1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

12-13-1994

Gov't V.I. v. Davis

Precedential or Non-Precedential:

Docket 93-7299

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Recommended Citation

"Gov't V.I. v. Davis" (1994). 1994 Decisions. Paper 219.

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 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ___________ 

 Nos. 93-7299 and 93-7300 

 ___________ 

 GOVERNMENT OF THE VIRGIN ISLANDS 

 vs. 

 ASTARTE DAVIS, 

 Appellant, No. 93-7299

 UNITED STATES OF AMERICA 

 vs. 

 RICE, ASTARTE 

 Astarte Davis, 

 Appellant, No. 93-7300

 ___________ 

 APPEAL FROM THE UNITED STATES DISTRICT COURT 

 FOR THE DISTRICT OF THE VIRGIN ISLANDS 

 (D.C. Criminal Nos. 88-00132 and 88-00403) 

 ___________ 

 ARGUED DECEMBER 1, 1993 

 BEFORE: MANSMANN, HUTCHINSON, and LEWIS, Circuit Judges. 

 (Filed December 13, 1994) 

 ___________ 
Thurston T. McKelvin (ARGUED) 

Office of the Federal Public Defender 

Post Office Box 1327 

Charlotte Amalie, St. Thomas 

USVI 00804-1327 

 Attorney for Appellant

David M. Nissman (ARGUED) 

Office of the United States Attorney 

1108 King Street, Suite 201 

Christiansted, St. Croix 

USVI 00820 

 Attorney for Appellee

 ___________ 

 OPINION OF THE COURT 

 ___________ 

LEWIS, Circuit Judge. 

 On December 21, 1988, Astarte Davis was charged in a 

28-count information with forgery, grand larceny, perjury, 

obtaining money under false pretenses, filing false documents, 

maintaining a fraudulent civil action, preparing false evidence 

and making false statements to the government in Government of 

the Virgin Islands v. Astarte Davis, D.C. VI Crim. No. 88-132 

(the "V.I. Case"). Davis was also indicted on five counts of 

mail fraud in United States v. Astarte Davis, D.C. VI Crim. No. 

88-403 (the "U.S. Case"). 

 On October 10, 1991, Davis pleaded guilty to Counts One 

(Conspiracy to Defraud, in violation of Virgin Islands Code, 

Title 14, Section 551); Two (Forgery on Real Property Deed, in 

violation of Virgin Islands Code, Title 14, Section 791(1)); 
Twenty-Four (Offering False Evidence in a Civil Case, in 

violation of Virgin Islands Code, Title 14, Section 1504); 

Twenty-Five (Perjury, in violation of Virgin Islands Code, 

Title 14, Section 1541); and Twenty-Six (Selling Property 

Obtained Unlawfully, in violation of Virgin Islands Code, 

Title 14, Section 2101(a) in the V.I. Case; and Count Two (Mail 

Fraud, in violation of United States Code, Title 18, 

Section 1341) of the indictment in the U.S. Case. Davis also 

pleaded guilty to Making False Statements in violation of 

18 U.S.C. § 1001 (§ 1001) and Failure to Appear in violation on 

18 U.S.C. § 3146 (§ 3146).1 

 Both the V.I. Case and the U.S. Case involved Davis' 

efforts to defraud the estate of James Merrills Rice (Rice 

estate) of more than one million dollars worth of real and 

personal property.2 Specifically, Davis prepared a false and 

fictitious last will and testament of James Rice purporting to 

bequeath to her the bulk of the Rice Estate; altered Rice's power 

of attorney, giving herself full and complete control over his 

property, assets and affairs; and prepared a false warranty deed 

for the purpose of facilitating the transfer of valuable realty 

owned by Rice to herself. Using the forged documents, Davis 

transferred title for or otherwise unlawfully appropriated or 

 

1. These charges stemmed from two related cases: D.C. VI Crim. 

Nos. 88-133 and 91-30. 

2. James Rice was Davis' alleged common-law husband who 

disappeared in July 1986. The government's theory was that Davis 

either murdered Rice or took advantage of his disappearance in 

order to convert his assets. 
conveyed personal property belonging to Rice which was valued at 

more than $120,000. Davis also forged Rice's signature on a 

series of checks which totalled $10,985 and entered into 

contractual agreements concerning Rice's boat, the Fish Eagle, 

assigning to herself a percentage of the profits earned by the 

venture. 

 In addition to the other illegal activities Davis stood 

convicted of by virtue of her plea in the V.I. Case, she filed a 

lawsuit against a number of entities and individuals, including 

Rice, to quiet title to property she had fraudulently obtained. 

In preparation for that lawsuit, Davis forged letters, deeds and 

other documents to make it appear as though James Rice was alive 

and that he had given all of his worldly possessions to her and 

her sons. Davis presented the false documents at a deposition 

during which she also gave false testimony. 

 With respect to the U.S. Case, Davis prepared forged 

documents instructing the Guardian Savings Bank in Houston, 

Texas, to transfer two one hundred thousand (100,000) dollar 

certificates of deposit into an account held by the Icon 

Corporation, which was wholly-owned by Davis and her sons. 

 As a result of her guilty pleas, on January 31, 1992, 

the District Court of the Virgin Islands, Division of St. Croix, 

sentenced Davis to 10 years imprisonment and five years probation 

in connection with the V.I. Case, and 15 months imprisonment in 
connection with the U.S. Case.3 In addition, the court ordered 

her to pay restitution in the amount of $547,000.4

 Following the district court's denial of her motions 

for reduction of sentence and for reconsideration, Davis 

appealed, claiming that the district court had failed to make 

specific findings with respect to: (1) the amount of loss 

sustained by the Rice estate as a result of the offenses; (2) her 

own financial resources and the relationship between the amount 

of restitution imposed, and (3) any loss caused by the underlying 

offenses for which she was convicted. Upon the government's 

request, we remanded the case for additional fact-finding in 

connection with the district court's restitution order. 

Government of the Virgin Islands v. Davis, Nos. 92-7472, 92-7473 

and 92-7474 (3d Cir. Jan. 20, 1993). 

 On remand, the district court conducted an evidentiary 

hearing and reduced the amount of restitution from $547,000 to 

$297,246.78. Of the total amount, $229,282.78 was awarded 

pursuant to Title 5, Virgin Islands Code, § 3721 (1993) (V.I.C. 

§ 3721 or V.I. restitution statute), and the remaining $67,964 

was awarded under the Victim and Witness Protection Act (VWPA), 

18 U.S.C. §§ 3663-3664. Davis now appeals the modified 

 

3. Davis also received a two-year sentence for the § 1001 

violation. 

4. The presentence report indicated that the proper amount 

of restitution owed to the victim -- the estate of James Rice -- 

was $1,812,000.00. Both Davis and the government agreed that the 

figure was too high and stipulated to the reduced amount. 
restitution order. We have jurisdiction over this appeal 

pursuant to 28 U.S.C. § 1291. 

I. 

 Davis raises three issues on appeal: (1) that the 

district court erred by including legal fees which the Rice 

estate incurred to recover funds which Davis had fraudulently 

obtained, as well as lost interest, in her obligation to the Rice 

estate; (2) that the district court erred in finding that she had 

the present or future means to comply with the restitution order, 

and (3) that the district court improperly ordered restitution 

under the V.I. restitution statute.5 

 Our review of whether a district court correctly 

imposed an order of restitution is bifurcated: we exercise 

plenary review over whether the award is permitted under law, but 

we review the amount of the award for abuse of discretion. 

United States v. Badaracco, 954 F.2d 928, 942 (3d Cir. 1992). 

 Because we conclude that restitution ordered pursuant 

to the VWPA may not include legal expenses, we will reverse the 

district court's inclusion of $27,964 in such fees in the amount 

of restitution ordered under the VWPA. We will, however, affirm 

the district court's order with respect to the inclusion of 

interest, and will likewise affirm the award made pursuant to the 

V.I. restitution statute in its entirety. 

 

5. Davis further contends that the district court erred by 

admitting as evidence at sentencing the affidavit of Kathleen 

Clements, James Rice's daughter and the court-appointed executor 

of the Rice estate. We have considered this argument and find it 

to be without merit. 
II. 

 We first address Davis' assertion that the district 

court improperly included legal fees and lost interest in her 

restitution obligations to the Rice estate. 

A. 

 As the government correctly points out, the restitution 

award in the V.I. Case was ordered pursuant to the V.I. 

restitution statute and not the VWPA. That point, which Davis 

fails to recognize, defeats her argument with regard to the 

$95,997.78 in legal expenses included in the restitution ordered 

in the V.I. Case. This expenditure by the estate arose from the 

fraud Davis had perpetuated on it, and was incurred in the 

estate's effort to recover losses it had sustained as a result of 

the offenses to which Davis pleaded guilty. The V.I. restitution 

statute provides that "the court shall require restitution 

designated to compensate the victim's pecuniary loss resulting 

from the crime to the extent possible . . . ." 5 V.I.C. § 3721 

(emphasis added). We believe that the district court 

appropriately included legal fees in the order of restitution 

made pursuant to the V.I. restitution statute because the 

expenses clearly represent pecuniary losses incurred by the 

estate, and these losses are directly attributable to Davis' 

crimes against the estate. 

B. 

 The amount of restitution ordered in the U.S. Case 

included compensation for legal expenses incurred by the Rice 

estate in litigation to recover the balance of the funds in 
Rice's account in the Guardian Savings of Houston, Texas. 

Guardian Savings had frozen Rice's account after discovering that 

Davis had fraudulently withdrawn two certificates of deposit, 

each worth one hundred thousand (100,000) dollars, and deposited 

them into an account held by the Icon Corporation. 

 In defining the substantive boundaries of compensation 

in cases where restitution is ordered for offenses resulting in 

the loss of property, § 3663(b)(1) of the VWPA provides: 

 (b) The order may require that such 

defendant -- 

 (1) in the case of an offense resulting 

in damage to or loss or destruction 

of property of a victim of the 

offense -- 

 (A) return the property to the 

owner . . .; or 

 (B) if return of the property 

under subparagraph (A) is 

impossible, impractical, or 

inadequate, pay an amount 

equal to the greater of -- 

 (i) the value of the property 

on the date of the 

damage, loss, or 

destruction, or 

 (ii) the value of the property 

on the date of 

sentencing, less the 

value (as of the date the 

property is returned) of 

any part of the property 

that is returned. 

 This section has been construed to authorize 

"restitution in an amount pegged to the actual losses suffered by 
the victims of the defendant's criminal conduct." United States 

v. Barany, 884 F.2d 1255, 1260 (9th Cir. 1989). Furthermore, the 

obligation must be based upon losses directly resulting from such 

conduct. Id. at 1261 (emphasis added). 

 Most courts which have analyzed the meaning of "losses 

directly resulting" from the offense have interpreted this 

language narrowly. In fact, the Fourth, Fifth, Seventh and Ninth 

and Tenth Circuits have specifically held that restitution under 

the VWPA cannot include consequential damages such as attorneys' 

fees. See United States v. Mullins, 971 F.2d 1138, 1147 (4th 

Cir. 1992) (holding that an award of restitution under the VWPA 

cannot include attorneys' and investigators' fees expended to 

recover the lost property); United States v. Mitchell, 876 F.2d 

1178, 1184 (5th Cir. 1989) (holding that restitution of 

attorneys' costs expended to recover from an insurance company 

are not authorized by the VWPA); United States v. Arvanitis, 902 

F.2d 489, 497 (7th Cir. 1990) (holding that restitution for 

consequential damages, such as legal fees expended to investigate 

a fraudulent insurance claim, are not available under the VWPA); 

Barany, 884 F.2d at 1261 (holding that attorneys' fees and costs 

spent to defend against a civil suit are not recoverable under 

the VWPA); and United States v. Patty, 992 F.2d 1045, 1049 (10th 

Cir. 1993) (holding that attorneys' fees incurred by victim to 

recover his property are not directly related to the defendant's 

criminal conduct and are thus not recoverable in restitution 

under VWPA). 
 The government argues that our decision in United 

States v. Hand, 863 F.2d 1100 (3d Cir. 1988) is directly on 

point, and requires us to conclude that the inclusion of 

attorneys' fees represents a legitimate means of accomplishing 

the far-reaching principles underlying the VWPA. In Hand, we 

upheld an award of restitution which, in part, compensated the 

United States Attorneys' Office for time and resources spent 

prosecuting a case which resulted in a mistrial because of juror 

misconduct. Hand, 863 F.2d at 1103. Although at first glance 

our decision in Hand arguably appears to control the issue of 

whether legal expenses may be included in a restitution award 

made under the VWPA, as we explain below, the facts of Hand were 

unique and are distinguishable from the matter before us. 

Moreover, despite our reliance in that case on comments in the 

legislative history which the government believes supports its 

position here, those comments can only be considered dicta, 

although we hasten to note that the conclusion we reach here is 

actually consistent with the result we reached in Hand in any 

event. 

 Patricia Hand was a juror in United States v. 

Militello, a complex narcotics conspiracy case involving multiple 

defendants. During the seven-week trial, Hand and one of the 

defendants, George Pepe, developed a personal relationship. The 

jury returned guilty verdicts against five co-defendants, found 

one not guilty, and deadlocked 11 to 1 in favor of conviction 

with respect to Pepe. Hand was the only juror who did not vote 

for Pepe's conviction. Hand's conduct was brought to the 
attention of the trial judge when the five co-defendants whom the 

jury had convicted filed motions for a new trial, claiming that 

they had been denied due process because of improper contacts 

between Hand and Pepe. Two of the co-defendants withdrew their 

motions and pleaded guilty to lesser charges, and the court 

vacated the convictions of the other three. 

 Hand subsequently pleaded guilty to contempt of court 

in violation of 18 U.S.C. § 401. As a special condition of her 

sentence, she was ordered to pay $46,850 in restitution, 

approximately $35,000 of which represented losses sustained by 

the United States Attorneys Office as a result of Hand's 

misconduct. Hand appealed the restitution order and we affirmed. 

In concluding that the damages claimed by the government were 

neither remote nor speculative, we relied primarily on the 

legislative history of the VWPA. Significantly, we observed that 

"in promulgating the VWPA, Congress intended to `insure that the 

wrongdoer [be] required to the degree possible to restore the 

victim to his or her prior state of well-being." Hand, 863 F.2d 

1103. We stated further that: 

 There is no doubt that compensation for such 

expenditures is permissible under the VWPA, 

given that Congress desired for offenders "to 

undue the financial harm they have done 

[their victims]." 

Hand, 863 F.2d at 1104-1105 (quoting S.Rep. No. 532, 97th Cong., 

2d. Sess. 30, reprinted in 1982 U.S.Code Cong. & Admin. News 

2515, 2536). 
 It is something considerably less than hyperbole to 

characterize the above-cited comments that appear in the 

legislative history of the VWPA as "sweeping." These comments 

aside, however, there is no doubt that the VWPA does not

necessarily authorize a sentencing court to order restitution in 

an amount that represents a victim's entire loss. See Hughey v. 

United States, 495 U.S. 411, 413 (1990). Congress simply did not 

write the VWPA to fully satisfy the more ambitious purpose 

expressed in the legislative reports upon which Hand relies. The 

plain and unambiguous language of § 3663(b)(1) clearly limits the 

amount of restitution to the value of the lost property. 

Moreover, restitution ordered pursuant to the VWPA cannot 

compensate for losses which do not directly result from the 

offense of conviction, id.; United States v. Seligsohn, 981 F.2d 

1418, 1421 (3d Cir. 1992) (adopting Hughey and stating, "we 

should take the Supreme Court at its word that the count of 

conviction controls the amount of restitution"), and this 

observation is wholly consistent with the result we reached in 

Hand, despite Hand's reliance on a more expansive reading of the 

VWPA, one which the government urges us to adopt here. It is 

important that we revisit our primary focus in Hand, which was 

that the government had lost five "hard-won convictions," as a 

direct result of Hand's misconduct. Hand, 863 F.2d at 1104. But 

for Hand's criminal conduct, the government would not have lost 

those convictions. Of critical importance is the fact that Hand 

was not required to pay for the expenses the government incurred 

in retrying the co-defendants, nor did she have pay restitution 
to cover the cost of her own conviction; instead, she was only 

ordered to pay compensation for what the court viewed as the 

"property" the government lost as a result of Hand's crime, 

namely, the convictions. Thus, not even Hand attempts to give 

full effect to the expressions of congressional intent cited 

therein. 

 The plain language of the VWPA, as well as the 

reasoning adopted by other courts of appeal, leads us to conclude 

that absent specific statutory authority for an award of 

attorneys' fees, the amount of restitution ordered under the VWPA 

may not include compensation for legal expenses unless such costs 

are sustained as a direct result of the conduct underlying the 

offense of conviction. 

 Accordingly, we will reverse the district court's 

decision to include legal fees as part of the restitution ordered 

under the VWPA. Although such fees might plausibly be considered 

part of the estate's losses, expenses generated in order to 

recover (or protect) property are not part of the value of the 

property lost (or in jeopardy), and are, therefore, too far 

removed from the underlying criminal conduct to form the basis of 

a restitution order. 

 C. 

 We now turn to the district court's inclusion in the 

restitution amount the interest lost on certificates of deposit 

that were fraudulently acquired by Davis. Although we have 

previously held that the VWPA implicitly authorizes the district 

court to include postjudgment interest in a restitution order, 
United States v. Kress, 944 F.2d 155, 160 (3d Cir. 1991), we have 

not considered the issue this case raises: whether § 3663(b)(1) 

authorizes the inclusion of prejudgment interest in a restitution 

award. See Kress, 944 F.2d at 159 n.7 (specifically reserving 

the question of whether prejudgment interest can be properly 

awarded under the VWPA). 

 We have, however, addressed the issue of prejudgment 

interest in the context of restitution ordered under the Federal 

Protection Act (FPA), 18 U.S.C. § 3651 (repealed November 1, 

1987), which authorized a sentencing judge to order "restitution 

and reparation to aggrieved parties for actual damage or loss" as 

a term of probation. See United States v. Sleight, 808 F.2d 1012 

(3d Cir. 1987). In Sleight, in concluding that prejudgment 

interest should not be included absent specific statutory 

authority, we based our decision on the fact that restitution 

under the FPA is imposed as a condition of probation and is, 

therefore, analogous to a criminal penalty. Sleight, 808 F.2d at 

1020-21. It is, of course, well established that criminal 

penalties do not bear interest. Id. at 1020 (citing Rodgers v. 

United States, 332 U.S. 371, 376 (1947) and Pierce v. United 

States, 255 U.S. 398 (1921)). 

 Although the VWPA is likewise silent with respect to 

prejudgment interest, that silence need not be interpreted as 

"manifesting an unequivocal congressional purpose that the 

obligation shall not bear interest." Kress, 944 F.2d at 159 

(quoting Rodgers, 332 U.S. at 373). Furthermore, restitution 

ordered under the VWPA is compensatory rather than punitive. 
Awards are designed to compensate victims for their losses, 

rather than to serve retributive or deterrent purposes. See

United States v. Rochester, 898 F.2d 971, 983 (5th Cir. 1990). 

We do not believe that the inclusion of prejudgment interest is 

comparable to a criminal penalty. Rather, it is an aspect of the 

victim's actual loss which must be accounted for in the 

calculation of restitution in order to effect full compensation. 

Lost interest translates into lost opportunities, as it reflects 

the victim's inability to use his or her money for a productive 

purpose. Accordingly we find that the district court's 

incorporation of prejudgment interest in the restitution amount 

was proper to effect full compensation. 

 III. 

 Davis also contends that the district court erred in 

concluding that, in spite of her indigence at the time of 

sentencing, she stood a realistic chance of acquiring the ability 

to pay the amount of restitution ordered. 

 We have held that in arriving at a proper amount for 

purposes of restitution, a district court must make factual 

findings concerning (1) the amount of loss sustained by the 

victims, (2) the defendant's ability to make restitution, and 

(3) "how the amount of . . . restitution imposed . . . relate[s] 

to any loss caused by the conduct underlying the . . . offenses 

for which [defendant] remain[s] convicted." United States v. 

Logar, 975 F.2d 958, 961 (3d Cir. 1992) (citations omitted). 

Although "restitution may not be ordered in an amount that a 

defendant cannot realistically pay," Sleight, 808 F.2d at 1021, 
the suggestion that a court cannot impose an order for 

restitution on an indigent defendant is, quite simply, without 

foundation. Logar, 975 F.2d at 962. We recognize that there may 

be a significant difference between a defendant's financial 

condition at sentencing and his or her ability to repay in the 

future losses sustained by the victim. As a result, we have 

instructed district courts to make specific findings of fact not 

only concerning a particular defendant's current financial 

status, but also as to his or her capacity to earn income in the 

future, before arriving at an appropriate amount of restitution. 

Id. 

 The possibility of repayment, however, cannot be based 

solely on chance. Id. (citing United States v. Rogat, 924 F.2d 

983, 985 (10th Cir.), cert. denied, 111 S.Ct. 1637 (1991)). Cf. 

United States v. Seale, 20 F.3d 1279, 1286 (3d Cir. 1994) ("In 

attempting to predict future ability to pay, district courts must 

be realistic and must avoid imposing a fine when the possibility 

of a future ability to pay is based merely on chance."). A 

sentencing court must fashion an obligation that a defendant 

realistically can be expected to fulfill. See Sleight, 808 F.2d 

at 1021. Thus, in Logar, we concluded that: 

 if it is realistic that a defendant may 

inherit a substantial sum from a well-off 

relative or has a story to write that will be 

a bestseller, then the district court would 

be entitled to consider these possible 

additional sources of income in fashioning a 

restitution order. 

Logar, 975 F.2d at 964. 
 In this case, the district court correctly considered 

Davis' potential for future income based on her then-pending 

probate claims against the Rice estate and her book, "Astarte: A 

True Story,"6 in ordering restitution. Not only is Davis a named 

beneficiary in Rice's handwritten will which has been admitted to 

probate in the Superior Court of California, she has challenged 

that will, claiming that somewhere among her effects is a more 

recent will which leaves her the bulk of the estate. She also 

claims that as Rice's common-law wife she is entitled to share in 

his estate, which is valued at more than $800,000. Based on the 

above, we conclude that Davis has a better-than-chance 

opportunity for future earnings, and that the district court's 

determination to that effect was correct. It follows, then, that 

the district court in this case properly balanced the victim's 

interest in compensation against Davis' financial resources and 

exercised sound discretion in determining an appropriate amount 

of restitution. 

 

6. Davis' story about her illegal activities has already been 

the subject of two nationally syndicated television news magazine 

programs. 
IV. 

 Finally, Davis argues that the district court erred in 

ordering restitution in the V.I. Case pursuant to the V.I.C. 

§ 3721. The V.I. restitution statute provides in pertinent part: 

 Restitution to Victims: . . . If the court 

places the person on probation, the court 

shall require restitution designed to 

compensate the victim's pecuniary loss 

resulting from the crime to the extent 

possible, unless the court finds there is a 

substantial reason not to order restitution 

as a condition of probation. 

5 V.I.C. § 3721. 

 Davis correctly claims that probation is a prerequisite 

of an order of restitution and that if a defendant does not 

receive probation, restitution cannot be imposed. We note, 

however, that in addition to receiving a ten-year term of 

imprisonment in the V.I. Case, Davis was also placed on probation 

for a period of five years. In fact, the very obligation she 

challenges was ordered as a condition of her probation. Thus, 

the district court clearly acted with authority when it ordered 

Davis to pay restitution to the Rice estate. 

 V. 

 For the reasons set forth above, we will affirm, in its 

entirety, the district court's restitution order in the V.I. 

Case. In addition we will affirm the district court's order of 

restitution in the U.S. Case, made pursuant to the VWPA, in all 

respects with the exception of its inclusion of legal fees. That 

portion of the order will be vacated, and the matter remanded to 
the district court for amendment of the amount of restitution 

consistent with this opinion.