amount justified a remand).

B. District Court Erred by Failing to Address Pu’s Arguments.

As stated above, Pu disputed the loss calculation, specifically arguing that the cost to Citadel of developing the source 

code should not be used because Pu only stole the outputs the 

source code generated, not the actual source code. Neither the 

PSR nor the record of the sentencing hearing addressed this 

argument. The full value of the development of the source 

code was attributed to Pu’s theft without comment. Pu also 

argued that because the government presented no evidence 

that he intended to do more than he actually did with the stolen outputs, which both sides agreed generated no actual loss, 

the intended loss should be zero, or at most $2,000. We find 

that Pu’s arguments were not frivolous. 

A district court’s failure to explain the rejection of a nonfrivolous argument requires resentencing. United States v. 

Martin, 718 F.3d 684, 687 (7th Cir. 2013); see also United States 

v. Villegas-Miranda, 579 F.3d 798, 801 (7th Cir. 2009) (“The 

court must state its reasons for rejecting a defendant’s principal arguments if the arguments have merit.”). In the loss calculation, neither the PSR nor the district court addressed or

analyzed these arguments. By not addressing these arguments, the district court erred. See Martin, 718 F.3d at 687–88; 

see also Rita v. United States, 551 U.S. at 356–57 (finding that the 

district court “should set forth enough [of an explanation] to 

satisfy the appellate court that he has considered the parties’

arguments”). This is true even though the district court gave 

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detailed reasons for the sentence it imposed. See Villegas-Miranda, 579 F.3d at 802. The error is not harmless “because we 

can never be sure of what effect it had, or could have had, on 

the court’s decision.” Id.

Additionally, in adopting the PSR, the district court admonished the defense that a challenge to a factual finding 

must be done with evidence and not “simple denials.” Pu had 

challenged the factual findings with more than denials. He 

submitted a written report of an expert on his behalf. Although the district court later acknowledged, during arguments concerning § 3553(a) factors, that the defendant had 

supported his position with written submissions, it did not 

address or engage in any analysis of these materials. From the 

record of the sentencing hearing, the district court appears to 

have taken no consideration of the defendant’s expert materials in making its loss calculation or determining Pu’s sentence. The evidence may have had, at least, some effect on the 

intended loss calculation. See United States v. Schneider, 930 

F.2d 555, 559 (7th Cir. 1991). Again, because of the district 

court’s silence on the issue, we cannot be sure of the effect that 

the evidence had, or could have had, on Pu’s sentence. See 

Leiskunas, 656 F.3d at 738. On remand the district court should

address Pu’s arguments and evidence when calculating the 

intended loss amount.

C. Finding of Economic Loss Not Required.

For the sake of completeness, we will address the mistake 

of law Pu alleges. Pu argues that the district court erroneously

believed that it was required to find an economic loss because 

Pu was convicted. It is unclear what the district court believed, but our impression from the record is that the district

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court may have thought that Pu’s conviction mandated a finding of an economic loss to the victims of an amount that was 

greater than zero. No such finding was required. 

Pu argued at sentencing that the proper loss calculation in 

this case was zero because he did not intend to cause financial 

harm to either of the victims of his theft. When Pu’s counsel 

made this argument, the district court asked whether this 

meant that the case should not have come to court, suggesting 

that it thought that it must find some loss amount for a crime 

to exist. The statute of conviction, 18 U.S.C. § 1832, does not 

explicitly require an economic loss to the victim. See 18 U.S.C. 

§ 1832(a)(2)–(3) (“Whoever, with intent to convert a trade secret ... to the economic benefit of anyone other than the owner 

thereof” copies or possesses a trade secret shall be fined or 

imprisoned.); see also United States v. Hanjuan Jin, 733 F.3d 718, 

721–22 (7th Cir. 2013) (finding that the “government does not 

have to prove that the owner of the trade secret actually lost 

money” because of the theft and noting that although the stolen trade secrets may have economic value, it may be impossible to monetize the value, or the injury may be the uncovering of the fact that a company cannot protect its trade secrets). 

Further, Pu’s plea agreement admits that he intended to convert a trade secret for economic benefit to someone other than 

the owner, not that he intended to cause an economic loss to 

the victims. 

Additionally, the guidelines do not require a loss calculation greater than zero. See Schneider, 930 F.2d at 559. The loss 

determination is a special offense characteristic that increases 

the guidelines offense level. The loss amount leads to “bonus 

punishment points,” which express a reasonable estimation 

of the victim’s financial loss. Id.; see U.S.S.G. § 2B1.1(b) & 

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n.3(A),(C); see also United State v. Lopez, 222 F.3d 428, 437 (7th 

Cir. 2000) (“Additional punishment is merited where sufficient evidence provides for determination of monetary 

loss.”). If there was a loss, but it cannot reasonably be determined, the district court could look at Pu’s gain. U.S.S.G. § 

2B1.1, n.3(B).

“A mistake of law generally satisfies clear error, de novo,” 

or abuse of discretion review. McMath, 559 F.3d at 663 n.2. If 

the district court misunderstood the law, it would have committed an error requiring remand. However, because we reverse on other grounds, we need not decide whether the district court misunderstood the law. We include this analysis to 

aid the district court on remand.

D. District Court Erred Deciding Restitution Amount.

Pu contends that the district court erred by failing to require the government to provide a complete accounting of the 

victim’s losses and authorizing a restitution amount that was 

unreasonable, lacked evidentiary support, and included prohibited expenses incurred by Citadel in connection to its civil 

lawsuit against Pu. Although Pu challenged the restitution 

amount below, he only argued that the restitution amount 

was improper because the government’s evidence lacked 

specificity and included expenses from Citadel’s civil case. 

The government argues that Pu “twice affirmatively represented during the sentencing hearing that [he] had no objection to restitution for expenses incurred during Citadel’s internal investigation.” But the two statements the government 

relies on do not establish a waiver of these issues. Defense 

counsel stated that the measure of restitution should be Citadel’s costs related to its internal investigation and that he 

“would not object to [costs] that had to do with [its] internal 

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No. 15-1180 19

investigation if the costs were reasonable.” These assertions 

concede that restitution is due for Citadel’s internal investigation costs. They do not affirmatively state that Pu had no objection to the expenses occurred during the investigation. We 

find no waiver. However, because Pu did not make the reasonableness and sufficiency of the evidence arguments at the 

time of sentencing, we will review those issues for plain error. 

See, e.g., United States v. Walker, 746 F.3d 300, 308 (7th Cir. 

2015).

Because Pu argued below that the restitution amount included prohibited expenses, we review that issue for abuse of 

discretion. See United States v. Hosking, 567 F.3d 329, 331 (7th 

Cir. 2009). In this context, we view the evidence in the light 

most favorable to the government. Id. “We will disturb a restitution order only if the district court relied upon inappropriate factors when it exercised its discretion or failed to use any 

discretion at all.” United States v. Havens, 424 F.3d 535, 538 (7th

Cir. 2005). When “the record does not sufficiently support [the 

district court’s] conclusions or clarify its reasoning, then we 

ask that the court provides us with that information, including its specific findings of fact, to facilitate our review.” United 

States v. Menza, 137 F.3d 533, 538 (7th Cir. 1998). A restitution 

award may include costs incurred by a corporate victim in 

conducting an internal investigation of the offense. Hosking, 

567 F.3d at 332. This may include attorney fees or fees paid to 

other professionals hired to participate in the investigation. 

See id.

The government entered into evidence a letter signed by 

Shawn Fagan, senior deputy general counsel at Citadel, 

which stated that Citadel sought $759,649.55 in restitution. 

The letter also stated that the amount reflects what Citadel 

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20 No. 15-1180

spent on computer forensic analysts and the outside legal 

counsel that it hired to conduct an internal investigation after 

it discovered Pu had copied data:

Specifically, Citadel paid legal counsel $151,500.50 to conduct its internal investigation ... . This amount reflects 

323.7 hours of work, billed by nine lawyers, paralegals, 

and legal assistants with hourly billing rates ranging from 

$115.50 to $630. During this period, Citadel paid FTI 

$608,149.05 for 1818.8 hours of work billed by sixteen analysts with hourly billing rates ranging from $171 to $567.

The letter also indicated that the amount did not “include the 

amount that Citadel paid other outside legal counsel to represent Citadel in its civil suit against Pu” or expenses. On this 

evidence, the district court essentially found that the costs 

were not related to the civil case. The district court was within 

its discretion in making this finding because the record supports it. Nonetheless, the restitution determination suffers

from an error.

“The district court is required to base its restitution order, 

to the extent practicable, on a ‘complete accounting’ of the 

loss.” Hosking, 567 F.3d at 332. Defendant argues that the restitution amount is unreasonable and lacks evidentiary support because the Fagan letter fails to give a complete accounting of the losses. We agree.

In Hosking, the government sought restitution to reimburse a bank for expenses for its internal investigation. To 

support its request for restitution, the government submitted 

a single document that listed the name and title of each bank 

employee who worked on the investigation, the employee’s 

hourly wage, and the number of hours spent on the investigation. The document included a brief description of the 

scope of the investigation and what a few employees did, but 

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No. 15-1180 21

generally failed to describe the work done by each employee.

The district court reviewed the evidence and cut the requested amount in half, finding restitution proper and that 

the reduced amount was “clearly legitimate.” Id. at 331–33. 

We vacated and remanded the restitution order because we 

found that the district court entered the order without explaining why it relied on the document and without requiring 

evidence that the costs reported were directly and reasonably 

caused by Hosking’s fraud. The lack of detail left us unable to 

discern whether the costs incurred by each employee’s work 

on the investigation were appropriate and reasonable. On remand, we required the government to submit evidence and 

an explanation of how each employee’s time was spent on the 

investigation. We further stated that “there must be an adequate indication that the hours claimed are reasonable” and 

that the costs were incurred in investigation of the fraud. Id.

at 344.

Citadel’s restitution letter suffers from many of the same 

deficiencies as the Hosking restitution evidence. As a result, 

the district court erred by awarding restitution without evidence that reflected a complete accounting of the investigation costs. The letter does not explain how any attorney’s time 

was spent on the investigation, and there is no information 

that provides an adequate indication that the hours were reasonable. Even the Hosking restitution evidence provided some 

description of what employees did to investigate the fraud. 

Here, we do not know what work the attorneys did. The district court concluded that the amount included divers that 

were hired to retrieve hard drives from a canal and money 

spent cooperating with the Federal Bureau of Investigation. 

Did the attorneys do these activities, or was it the forensic analysts? There is simply not enough information in the record 

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22 No. 15-1180

for us to meaningfully review the restitution order. As to the

forensic analysts, the record reveals that they analyzed data 

to determine what data was taken and where that data was 

stored. That information is helpful, but it does not help us 

evaluate whether the cost incurred for over 1,800 hours of 

work in a one-month period was reasonable. A letter like the 

one submitted coupled with invoices from the firms would be 

more helpful. This was a tough case. The district court had 

complex issues to work through in order to sentence Pu. As 

in Hosking, the government must provide an explanation, 

supported by evidence, of how each professional’s time was 

spent investigating the data breach, being certain that the evidence provides “adequate indication that the hours claimed 

are reasonable.” Id. at 334. Then, the court must ensure that 

the amount claimed was in fact incurred by the investigation 

of Pu’s misconduct. Id.

In light of Hosking, we find the district court’s error plain. 

We are only required to correct such error if it affects Pu’s 

substantial rights. United States v. Kieffer, 794 F.3d 850, 854 (7th 

Cir. 2015). By awarding a restitution amount without a complete accounting, the district court may have required Pu to 

pay more restitution than he owed. This error affects Pu’s substantial rights. See United States v. Allen, 529 F.3d 390, 397 (7th 

Cir. 2008). So, we vacate the restitution order.

III. CONCLUSION

For the reasons stated, we VACATE Pu’s sentence and the 

restitution order and REMAND for resentencing.

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