16-3754-cr (L)

United States v. Rutigliano



## In the



# United States Court of Appeals

**for the Second Circuit**

A UGUST T ERM 2017

Nos. 16

‐ 3754

‐ cr (L), 16

‐ 3858

‐ cr (CON), 16

‐ 3894

‐ cr (CON),

16

‐ 3898

‐ cr (CON), 16

‐ 3979

‐ cr (XAP)

U NITED S TATES OF A MERICA

, Appellee

‐ Cross

‐ Appellant

,

v.

J OSEPH R UTIGLIANO

, P ETER J. A JEMIAN

,

M ARIE B ARAN

, P ETER J. L ESNIEWSKI

, Defendants

‐ Appellants

‐ Cross

‐ Appellees

,

M ARIA R USIN

, G REGORY N OONE

, R EGINA W ALSH

, S HARON F ALLOON

,

G ARY S ATIN

, S TEVEN G AGLIANO

, R ICHARD E HRLINGER

, B RIAN

D ELGIORNO

, P HILIP P ULSONETTI

, G REGORY B IANCHINI

, F RANK P LAIA

AKA F RANKLIN P LAIA

, M ICHAEL D ASARO

, K ARL B RITTEL

, K EVIN

N UGENT

, G ARY S UPPER

, T HOMAS D ELALLA

, M ICHAEL S TAVOLA

, Defendants

. 

 The Clerk of the Court is directed to amend the official caption to read as shown above. 16-3754-cr(L)

United States v. Rutigliano16-3754-cr (L)

United States v. Rutigliano

2 On Appeal from the United States District Court

for the Southern District of New York

A RGUED : N OVEMBER 29, 2017

D ECIDED : A PRIL 4, 2018

Before: J ACOBS

, R AGGI

, D RONEY

, Circuit Judges

.

____________

On cross appeals from a judgment of the United States District

Court for the Southern District of New York (Marrero, J. ), entered

pursuant to 28 U.S.C. § 2255, the parties challenge a reduction in the

defendants’ restitution obligations as imposed in their original

judgments of conviction. Defendants argue that even the reduced

restitution amounts are not supported by the record. The government

argues that § 2255 does not authorize, nor do the facts warrant, any

reduction in restitution. We agree with the government. Consistent

with this court’s controlling precedent, we conclude that § 2255

jurisdiction does not reach the restitution part of a sentence where, as

here, the restitution cannot be deemed custodial punishment. It is not

the amount of restitution alone but, rather, the terms of payment that

identify those rare cases in which a restitution order might equate to

custodial punishment. Because the challenged judgments here

contemplate the payment of restitution on schedules yet to be set by

the district court, defendants cannot show on the present record that

their restitution obligations are custodial punishments for purposes16-3754-cr (L)

United States v. Rutigliano

3 of § 2255 review. Accordingly, the judgment reducing restitution

must be vacated, and the case is remanded for reinstatement of the

original judgments. No different conclusion is warranted for

defendant Baran, who also invoked coram nobis to seek relief from

restitution. Although the district court did not rule on Baran’s coram

nobis petition, there is no need for it to do so on remand because Baran

identifies no fundamental error in her original restitution sentence, as

necessary for coram nobis relief.

V ACATED AND R EMANDED

.

D ANIEL B. T EHRANI

, Assistant United States

Attorney (Karl Metzner, Assistant United

States Attorney, on the brief ), for Geoffrey S.

Berman, United States Attorney for the

Southern District of New York, New York,

New York, for Appellee

‐ Cross

‐ Appellant

.

J OSEPH W. R YAN

, J R

., Law Offices of Joseph

W. Ryan, Jr., Melville, New York,

for Defendant

‐ Appellant

‐ Cross

‐ Appellee Joseph

Rutigliano.

S EAN M. M AHER

, Law Offices of Sean M.

Maher, PLLC, New York, New York,

for Defendant

‐ Appellant

‐ Cross

‐ Appellee Peter J.

Ajemian.16-3754-cr (L)

United States v. Rutigliano

4 J OHN D. C LINE

, Law Office of John D. Cline,

San Francisco, California (Thomas A.

Durkin, Durkin & Roberts, Chicago, Illinois,

on the brief ), for Defendant

‐ Appellant

‐ Cross

‐

Appellee Peter J. Lesniewski.

Marie Baran, pro se

, Danbury, Connecticut.

R EENA R AGGI

, Circuit Judge :

Defendants Joseph Rutigliano, Peter J. Ajemian, Peter J.

Lesniewski, and Marie Baran stand convicted in the United States

District Court for the Southern District of New York (Victor Marrero,

Judge ) for participating in a massive scheme to defraud the United

States Railroad Retirement Board (“RRB”) by filing fraudulent

disability pension applications on behalf of Long Island Rail Road

(“LIRR”) employees. See United States v. Ajemian

, No. 11 Cr. 1091

(S.D.N.Y.), Dkt. Nos. 401, 592, 649, 704. Defendants here appeal from

a subsequent judgment of the same court, entered on November 1,

2016, which, in response to their motions for vacatur of sentence

pursuant to 28 U.S.C. § 2255, amended each defendant’s sentence in

part to reduce original restitution obligations: for Rutigliano from

$82,356,348 to $42,317,076; for Ajemian from $116,500,000 to

$53,494,797; for Lesniewski from $70,632,900 to $34,237,476; and for

Baran from $31,398,907 to $21,467,954. See United States v. Ajemian

,

No. 11 Cr. 1091 (VM), 2016 WL 6820730, at *3–4 (S.D.N.Y. Nov. 1,

2016). Defendants argue that even these reduced amounts are not16-3754-cr (L)

United States v. Rutigliano

5 supported by record evidence. The government cross

‐ appeals,

arguing that § 2255 does not authorize, nor do the facts warrant, any

reduction of the restitution parts of defendants’ sentences. The

government further argues that the certificate of appealability

granted defendants in this case does not reach their restitution

challenges; that Ajemian waived any challenge to restitution in his

plea agreement; and that, insofar as Baran had already filed one

unsuccessful § 2255 motion, she had not secured the necessary leave

to file a successive petition.

We need not reach the government’s last three arguments

because we are persuaded by its first. We conclude that § 2255 does

not authorize district courts to hear collateral challenges to the

restitution parts of criminal sentences where, as here, restitution

obligations do not equate to custodial punishment. Accordingly, we

vacate the § 2255 judgment reducing defendants’ restitution

obligations as imposed in their original judgments of conviction, and

we remand for reinstatement of the original judgments. To the extent

defendant Baran also invoked coram nobis to seek relief from

restitution, the district court did not address that claim, but no

remand is necessary for that purpose because Baran cannot show

fundamental error in the original order of restitution.

BACKGROUND

I. Defendants’ Convictions and Original Sentences

The fraud scheme for which defendants stand convicted sought

to take advantage of a disability pension plan made available to LIRR16-3754-cr (L)

United States v. Rutigliano

6 employees by the RRB. The LIRR’s own pension plan allowed

employees with 20 or more years of service to retire as early as age 50

and to receive payments equal to half their pre

‐ retirement income.

When an employee reached age 62 or 65, he was eligible for an

additional retirement pension from the RRB. The RRB also offered

disability pensions to employees of any age who were no longer able

to work, for which payments began immediately upon approval of a

disability claim.

As part of a decades

‐ long scheme to defraud the RRB,

defendants Rutigliano, Ajemian, Lesniewski, and Baran, together

with 17 confederates, repeatedly submitted applications for disability

pensions based on fabricated medical documents. Orthopedic

physicians Ajemian and Lesniewski created these fabricated

documents. Rutigliano, a former LIRR conductor and union local

president, obtained a disability pension for himself by submitting

false documentation of his physical condition from Lesniewski.

Rutigliano also acted as a facilitator or consultant for numerous other

LIRR employees seeking disability pensions, charging approximately

$1,000 per person to fill out fraudulent applications. Baran, a former

RRB employee whose LIRR

‐ employed husband obtained an RRB

disability pension through a fraudulent application supported by

Lesniewski, also acted as a facilitator

‐ for

‐ hire, submitting disability

pension applications for LIRR employees that she knew were

supported by fraudulent documentation.

On January 18, 2013, Ajemian entered into an agreement with

the government and pleaded guilty to conspiracy to commit mail,16-3754-cr (L)

United States v. Rutigliano

7 wire, and health care fraud, as well as substantive health care fraud.

See 18 U.S.C. §§ 1347, 1349. On May 24, 2013, the district court

sentenced Ajemian inter alia to 96 months’ imprisonment and ordered

$116,500,000 restitution, the amount identified in his plea agreement.

Further consistent with that agreement, Ajemian did not challenge his

conviction or any part of his sentence on direct appeal.

Rutigliano, Lesniewski, and Baran stood trial and, on August 6,

2013, a jury found them guilty of multiple conspiratorial and

substantive counts of mail, wire, and health care fraud. See id. §§ 371,

1341, 1343, 1347, 1349. The district court sentenced Rutigliano and

Lesniewski inter alia to 96 months’ imprisonment each and to

$82,356,348 and $70,632,900 in restitution respectively. It sentenced

Baran inter alia to 60 months’ imprisonment and $31,398,907

restitution.

The restitution amounts ordered were based on data compiled

by Natasha Marx, an Auditor in the Office of the RRB Inspector

General, and reflected disability pension payments made to identified

LIRR annuitants—for whom each defendant had submitted or

supported fraudulent claims—as of the dates the RRB terminated

their disability pensions due to the discovery of the fraud.

Rutigliano, Lesniewski, and Baran unsuccessfully challenged

their convictions, including their sentences, on direct appeal. See

United States v. Rutigliano

, 790 F.3d 389 (2d Cir. 2015); United States v.

Rutigliano

, 614 F. App’x 542 (2d Cir. 2015).16-3754-cr (L)

United States v. Rutigliano

8 II. The RRB Board Orders and Post

‐ Termination Approvals

Defendants submit that post

‐ conviction actions by the RRB

constitute new evidence supporting the instant collateral challenges

to their convictions and sentences. We briefly summarize those

actions here.

On June 27, 2013, i.e.

, approximately one month after Ajemian’s

conviction, the RRB issued Board Order 13

‐ 33, which terminated the

disability pension benefits of all LIRR employees whose applications

were supported by medical evidence from Ajemian. The RRB

provided notice to all annuitants affected by the order, and

termination became effective three months after the date of those

notices. On September 30, 2013, i.e.

, approximately two months after

the guilty verdicts against Rutigliano, Lesniewski, and Baran, the RRB

issued Board Order 13

‐ 55, which similarly terminated the disability

pension benefits of all LIRR employees whose applications were

supported by medical evidence from Lesniewski. By their terms,

Orders 13

‐ 33 and 13

‐ 55 terminated benefits only prospectively; they

did not seek disgorgement of benefits paid prior to their

pronouncement. Further, the orders permitted employees whose

benefits were terminated to reapply based on “current medical

evidence” of disability from within twelve months of the new

application and not derived from Ajemian or Lesniewski. Lesniewski

App’x at 168–69, 171–72.

By May 22, 2015, the RRB had decided 531 reapplications for

disability pension benefits, granting 485 and reinstating such benefits16-3754-cr (L)

United States v. Rutigliano

9 retroactive to the terminations effected by Board Orders 13

‐ 33 and 13

‐

55. Approximately 80% of the granted reapplications relied on at least

one new medical condition not included in the employee’s initial

fraudulent application, and approximately 70% of the granted

applications omitted at least one medical condition relied on in the

initial fraudulent applications.

III. Collateral Challenges to Convictions and Sentences

A. Baran’s First § 2255 Motion

On July 15, 2015, Baran moved pursuant to 28 U.S.C. § 2255 for

vacatur of her conviction based on ineffective assistance of counsel.

The motion made no challenge to any part of Baran’s sentence.

Specifically, it did not challenge restitution although the RRB had, by

then, taken the aforementioned action on disability pension

reapplications. The district court denied Baran’s § 2255 motion on

January 5, 2016. See Baran v. United States

, 160 F. Supp. 3d 591, 594

(S.D.N.Y. 2016). Baran did not appeal.

B. Defendants’ Rule 33 and Instant § 2255 Motions

On October 2 and 13, 2015, Lesniewski and Rutigliano

respectively moved for a new trial under Fed. R. Crim. P. 33, arguing

that the RRB’s approval of the vast majority of reapplications for

disability pension benefits was newly discovered evidence showing

that there was no fraud in the original applications. Alternatively,

they moved for resentencing under 28 U.S.C. § 2255 on the ground

that the RRB’s approval of reapplications showed that the district16-3754-cr (L)

United States v. Rutigliano

10 court had based defendants’ original sentences—both their

incarceratory and non

‐ incarceratory components—on erroneously

high loss calculations. On November 25, 2015, Ajemian also cited the

RRB’s approval of reapplications to move for vacatur of his conviction

and resentencing pursuant to § 2255.

On March 4, 2016, the district court denied Rutigliano’s and

Lesniewski’s Rule 33 motions, see United States v. Rutigliano

, 168 F.

Supp. 3d 661, 667 (S.D.N.Y. 2016), which denials this court

subsequently affirmed, see United States v. Rutigliano, 694 F. App’x 19,

22, 24 (2d Cir. 2017). On March 18, 2016, the district court denied

Ajemian’s § 2255 motion for vacatur of conviction, see Ajemian v.

United States

, 171 F. Supp. 3d 206, 209, 215 (S.D.N.Y. 2016), and on

June 21, 2016, it denied all defendants’ § 2255 challenges to the

incarceratory parts of their sentences, explaining that the alleged

reduction in actual loss to the RRB was immaterial because

defendants’ Guidelines ranges were properly calculated by reference

to intended loss, see United States v. Ajemian

, 193 F. Supp. 3d 298, 302–

03 (S.D.N.Y. 2016), aff’d sub nom

. United States v. Rutigliano

, 694 F.

App’x 19 (2d Cir. 2017). 1 Nevertheless, recognizing that restitution

may only be ordered with respect to actual loss, the district court

directed the parties to submit additional briefing on the question of

whether the RRB’s reapplication approvals in fact showed that it

1 Although portions of defendants’ § 2255 motions remained pending, the district court

granted Rutigliano, Lesniewski, and Ajemian certificates of appealability under 28 U.S.C.

§ 2253 on their prison

‐ term challenges. See United States v. Rutigliano

, 694 F. App’x at 21

n.1.16-3754-cr (L)

United States v. Rutigliano

11 suffered a lower actual loss amount than had been thought at the

original sentencing. See id. at 303–04.

Approximately two weeks earlier, on June 3, 2016, Baran had

advanced essentially the same arguments as Rutigliano, Ajemian, and

Lesniewski to move for resentencing pursuant to either § 2255 or a

writ of error coram nobis under 28 U.S.C. § 1651. The district court

denied the motion on June 29, 2016, to the extent Baran challenged

her incarceratory sentence, but directed that she too file supplemental

briefing on whether a reduction in restitution was warranted. See

United States v. Baran, 192 F. Supp. 3d 496, 501–03 (S.D.N.Y. 2016).

On November 1, 2016, the district court granted all four

defendants’ § 2255 motions in part, amending their original

judgments of conviction to reduce their restitution obligations by the

amounts of all pre

‐ termination disability pension benefits paid to

individuals whose benefits reapplications the RRB had thereafter

approved. See United States v. Ajemian

, 2016 WL 6820730, at *3–4. The

district court reasoned that the reapplication approvals were based

on current and reliable medical evidence that employees qualified for

benefits without regard to earlier fraudulent submissions, and that

the RRB was not entitled to restitution for past payments it was thus

required to make in any event. See id. at *3. The district court

explained that this reasoning did not apply to disability pension

recipients who had not sought or obtained reapplication approvals

and, thus, it rejected defendants’ argument for vacatur of all

restitution obligations. See id. at *4. Accordingly, the district court

reduced defendants’ restitution obligations as indicated earlier, so16-3754-cr (L)

United States v. Rutigliano

12 that Rutigliano was now obligated in the amount of $42,317,076;

Ajemian in the amount of $53,494,797; Lesniewski in the amount of

$34,237,476; and Baran in the amount of $21,467,954. See id.

The parties timely filed these cross appeals, challenging only

the district court’s ruling with respect to the reduction of the

restitution parts of defendants’ sentences.

DISCUSSION

I. Jurisdiction to Review Defendants’ § 2255 Challenges to

Restitution

We begin with the government’s argument that defendants

could not use § 2255 to challenge the restitution parts of their original

sentences, because the issue implicates the district court’s subject

matter jurisdiction. See Kaminski v. United States

, 339 F.3d 84, 86–87,

91 (2d Cir. 2003) (affirming dismissal of § 2255 challenge to restitution

order for lack of subject matter jurisdiction). As this is a question of

law, our review is de novo

. See Moser v. Pollin

, 294 F.3d 335, 339 (2d

Cir. 2002).

Section 2255 states in pertinent part as follows:

A prisoner in custody under sentence of a court

established by Act of Congress claiming the right to be

released upon the ground that the sentence was imposed

in violation of the Constitution or laws of the United

States,

. . . or is otherwise subject to collateral attack, may

move the court which imposed the sentence to vacate, set

aside or correct the sentence.16-3754-cr (L)

United States v. Rutigliano

13 28 U.S.C. § 2255(a). It is well established in our precedent that to

secure § 2255 review, a petitioner “must satisfy the jurisdictional ‘in

custody’ requirement” of the statute. Scanio v. United States

, 37 F.3d

858, 860 (2d Cir. 1994); see United States v. Brilliant

, 274 F.2d 618, 620

(2d Cir. 1960) (holding district court “without jurisdiction to entertain

. . . § 2255 motion if the relator or movant is not in custody”); see also

Vega v. Schneiderman

, 861 F.3d 72, 74 (2d Cir. 2017) (reaching same

conclusion with respect to parallel “in custody” requirement of

§ 2254).

At the time defendants filed the § 2255 motions at issue on this

appeal, all were “in custody” serving the incarceratory terms of their

respective sentences. Thus, to the extent defendants’ § 2255 motions

challenged their prison terms, the district court had jurisdiction to

consider those challenges on their merits. See Kaminski v. United

States

, 339 F.3d at 86. Whether the district court was also empowered

to review defendants’ challenges to restitution presents a different

question.

In considering that issue, we are guided by this court’s decision

in Kaminski v. United States

. We there concluded that the monetary

components of criminal sentences, such as fines and restitution

orders, generally do not restrict liberty so severely as to satisfy the

custody requirement of § 2255. See id. at 86–87. Kaminski explained

that § 2255, by its terms, applies to prisoners “claiming the right to be

released”; thus, the statute “may not be used to bring collateral

challenges addressed solely to noncustodial punishments” such as

fines and restitution. Id. ; accord Gonzalez v. United States

, 792 F.3d 232,16-3754-cr (L)

United States v. Rutigliano

14 237 (2d Cir. 2015) (reiterating that § 2255 motion generally “may not

attack the non

‐ custodial aspects of a sentence”).

A party cannot avoid this conclusion by challenging both the

custodial and noncustodial parts of his sentence in the same § 2255

motion. In Kaminski

, as here, the incarcerated defendant’s § 2255

motion challenged both his prison term and his restitution obligation.

This court held that the district court properly exercised jurisdiction

over the prison

‐ term challenge, see Kaminski v. United States

, 339 F.3d

at 86, but “lacked subject matter jurisdiction” over the restitution

challenge because the defendant “was not in custody in relation to the

claims against his order of restitution,” id. at 91. In sum, a

noncustodial punishment “may not be attacked in a § 2255 [motion],

even if the [motion] also alleges error in the sentence of

imprisonment.” Id. at 88–89 (identifying “no reason why the presence

of a plausible claim against a custodial punishment should make a

noncustodial [restitution] punishment more amenable to collateral

review than it otherwise might be”). Accordingly, to the extent the

challenged restitution orders here are noncustodial punishments,

precedent dictates that the district court lacked subject matter

jurisdiction to review such challenges under § 2255 even though the

same motions challenged defendants’ prison sentences.

In nevertheless defending the district court’s exercise of § 2255

jurisdiction, defendants argue that their restitution orders should be

deemed “custodial” because the amounts are so high. The argument

cannot be dismissed out of hand because this court, by contrast to

most of our sister circuits, has not pronounced “fines and restitution16-3754-cr (L)

United States v. Rutigliano

15 orders to be, ipso facto

, noncustodial” so as categorically to preclude

their § 2255 review. Id. at 87. 2 Rather, we have left open the question

whether such fines and orders “could ever be such a restraint on the

liberty of a petitioner as to amount to custody.” Id. ; accord Gonzalez v.

United States

, 792 F.3d at 237. The question is grounded in precedent

recognizing that even a non

‐ incarcerated petitioner may satisfy the

“in custody” requirement of the federal habeas statutes by showing

that he is subject to “a significant restraint upon [his] physical liberty

‘not shared by the public generally.’” Vega v. Schneiderman

, 861 F.3d

at 74 (quoting Jones v. Cunningham

, 371 U.S. 236, 240 (1963)). This does

not mean that every aspect of a sentence not shared by the general

public equates to custody for purposes of § 2254 or § 2255 review.

Rather, the challenged condition must “impose a severe restraint on

individual liberty or the imminent threat of such a restraint.” Id.; see

Kaminski v. United States

, 339 F.3d at 86–87. Thus, the Supreme Court

has recognized parole to constitute a sufficiently severe restraint on

individual liberty to keep a defendant in the state’s “custody” as that

word is used in the federal habeas statutes. See Jones v. Cunningham,

371 U.S. at 243. But a sentence of conditional discharge may or may

2 See Smullen v. United States, 94 F.3d 20, 26 (1st Cir. 1996) (concluding restitution cannot be

challenged under § 2255); United States v. Hatten

, 167 F.3d 884, 887 (5th Cir. 1999) (same);

Barnickel v. United States

, 113 F.3d 704, 706 (7th Cir. 1997) (same); United States v. Bernard

,

351 F.3d 360, 361 (8th Cir. 2003) (same); United States v. Kramer

, 195 F.3d 1129, 1130 (9th Cir.

1999) (same); Mamone v. United States

, 559 F.3d 1209, 1210–11 (11th Cir. 2009) (same); see

also United States v. Ross

, 801 F.3d 374, 380 (3d Cir. 2015) (recognizing that monetary

component of sentence cannot satisfy custody requirement of federal habeas statutes);

Erlandson v. Northglenn Mun. Court

, 528 F.3d 785, 788 (10th Cir. 2009) (same); but see

Weinberger v. United States

, 268 F.3d 346, 351 n.1 (6th Cir. 2001) (declining categorically to

prohibit restitution challenges under § 2255).16-3754-cr (L)

United States v. Rutigliano

16 not so severely restrain liberty as to equate to custody depending on

whether it requires a defendant’s “physical presence at particular

times and locations, both for community service and court

appearances,” Nowakowski v. New York

, 835 F.3d 210, 217 (2d Cir. 2016)

(holding defendant in custody in such circumstances), or only his

refrainment from certain conduct, such as contact with a specified

person, see Vega v. Schneiderman

, 861 F.3d at 75 (holding that

conditional discharge requiring defendant to abide by order of

protection did not equate to custody under § 2254).

While, in Kaminski

, we left open the possibility of a restitution

order imposing such a severe restraint on individual liberty as to

equate to custody, this court also observed that such situations will

likely be “rare” and, in any event, “cannot be known” until the

“terms” of restitution, as well as the “amount,” are set. Gonzalez v.

United States

, 792 F.3d at 237. Thus, when in Kaminski we held a

$21,180 restitution order not to equate to custodial punishment

reviewable under § 2255, we focused on the terms of payment, which

were there limited “on a monthly basis [to] the greater of ten percent

of Kaminski’s monthly income, or $100,” and concluded that those

terms did “not come close to” creating a sufficiently severe restraint

on liberty to equate to custody. Kaminski v. United States

, 339 F.3d at

87. Following Kaminski

, district courts in this circuit have dismissed

§ 2255 challenges to even multi

‐ million

‐ dollar restitution orders

based on similar payment terms. See, e.g.

, Mansour v. United States

,

No. 11 Cr. 612 (NRB), 2015 WL 1573327, at *4 (S.D.N.Y. Apr. 9, 2015)

(holding challenge to $9,301,538 restitution order not cognizable16-3754-cr (L)

United States v. Rutigliano

17 under § 2255 because, as in Kaminski

, payment obligation was limited

to ten percent of defendant’s monthly income, so as not to constitute

custody); McEwan v. United States

, 279 F. Supp. 2d 462, 464 & n.1

(S.D.N.Y. 2003) (holding challenge to $6,984,000 restitution order not

cognizable under § 2255 where defendant required to make payments

in installments of fifteen percent of gross monthly income).

Here, the challenged judgments do not set terms for

defendants’ payment of restitution. Nevertheless, the record

indicates that the district court plainly contemplated such terms,

deferring its fixing of payment schedules until receipt of Probation

Department recommendations, presumably upon defendants’ release

from prison when realistic assessments of their means can be made.

This is evident from Lesniewski’s and Baran’s original judgments of

conviction, which expressly state that the monetary parts of their

sentences are to be paid “[a]s determined by probation.” United States

v. Ajemian

, No. 11 Cr. 1091 (S.D.N.Y.), Dkt. Nos. 649, 704. 3 While no

similar statement is included in Rutigliano’s or Ajemian’s judgment

of conviction, the omission appears to be scrivener’s error because all

four defendants’ judgments of conviction state that the only monetary

3 Because a district court cannot delegate its authority to fix either the amount of restitution

or the schedule for payment to the Probation Department, see United States v. Kinlock

, 174

F.3d 297, 300 (2d Cir. 1999); United States v. Porter

, 41 F.3d 68, 71 (2d Cir. 1994), we do not

construe this language—which no defendant challenges—to indicate such impermissible

delegation. Rather, we expect that the able and experienced district judge intended only

for Probation to recommend schedules of payments to the court, which recommendations

would then inform the judge’s own scheduling decisions. To eliminate any ambiguity in

this regard, when the district court on remand reenters defendants’ original judgments, it

should clarify the language to make plain that it will itself order the schedules on which

defendants are to make restitution.16-3754-cr (L)

United States v. Rutigliano

18 component of their sentences that is “due immediately” is each

defendant’s special assessment. Id.

, Dkt. Nos. 401, 592, 649, 704.

Moreover, all four judgments impose additional supervised release

terms based on each defendant’s “compliance with the installment

payment schedule.” Id. In sum, because defendants’ original

judgments of conviction plainly contemplate that restitution will be

paid not immediately, but pursuant to terms yet to be set by the

district court, and because there is no reason to think those terms will

present the “rare situation” where restitution obligations so constrain

liberty as to equate to custody, Gonzalez v. United States, 792 F.3d at

237, defendants’ collateral challenges to the restitution parts of their

sentences were not cognizable under § 2255. 4

In seeking to avoid this conclusion, defendants argue that their

restitution orders must be deemed custodial because they will never

be able to make full restitution on any terms and, thus, necessarily face

imprisonment. The argument fails because only a willful failure to

pay restitution can result in incarceration, see 18 U.S.C. § 3614(b), and

4 Indeed, Lesniewski’s Presentence Investigation Report (“PSR”) recommended that

restitution be “paid in monthly installments of 10% of gross monthly income” following

release from incarceration, Lesniewski PSR at 149, a schedule that would not equate to

custodial punishment. See Kaminski v. United States

, 339 F.3d at 87. It is not clear whether

the district court, in originally ordering restitution for Lesniewski and Baran “[a]s

determined by probation,” United States v. Ajemian

, No. 11 Cr. 1091 (S.D.N.Y.), Dkt. Nos.

649, 704, was itself setting this recommended payment schedule for Lesniewski. Neither

Baran’s nor any other defendant’s PSR contained a recommended restitution payment

schedule. The district court may clarify this point on remand. We here conclude only that

there is no basis in the present record for assuming that any defendant’s payment schedule

will be so onerous as to equate to custodial punishment.16-3754-cr (L)

United States v. Rutigliano

19 the law specifically prohibits incarceration solely on the basis of a

defendant’s financial inability to pay, see id. § 3614(c).

In sum, because defendants fail to show that the restitution

ordered in their judgments of conviction equates to custodial

punishment, the district court was without authority to review and

reduce restitution pursuant to § 2255. See Kaminski v. United States

,

339 F.3d at 87, 91. 5

II. Baran’s Alternative Pursuit of Coram Nobis Relief

Alone among the defendants, Baran pursued relief from

restitution not only under § 2255, but also through a writ of error

coram nobis pursuant to the All Writs Act. See 28 U.S.C. § 1651. The

district court did not address this alternative ground for relief, and

we do not direct it to do so on remand because we conclude that Baran

cannot show fundamental error in her original restitution order, as

required for coram nobis relief.

The writ of error coram nobis is an “extraordinary remedy” that

“issues only in extreme cases,” United States v. Denedo

, 556 U.S. 904,

916 (2009), and “typically [is] available only when habeas relief is

unwarranted because the petitioner is no longer in custody,” Kovacs

v. United States

, 744 F.3d 44, 49 (2d Cir. 2014). The writ thus serves as

5 For the first time at oral argument, Rutigliano submitted that the district court reduced

restitution pursuant to Fed. R. Crim. P. 33 and not § 2255. The procedural history belies

this assertion and shows that the district court granted defendants relief only under § 2255.

Compare United States v. Rutigliano

, 168 F. Supp. 3d at 666–67 (denying relief under Rule

33); United States v. Baran

, 192 F. Supp. 3d at 499–500 (same), with United States v. Ajemian

,

2016 WL 6820730, at *4 (partially granting § 2255 motions to reduce restitution).16-3754-cr (L)

United States v. Rutigliano

20 “a remedy of last resort,” Fleming v. United States

, 146 F.3d 88, 89–90

(2d Cir. 1998), “strictly limited to those cases in which errors

. . . of the

most fundamental character have rendered the proceeding itself

irregular and invalid,” Foont v. United States

, 93 F.3d 76, 78 (2d Cir.

1996) (internal quotation marks omitted) (alteration in original).

To secure coram nobis relief, a petitioner must show that

(1) “there are circumstances compelling such action to achieve

justice,” (2) “sound reasons exist for failure to seek appropriate earlier

relief,” and (3) “the petitioner continues to suffer legal consequences

from his conviction that may be remedied by granting of the writ.”

Id. at 79 (internal quotation marks and alteration omitted); accord

Kovacs v. United States

, 744 F.3d at 49. The burden is a heavy one

because a court reviewing a petition for coram nobis relief “must

presume that the proceedings were correct, and the burden of

showing otherwise rests on the petitioner.” United States v. Mandanici

,

205 F.3d 519, 524 (2d Cir. 2000).

The possibility that coram nobis could afford collateral relief

from restitution was raised in our precedent by that part of the

Kaminski opinion wherein Judge Calabresi wrote only for himself. See

Kaminski v. United States

, 339 F.3d at 89–91; see also Gonzalez v. United

States

, 792 F.3d at 238 n.31 (characterizing Kaminski ’s discussion of

coram nobis as dicta ); but see Barnickel v. United States

, 113 F.3d 704, 706

(7th Cir. 1997) (recognizing availability of coram nobis for restitution

challenges not cognizable under § 2255). In suggesting that

restitution challenges not cognizable under § 2255 might be reviewed

through coram nobis

, Judge Calabresi was nevertheless careful to note16-3754-cr (L)

United States v. Rutigliano

21 that relief could be afforded “only if the challenged error is

fundamental.” Kaminski v. United States

, 339 F.3d at 91. The

challenged restitution orders here manifest no fundamental error.

Thus, we need not decide if, or when, coram nobis might be invoked

collaterally to challenge the restitution component of a criminal

sentence because, even assuming Baran could do so here, her claim

would necessarily fail on the merits.

Baran based her coram nobis claim—as she and her co

‐

defendants based their § 2255 claims—on the fact that, after the RRB

terminated disability pension benefits to annuitants whose claims had

been supported by Ajemian or Lesniewski, the RRB approved

benefits for a majority of those annuitants who reapplied. The district

court was persuaded in part, concluding that the pre

‐ termination

benefits paid to reapproved applicants represented no loss to the RRB

because it had made its own independent determination as to those

applicants’ disability statuses based on reliable information. See

United States v. Ajemian

, 2016 WL 6820730, at *3. Therefore, the district

court reduced the challenged restitution orders to eliminate pre

‐

termination benefits paid to reapproved applicants, explaining that

“[t]he RRB may not seek reimbursement from the Defendants for

disability payments it is required to make based on its own

independent determinations.” Id.

While the government challenges this conclusion, Baran (and

her co

‐ defendants) submit that it does not go far enough. They

maintain that the district court should have vacated their restitution

obligations entirely because the high rate of reapplication approvals16-3754-cr (L)

United States v. Rutigliano

22 leaves insufficient reliable evidence to conclude that any persons,

including those who did not reapply for benefits, received disability

pension benefits to which they were not entitled so as to cause a loss

to the RRB.

We reject Baran’s argument. Not only do the facts she relies on

not show fundamental error in the original restitution order

warranting wholesale vacatur; they fail to show fundamental error

supporting any reduction of restitution.

In reaching that conclusion, we are guided by two general

principles. First, the essence of fraud is misrepresentation, made with

the intent to induce another person to take action “without the

relevant facts necessary to make an informed

. . . decision.” United

States v. Binday

, 804 F.3d 558, 579 (2d Cir. 2015). It is not necessary

that the fraudster intend to inflict a financial loss. See id. Second, and

by contrast, a court’s power to order restitution is “limited to actual

loss” and “may be awarded only in the amount of losses directly and

proximately caused by [a] defendant’s conduct.” United States v.

Gushlak, 728 F.3d 184, 194–95 (2d Cir. 2013) (emphasis omitted).

The record here, including the trial record supporting Baran’s

conviction, convincingly demonstrates that she and her co

‐

defendants supplied the RRB with false medical documentation to

induce its payment of many millions of dollars in disability pension

benefits. There is no question that if the RRB had known the

supporting medical documents were fraudulent, it would not have

made these payments; thus, by making payments, the RRB sustained16-3754-cr (L)

United States v. Rutigliano

23 an actual loss. Cf. United States v. Marino

, 654 F.3d 310, 322 (2d Cir.

2011) (observing, in rejecting causation challenge to restitution on

direct appeal, that “but for” defendant’s affirmative concealment of

falsity of certain representations, victims would not have invested in

venture “as no reasonable investor would invest in a known Ponzi

scheme”).

Baran and her co

‐ defendants urge otherwise, arguing that the

RRB sustained no loss in paying benefits to annuitants who could have

demonstrated their entitlement to disability pensions without fraud.

The argument fails. Nothing in the record shows that the RRB, once

having been induced to pay disability benefits on the basis of

fraudulent applications, remained obliged to pay those benefits to

persons who purportedly could have demonstrated disability

without fraud. Cf. United States v. Klein

, 543 F.3d 206, 215 (5th Cir.

2008) (remanding for reduction of restitution where defendant

showed insurance companies would have had to pay for medications

actually provided to patients, “regardless” of defendant’s fraudulent

billing practices relating to how medications were administered). In

any event, neither Baran nor her co

‐ defendants offered evidence that

any annuitants could have made a non

‐ fraudulent showing of

disability at the time of their original applications.

To be sure, at sentencing, the government bears the

preponderance burden of proving actual loss supporting a restitution

order. See United States v. Finazzo

, 850 F.3d 94, 117 (2d Cir. 2017). But

where, as here, the government carried that burden at the original

sentencing by showing that the RRB’s pre

‐ termination payments16-3754-cr (L)

United States v. Rutigliano

24 were induced by fraud, a defendant seeking coram nobis relief cannot

show fundamental error in the restitution order simply by

speculating that some annuitants might have been able to

demonstrate eligibility without fraud. See United States v. Mandanici

,

205 F.3d at 524 (referencing coram nobis petitioner’s burden to rebut

presumption that underlying proceedings were correct); Foont v.

United States

, 93 F.3d at 78 (“strictly limit[ing]” coram nobis relief to

fundamental errors rendering original proceeding itself “irregular

and invalid” (internal quotation marks omitted)).

Defendants argue that more than speculation supports their

challenges to the original restitution orders. Specifically, they assert

that the RRB, in approving such a large number of disability pension

reapplications based on reliable information, itself determined that it

was required to pay pre

‐ termination benefits to the approved re

‐

applicants. The record does not support this conclusion.

After issuing Board Orders 13

‐ 33 and 13

‐ 55 terminating future

disability pension payments to persons found disabled based on

defendants’ fraudulent submissions, the RRB allowed terminated

annuitants to reapply for benefits. The review process for such

reapplications, however, expressly stated that the RRB would not

reopen or reevaluate an annuitant’s original disability determination.

Rather, reapplications would be assessed on the basis only of current

medical evidence, specifically, evidence from within twelve months

of the reapplication and not connected to Ajemian or Lesniewski. In

short, reapplication approvals determined only an annuitant’s present

eligibility for disability pension benefits. In no way can these16-3754-cr (L)

United States v. Rutigliano

25 approvals be understood as “independent determinations” that

reapplicants were disabled at the time of their initial—fraudulent—

applications, much less that the RRB was “required” to pay these

applicants the pre

‐ termination benefits they received. United States v.

Ajemian

, 2016 WL 6820730, at *3.

Our conclusion is only reinforced by the temporal and factual

gulf between the fraudulent applications that induced the RRB’s

payment of pre

‐ termination benefits and the approved

reapplications. An average 8.3

‐ year interval separated the two.

Moreover, some 80% of reapplications relied on at least one medical

condition not included in the initial application to demonstrate

present disability, while some 70% of reapplications omitted a

medical condition asserted in the initial fraudulent applications. In

these circumstances, an RRB finding on reapplication that a person

was then eligible for a disability pension cannot be said to have found

that he was also eligible years earlier or that the RRB considered itself

“required to make” pre

‐ termination benefits payments despite

defendants’ fraud.

In sum, the record convincingly supports the district court’s

initial determination of the actual loss caused to the RRB through its

termination of benefits by defendants’ fraud and, therefore, the

restitution amounts ordered in defendants’ original judgments. The

RRB’s subsequent approval of most reapplications for benefits shows

no fundamental error in restitution because the RRB determined only

a reapplicant’s present eligibility for benefits; it made no16-3754-cr (L)

United States v. Rutigliano

26 determination as to eligibility in the pre

‐ termination period. 6 Thus,

because Baran cannot show fundamental error in the $31,398,907

restitution ordered in her original judgment of conviction, she was

not entitled to have that order vacated or even reduced through a writ

of error coram nobis.

CONCLUSION

For the reasons stated, we conclude,

1. Collateral review jurisdiction under 28 U.S.C. § 2255 does

not reach the restitution parts of criminal sentences where, as here,

the restitution cannot be deemed custodial punishment. It is not the

amount of restitution alone but, rather, the terms of payment that

identify those rare cases in which a restitution order might so severely

deprive a defendant of liberty as to equate to custodial punishment.

Defendants’ judgments of conviction reference payment schedules,

but no such schedules have yet been set by the district court. Thus,

there is no basis in the present record for equating defendants’

restitution obligations to custodial punishments, without which the

district court could not review collateral challenges to restitution

pursuant to § 2255.

6 To the extent Baran or defendants suggest that the RRB’s failure to seek disgorgement of

pre

‐ termination benefits payments shows that it considered itself required to make those

payments, this argument fails to persuade. The RRB did not seek disgorgement from any

annuitants, not simply the ones whose reapplications it approved. Any number of reasons

could explain the RRB’s decision not to seek disgorgement, not least the low likelihood of

recovery as against the high cost of pursuit.16-3754-cr (L)

United States v. Rutigliano

27 2. To the extent Baran also collaterally challenges restitution

through a writ of error coram nobis

, we need not decide whether coram

nobis is available for that purpose because, even if it is, Baran cannot

show fundamental error in the $31,398,907 restitution ordered in her

original judgment of conviction. As a result, she is entitled neither to

the vacatur of all restitution that she seeks nor to the reduction in

restitution that the district court granted pursuant to § 2255.

Accordingly, we VACATE the district court’s November 1,

2016 order reducing the restitution amounts ordered in defendants’

original judgments of conviction, and we REMAND with directions

to reinstate the original judgments and to dismiss all defendants’

§ 2255 petitions as well as Baran’s coram nobis petition.