Court Opinion

ID: 621162
Source: CourtListenerOpinion
Date Created: 2012-01-20 01:00:47+00
Date Added: 2024-06-11T17:50:55.413032
License: Public Domain

10-5042-cr
United States v. Rutkoske

                            UNITED STATES COURT OF APPEALS
                                FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO
A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS
GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S
LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH
THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING
A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY
COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Daniel Patrick Moynihan Courthouse, 500 Pearl Street, in the City of New York, on the 19th day
of January, two thousand twelve.

Present:
         ROBERT A. KATZMANN,
         GERARD E. LYNCH,
                     Circuit Judges,
         LEWIS A. KAPLAN,
                     District Judge.
________________________________________________

UNITED STATES OF AMERICA

           Appellee,

                  v.                                               No. 10-5042-cr

MICHAEL NIEBUHR, ANTHONY BISCEGLIE, RICHARD
LAGRECA, MICHAEL GIANGREGORIO, NICHOLAS
CIANCIARUSO, MICHAEL COLAIACOVO, JR., RICHARD
WILLIAMS, JR., RAFFI OGHLIAN, RALPH DELUCA,
DAMON PICCOLO, JAMES MORGAN, JR., FRANK
CARDONE, EDWARD MACHADO, EDWARD GOMEZ,

           Defendants ,

* The Honorable Lewis A. Kaplan, United States District Judge for the Southern District of New
York, sitting by designation.
DAVID RUTKOSKE,

         Defendant-Appellant.
________________________________________________

For Defendant-Appellant:                      ANDREW G. PATEL, New York, N.Y.

For Appellee:                                 RUSSELL CAPONE, Assistant United States Attorney
                                              (Justin Anderson, on the brief), for Preet Bharara,
                                              United States Attorney for the Southern District of
                                              New York.

     Appeal from the United States District Court for the Southern District of New York
(McKenna, J.).

       ON CONSIDERATION WHEREOF, it is hereby ORDERED, ADJUDGED, and

DECREED that the judgment of the district court is AFFIRMED.

       Defendant-Appellant David Rutkoske appeals from a final order of restitution entered by

the Southern District Court for the District of New York (McKenna, J.). On February 23, 2006,

following a two-week trial, a jury convicted Rutkoske of one count of securities fraud and one

count of conspiracy to commit securities fraud, commercial bribery, and wire fraud. On August

15, 2006, the district court to which this action was originally assigned (Casey, J.) sentenced

Rutkoske principally to a term of 108 months in prison and ordered him to pay restitution in the

amount of $12,057,928. On appeal, we affirmed Rutkoske’s conviction but held that the district

court erred in reflexively calculating the loss amount associated with Rutkoske’s crimes by

reference to the total amount lost by Rutkoske’s victims in their transactions with Rutkoske’s

brokerage firm, because those losses could have been caused, at least in part, by factors other

than Rutkoske’s fraud, such as “market forces.” United States v. Rutkoske, 506 F.3d 170, 178,

180 (2d Cir. 2007) (“Rutkoske I”). Accordingly, we remanded to the district court to

“redetermine the amount of the loss, both for purposes of the sentence and resentencing.” Id. at
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179. On remand, the district court (McKenna, J.) held that the Government had failed to

establish any loss amount for purposes of calculating the advisory range under the United States

Sentencing Guidelines (the “Guidelines”), but ordered Rutkoske to pay restitution of $1,616,415,

an amount equivalent to the amount of hidden, excessive commissions that Rutkoske’s firm

charged its customers. We presume the parties’ familiarity with the remaining facts and

procedural history of this case.

       “We review a district court’s order of restitution for abuse of discretion.” United States

v. Lucien, 347 F.3d 45, 52 (2d Cir. 2003). “To identify such abuse, we must conclude that a

challenged ruling rests on an error of law, a clearly erroneous finding of fact, or otherwise cannot

be located within the range of permissible decisions.” United States v. Pearson, 570 F.3d 480,

486 (2d Cir. 2009) (per curiam) (quotation marks omitted). Because determining the proper

level of restitution “requires a delicate balancing of diverse, sometimes incomparable, factors,

some of which not only lack certainty but may indeed be based on mere probabilities,

expectations, guesswork, even a ‘hunch,’” it “makes little sense for an appellate court,

significantly more removed from the case than the district court, to scrutinize [restitution]

decision[s] closely.” United States v. Rossi, 592 F.3d 372, 376 (2d Cir. 2010) (per curium)

(internal quotation marks and brackets omitted).

       Rutkoske argues that the district court erred in ordering restitution because it did not

apply a loss enhancement pursuant to U.S.S.G. § 2B1.1(b) in connection with its calculation of

the applicable sentencing range under the Guidelines. While calculating the “loss amount” for

Guidelines purposes and the “victims’ losses” for restitution purposes are obviously “closely

related” inquiries, United States v. Copus, 110 F.3d 1529, 1537 (10th Cir. 1997), they are not

identical. A sentencing court’s duty to make the two calculations derives from separate statutory
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sources. On the one hand, the Mandatory Victims Restitution Act (“MVRA”) requires courts to

order defendants to “make restitution to the victim of the offense in the full amount of each

victim’s losses as determined by the court,” 18 U.S.C. § 3663A(a)(1) & 3664(f)(1)(A), so as to

“make victims of crime whole, to fully compensate these victims for their losses and to restore

these victims to their original state of well-being,” United States v. Pescatore, 637 F.3d 128, 139

(2d Cir. 2011) (internal quotation marks omitted). The Guidelines, on the other hand, explicitly

link “the offense level for fraud offenses . . . to the harm caused to victims, measured in terms of

monetary loss.” United States v. Byors, 586 F.3d 222, 225 (2d Cir. 2009); see also U.S.S.G. §

2B1.1(b). In other words, the MVRA is intended to compensate victims, while sentencing

enhancements for loss amount under the Guidelines are predicated on the notion that fraudsters

who cause more monetary harm are more culpable and should therefore generally be given

longer terms of imprisonment. As we have held, because “[a] defendant’s culpability will not

always equal the victim’s injury,” United States v. Catherine, 55 F.3d 1462, 1464-65 (9th Cir.

1995) (cited in United States v. Germosen, 139 F.3d 120, 130 (2d Cir. 1998)), “an amount-of-

loss calculation for purposes of sentencing does not always equal such a calculation for

restitution.” Germosen, 139 F.3d at 130; see also, e.g., Catherine, 55 F.3d at 1464-65

(cataloguing the differences in the methodologies for making the calculations for restitution and

loss amount).

       Moreover, in the instant case, it seems clear that the discrepancy between the district

court’s calculation of loss amount under the Guidelines and its restitution order arises from the

simple fact that the Government advocated a theory of loss in connection with its application for

restitution that it had not made in connection with Rutkoske’s sentencing. The Government has

the burden of proving, by the preponderance of the evidence, both the amount of restitution and
                                                 4
the loss amount. See 18 U.S.C. § 3664(e); United States v. Martinez-Rios, 143 F.3d 662, 667 (2d

Cir. 1998). Given that the Government decided to advance different theories of loss in

connection with the two different calculations, the district court did not err in holding that the

Government satisfied its burden of proof as to one calculation but not the other. In other words,

the district court was not obligated to sua sponte consider all possible measures of loss amount;

it operated well within its discretion by simply ruling on the basis of the arguments presented to

it.

       Rutkoske next argues that the district court erred in measuring restitution by reference to

the amount of the hidden, excessive commissions that Rutkoske charged his victims. This

argument also fails. As we recently noted in United States v. Newsom, 399 Fed. App’x 625 (2d

Cir. 2010) (summary order), such a measure of restitution “ accurately (and reasonably)

reflect[ed] the nature of the fraud . . . , which centered on hiding exorbitantly high commission

rates so as to induce investors to buy securities at an inflated price.” Id. at 628; see also

Rutkoske I, 506 F.3d at 173 (noting that brokers at Rutkoske’s firm “received large commissions,

which Rutkoske personally authorized . . . [and which] were not disclosed to clients,” and that

“[f]ollowing an audit by the National Association of Securities Dealers . . . , [Rutkoske’s

brokerage firm] recharacterized the commissions as trading profits and created a new trading

account to track the hidden commissions.”).

       Finally, we reject Rutkoske’s contention that the district court was barred from using the

hidden, excessive commissions charged to Rutkoske’s victims as a basis for measuring

restitution under the “mandate rule,” which “forecloses relitigation of all issues previously

waived by the defendant or decided by the appellate court,” United States v. Quintieri, 306 F.3d
1217, 1225 (2d Cir. 2002). Rutkoske contends that the mandate rule applies here because “[i]n
                                                  5
reviewing the sufficiency of the evidence in the initial appeal, this Court specifically refused to

find that the commissions paid [by Rutkoske’s victims] were excessive.” Appellant’s Br. 6. In

Rutkoske I, however, we determined that “[w]e need not consider [Rutkoske’s] argument . . . that

the evidence was insufficient to establish that . . . brokers [at Rutkoske’s firm] had a duty to

disclose their profits to their customers” because the evidence at trial was sufficient to uphold

Rutkoske’s conviction on the alternate ground that those brokers had made material

misrepresentations to their customers. Rutkoske I, 506 F.3d at 176. Because it is well-

established that “a mandate is controlling only as to matters within its compass . . . [and] does

not extend to issues an appellate court did not address,” New England Ins. Co. v. Healthcare

Underwriters Mut. Ins. Co., 352 F.3d 599, 606 (2d Cir. 2003) (internal citations and quotation

marks omitted), the mandate rule does not apply here.

       We have considered all of Rutkoske’s other arguments and find them to be without merit.

Accordingly, for the foregoing reasons, the judgment of the district court is AFFIRMED.

                                               FOR THE COURT:
                                               CATHERINE O’HAGAN WOLFE, CLERK

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