Opinion ID: 172808
Heading Depth: 2
Heading Rank: 2

Heading: Griffith's challenge to the restitution order

Text: The MVRA mandates, in pertinent part, that the district court must impose restitution when sentencing a defendant convicted of an offense in which an identifiable victim ... has suffered a physical injury or pecuniary loss. 18 U.S.C. ง 3663A(c)(1)(B). Just as the loss caused by the conduct underlying the offense of conviction establishes the outer limits of a restitution order under the Victim Witness and Protection Act of 1982 (VWPA), Hughey v. United States, 495 U.S. 411, 420, 110 S.Ct. 1979, 109 L.Ed.2d 408 (1990), so are restitution orders under the MVRA [12] limited to losses caused by the offense of conviction, United States v. Gordon, 480 F.3d 1205, 1211 (10th Cir. 2007). Furthermore, restitution under the MVRA must be based on actual loss, which [t]he government bears the burden of proving. United States v. Quarrell, 310 F.3d 664, 678, 680 (10th Cir.2002). [T]he purpose of restitution is not to punish defendants or to provide a windfall for crime victims but rather to ensure that victims, to the greatest extent possible, are made whole for their losses. United States v. Serawop, 505 F.3d 1112, 1124 (10th Cir.2007) (quotation omitted). Consequently, a district court that orders restitution in an amount greater than the total loss caused by the offense thereby exceeds its statutory jurisdiction and imposes an illegal sentence. Id. (quotation, alterations omitted). We review de novo the legality of a restitution order. Gordon, 480 F.3d at 1210. We review the district court's underlying factual findings for clear error, and the amount of restitution for abuse of discretion. Serawop, 505 F.3d at 1117.
Griffith's offense of conviction was theft of U.S. property in violation of 18 U.S.C. ง 641. In her Petition to Enter Plea of Guilty and Order Entering Plea, Griffith admitted that [f]rom March, 2003, to July, 2005, [she] embezzled more than one thousand dollars ... from the Department of Veterans Affairs ... by taking DAV benefits of David Norvell and converting them to [her] own use. R. vol. 1, tab 4, at 2. She explained to the district court that the VA benefit checks were deposited directly into Norvell's checking account, and that he then would sign checks for her so that she would get the benefit of the VA money. (R. vol. VI at 11.) She further acknowledged that the cumulative total of all these checks deposited into Norvell's account was $22,870. ( Id. ) Before we may consider episodes of putative actual loss of VA funds caused by Griffith's offense conduct, we must determine whether those funds, once deposited into a beneficiary's account and made available for withdrawal, would retain their identity as VA funds. While the federal courts have not addressed this question with reference to ง 641, the Supreme Court and lower courts have done so with reference to 38 U.S.C. ง 5301 and its predecessor statutes, which exempt veterans' benefits from taxation, ... from the claim of creditors, and ... [from] attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary. 38 U.S.C. ง 5301(a)(1). The World War Veterans' Act of 1924, 38 U.S.C. ง 454, provided that `[t]he compensation, insurance, and maintenance and support allowance payable [to veterans] shall not be assignable; shall not be subject to the claims of creditors of any person to whom an award is made ...; and shall be exempt from all taxation.' Trotter v. Tennessee, 290 U.S. 354, 356, 54 S.Ct. 138, 78 L.Ed. 358 (1933) (quoting 38 U.S.C. ง 454). In Trotter, the Supreme Court held open the question of whether veterans' benefits received under this statute retained their exempt character once they were in the hands of the veteran or on deposit in a bank. Id. The Trotter Court did conclude, however, that such benefits lost their exempt character once they had lost the quality of moneys and were converted into land and buildings. Id. at 356-57, 54 S.Ct. 138. Congress then amended the statute, mandating both that veterans' benefits were to remain exempt `either before or after receipt by the beneficiary' and that the benefits' exempt status should not extend `to any property purchased in part or wholly out of such payments.' Lawrence v. Shaw, 300 U.S. 245, 249, 57 S.Ct. 443, 81 L.Ed. 623 (1937) (quoting 38 U.S.C. ง 454, as amended by the World War Veterans' Act of 1935). In Lawrence, the Court held that veterans' benefits deposited in a bank retained their exempt character so long as those deposits are made in the ordinary manner such that the proceeds of the collection are subject to draft upon demand for the veteran's use. Id. at 250, 57 S.Ct. 443. [A] mere allowance of interest upon deposits, the Court noted, would not be enough to destroy an immunity [to taxation and attachment] where it would otherwise attach. Id. However, the Court later explained in Carrier v. Bryant, 306 U.S. 545, 547, 59 S.Ct. 707, 83 L.Ed. 976 (1939), that [i]nvestments purchased with money received in settlement of benefits do not retain their exempt character. The statute assumed its current form in 1958, when it was amended to provide that [p]ayments of benefits due or to become due under any law administered by the Veterans' Administration shall not be assignable except to the extent specifically authorized by law, and such payments made to, or on account of, a beneficiary shall be exempt from taxation, shall be exempt from the claim of creditors, and shall not be liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary. The preceding sentence shall not apply to claims of the United States arising under such laws nor shall the exemption therein contained as to taxation extend to any property purchased in part or wholly out of such payments. 38 U.S.C. ง 3101(a) (1958) (quoted in Porter v. Aetna Cas. & Surety Co., 370 U.S. 159, 159 n. 1, 82 S.Ct. 1231, 8 L.Ed.2d 407 (1962)). In Porter, the Court extended Lawrence 's holding to veterans' benefit funds on deposit in federal savings and loan associations. Since legislation of this type should be liberally construed to protect funds granted by the Congress for the maintenance and support of the beneficiaries thereof, we feel that deposits such as are involved here should remain inviolate. The Congress, we believe, intended that veterans in the safekeeping of their benefits should be able to utilize those normal modes adopted by the community for that purpose โ provided the benefit funds, regardless of the technicalities of title and other formalities, are readily available as needed for support and maintenance, actually retain the qualities of moneys, and have not been converted into permanent investments. 370 U.S. at 162, 82 S.Ct. 1231 (citations omitted). Congress gave the statute its current numbering, 38 U.S.C. ง 5301, in 1991. We think that Porter 's interpretation of ง 5301 is equally applicable to VA funds at issue under ง 641. Therefore, as long as a veteran's benefits are held in an account making those funds readily available as needed for support and maintenance, and the funds are not converted into permanent investments or into property, Porter, 370 U.S. at 162, 82 S.Ct. 1231; Lawrence, 300 U.S. at 249, 57 S.Ct. 443, they retain their identity as public money under ง 641. Furthermore, even if VA funds are commingled in an account with other funds, they will retain their VA character as long as they are readily traceable and may be accounted for with a standard accounting method, such as first-in, first-out tracing. See S & S Diversified Servs., L.L.C. v. Taylor, 897 F.Supp. 549, 552 (D.Wyo.1995) (reasoning that social security benefits deposited in a joint bank account retain their exempt status [pursuant to 42 U.S.C. ง 407] if they are readily traceable); NCNB Fin. Servs., Inc. v. Shumate, 829 F.Supp. 178, 180-81 (W.D.Va.1993) (If the recipient of social security benefits commingles the benefits with other funds, he is entitled to protection as to those funds that are reasonably traceable to social security income.). [13]
The district court imposed $27,002 in restitution, based on Griffith's misappropriation of the following VA funds: $3,118 directly diverted from Norvell's funds-receiving account and used for Griffith's benefit; $9,495 in bills left unpaid after Griffith's unauthorized cash withdrawals from Norvell's funds-receiving account; $4,236 (60% of $7,060) in lump-sum VA payments dissipated by Griffith and used more for her benefit than for Norvell's; and $10,153 in VA funds obligated by Griffith's misuse of Norvell's credit. As to the VA funds obligated by Griffith's misuse of Norvell's credit, the district court reasoned that because Griffith was responsible for loss to Norvell of $18,130, or 60% of $30,216, in accumulated credit card debt, see supra ง II.A.4.i.b, and because VA benefits constituted roughly 56% of Norvell's total income during the period covered by the indictment, 56% of $18,130 had been obligated toward the repayment of this debt. (PSR at 16.)
As regards the $3,118 directly diverted from Norvell's account and the $9,495 in funds withdrawn to pay bills but which were not used to pay bills, the record contains ample evidence demonstrating that the Government met its burden of proving actual loss caused by the offense of conviction. As regards the $4,236 in lump-sum VA payments and the $10,153 in VA funds obligated by Griffith's misuse of Norvell's credit, however, we conclude that the Government failed to meet that burden.
While we do not doubt that Griffith may be ordered to pay restitution for her dissipation and misappropriation of lump-sum benefit payments to Norvell, her offense of conviction is theft of U.S. funds during the period from March of 2003 to July of 2005. At Griffith's sentencing hearing, VA Agent Sewell first testified that during the period covered by the indictment, $7,543 in lump-sum benefit payments were deposited into Norvell's account. [14] On cross-examination, however, he corrected that figure, testifying, as I'm looking at it now, one of those payments was made-one of the lump sum payments was made before [Griffith] was fiduciary. (R. vol. III at 70.) According to Agent Sewell, that payment, of $4,250, was made in August of 2002. Because the Government did not put on evidence demonstrating that Griffith dissipated and misappropriated this payment of $4,250 during the period of the offense of conviction, the district court erred in ordering Griffith to pay restitution for the loss of 60% of that payment. Therefore, the restitution order must be reduced by $2,550, or 60% of $4,250.
Because the Government did not put on evidence that the accumulated credit card debt was ever paid and thus did not prove actual loss to Norvell from that debt, see supra ง II.A.4.i.b, the district court erred in ordering Griffith to pay restitution for that debt. Furthermore, we note that because Griffith may be ordered to pay restitution only for conduct underlying the offense of conviction, she may be ordered to pay restitution only for Norvell's loss of VA benefits; and under 38 U.S.C. ง 5301(a)(1), those benefits are exempt from the claim of creditors, and not ... liable to attachment, levy, or seizure by or under any legal or equitable process whatever. Therefore, in the absence of evidence demonstrating that Norvell actually repaid the credit card debt with VA funds, the district court lacked authority to impose restitution upon Griffith for even a portion of that debt. Consequently, the restitution order must be reduced by an additional $10,153.
Because the district court exceeded its authority and thus abused its discretion in ordering Griffith to pay restitution for conduct not proven to underlie the offense of conviction and conduct not proven to have caused actual loss, the restitution order must be reduced by a total of $12,703.