Opinion ID: 2978318
Heading Depth: 3
Heading Rank: 3

Heading: Bourke’s Fees

Text: As the district court recognized, the government sought two categories of attorney fees on behalf of Bourke. First, the government requested the attorney fees Bourke incurred in defending himself against the fraudulent lawsuits filed against him as part of the scheme devised to frustrate Bourke’s and other creditors’ attempts to recover judgments against Schultz. Because these fees were not incurred during Bourke’s “participation in the investigation or prosecution of the offense,” see 18 U.S.C. § 3663A(b)(4), in order to be recoverable, the attorney fees must have been “‘caused by the specific conduct that is the basis for the offense of conviction.’” Akbani, 151 F.3d at 780 (quoting Marsh, 932 F.2d at 712); see Hughey, 495 U.S. at 416. No. 07-3778 United States v. Elson Page 16 We agree with the district court’s conclusion that the attorney fees Bourke sustained defending himself against the fraudulent lawsuits are recoverable. It is undisputed that a central part of the conspiracy was “to engage in sham lawsuits” (J.A. 132), including deceptive litigation techniques such as controlled depositions and collusive filings in civil court. The time and resources Bourke spent defending the lawsuits directly resulted from the filing of collusive lawsuits by Elson and his coconspirators in furtherance of the scheme to conceal assets from and to frustrate the collection efforts of Schultz creditors such as Bourke. Accordingly, the portion of Bourke’s fees related to defending himself against fraudulent lawsuits is recoverable. See United States v. Havens, 424 F.3d 535, 539 (7th Cir. 2005) (upholding inclusion of attorney fees “paid [by an identity fraud victim] to counsel or other experts for dealing with the banks and credit agencies in the effort to correct her credit history and repair the damage to her credit rating” in the restitution order). The government also sought the attorney fees Bourke incurred in attempting to collect a civil judgment against Schultz. As noted above, Bourke secured a judgment on behalf of his client, Bryant, against Schultz in California state court, which Bryant later assigned to Bourke. At the restitution hearing, Bourke testified that the coconspirators’ use of nominees to hide Schultz’s assets made it more difficult for him to locate available assets for purposes of collecting the California judgment. Bourke stated that his attorney fees resulted from “chasing Mr. Schultz’s assets around the world” in an attempt to collect on the court’s judgment. (J.A. 376.) More specifically: Instead [of receiving the value of the judgment by return mail], we had to discover from piercing a stone wall, after months and months of discovery . . . , we had to . . . find out from the[ documents] where the assets had gone, figure out the lies and deception that were going in [sic] to block us and then figure out what to do about that and what courts to go to and what courts to present the evidence to. And that took hundreds of thousands of hours of time and we had to hire lawyers in New York, Florida, Illinois, Ohio, and we ourselves did the California work. (J.A. 379.) Bourke further estimated that “there were between 11 and 36 layers of phony corporations and shills that [Schultz] was using that we had to . . . prove to some court somewhere that he was using these.” (J.A. 380.) Bourke therefore incurred significant No. 07-3778 United States v. Elson Page 17 attorney fees and other costs in researching and uncovering the numerous layers of nominees created by the Schultz conspiracy in an attempt to hide Schultz’s assets. We conclude that the costs Bourke expended to locate Schultz’s assets are recoverable under § 3663A(b)(4). On this issue, the Eighth Circuit’s recent decision in United States v. Stennis-Williams, 557 F.3d 927 (8th Cir. 2009), is instructive. In Stennis-Williams, the defendant was an attorney appointed as the personal representative of an estate. Id. at 928. The defendant subsequently defrauded the estate of over $200,000. Id. In the course of discovering and investigating the fraud, the estate paid approximately $70,000 in attorney and accountant fees, which the district court included in its restitution order. Id. at 928, 930. On appeal, the Eighth Circuit concluded that “the district court did not clearly err by including the estate’s investigative costs in its restitution calculation” because the fees were recoverable pursuant to § 3663A(b)(4). Id. at 930. The court reasoned that “privately incurred investigative costs constitute foreseeable losses that are directly caused by a defendant’s fraudulent conduct.” Id. Based on the reasoning set forth in Stennis-Williams, Bourke’s attorney fees are recoverable under § 3663A(b)(4). Like the estate in Stennis-Williams, Bourke sustained significant costs and fees in discovering and investigating the numerous layers of shill corporations and nominees related to Schultz’s fraud. While Bourke did not investigate the fraud as part of the government’s prosecution of Elson and his co-conspirators, Bourke’s costs and fees “constitute foreseeable losses that [we]re directly caused” by the conspiracy’s act of concealing Schultz’s assets from creditors such as Bourke. See id. We therefore follow the reasoning of the Eighth Circuit in Stennis-Williams and conclude that Bourke’s attorney fees incurred in pursuing the Bryant judgment are recoverable under § 3663A(b)(4). Alternatively, the attorney fees and costs Bourke expended in attempting to collect the judgment against Schultz constitute losses that were “caused by the specific conduct that is the basis of the offense of conviction.” Hughey, 495 U.S. at 413; see Akbani, 151 F.3d at 780. Generally, attorney fees incurred in civil litigation against the defendant for the same acts at issue in the criminal proceedings are consequential No. 07-3778 United States v. Elson Page 18 damages that are not recoverable. E.g., United States v. Seward, 272 F.3d 831, 839 (7th Cir. 2001) (“In calculating . . . the actual loss amount for restitution, the district court should include in the calculation all direct damages, but not include consequential or incidental damages [such as attorney fees].”). However, where a victim’s attorney fees are incurred in a civil suit, and the defendant’s overt acts forming the basis for the offense of conviction involved illegal acts during the civil trial, such as perjury, such fees are directly related to the offense of conviction and therefore are recoverable as restitution under the MVRA. See United States v. DeGeorge, 380 F.3d 1203, 1221-22 (9th Cir. 2004). In DeGeorge, the defendant “participated in a scheme to defraud by purchasing a yacht, inflating its value through a series of sham transactions, [and] obtaining insurance [from Cigna Property and Casualty Company (“Cigna”)] on the yacht at the inflated value.” Id. at 1207. After obtaining insurance, the defendant furthered his scheme by “scuttling [the yacht] off the coast of Italy, and attempting to collect the insurance proceeds, in part by lying about the cause of the sinking during civil litigation with the yacht’s insurer.” Id. at 1207-08. When payment was sought under the terms of the insurance policy, “Cigna refused to pay . . . . [and] filed a civil lawsuit against the defendant [and his co-conspirators] seeking rescission of the insurance contract.” Id. at 1210. At trial, Cigna prevailed and was awarded attorney fees. Id. One year after the judgment was affirmed, the defendant was indicted for mail fraud, wire fraud, and perjury. Id. At sentencing following his conviction on all counts, the district court ordered restitution of almost $3 million, “which was the amount of attorney’s fees incurred by Cigna in defending the civil case.” Id. at 1221. On appeal, the court of appeals affirmed the district court’s inclusion of attorney fees in the restitution award. The court reasoned that the defendant’s offense “included his perjury and other conduct during the civil trial” and therefore “the insurance company’s expenses in the civil trial were directly, not tangentially, related to [the defendant]’s offenses.” Id. No. 07-3778 United States v. Elson Page 19 Similarly, Bourke’s attorney fees incurred in pursuing the Bryant judgment were a direct result of the acts forming the basis of the Schultz conspiracy. As alleged in the indictments: It was part of the conspiracy that . . . Defendants . . . orchestrated a series of false and fraudulent transactions that were designed to make it appear that Richard Schultz had spent or lost millions of dollars through business deals . . . when, in fact, the Defendants and others assisted Schultz in concealing, shielding and transferring Schultz’s assets . . . both within and outside the United States to hide the existence, location, source, ownership, nature, and control of such assets. (J.A. 79.) Bourke testified at the restitution hearing that the use of nominees to conceal the existence and true ownership of Schultz’s assets required Bourke to “chas[e] Mr. Schultz’s assets around the world” in an attempt to collect on the judgment. (J.A. 376.) Bourke’s testimony evinces that the time he spent pursuing Schultz’s assets and attempting to unravel the numerous layers of nominees “reflect the losses [Bourke] suffered as a direct result” of the actions of Elson and his co-conspirators in concealing Schultz’s assets. See Havens, 424 F.3d at 539. Thus, the district court did not err in concluding that Bourke’s attorney fees could be included in the restitution award.