SERGIO FERNANDO LAGOS v. UNITED STATES
Supreme Court of the United States, Breyer, May 29, 2018,
Restitution (Federal) – The Mandatory Victims Restitution Act (MVRA) does not authorize restitution for private investigations conducted by a victim prior to law-enforcement action
Facts:
Lagos used a company that he controlled to defraud GE Capital out of tens of millions of dollars.
Eventually, the scheme came to light and Lagos’ company went bankrupt. GE Capital conducted a private investigation and participated in the bankruptcy proceedings.
GE turned over the results of its investigation to government officials and Lagos was criminally charged in federal court.
Lagos pled guilty to Wire Fraud and the judge ordered him to pay restitution. Part of this restitution order required Lagos to pay $5 million for expenses that GE incurred as part of its private investigation and its participation in the bankruptcy proceedings.
Lagos appealed to the 5th Circuit, which upheld the order.
Lagos requested review by the Supreme Court, arguing that the Mandatory Victims Restitution Act only covers expenses related to the criminal investigation and prosecution.
Held: The Supreme Court agreed. GE’s investigation occurred prior to law-enforcement involvement and its participation in the bankruptcy was unrelated to the criminal case. Therefore, restitution was inappropriate.
Restitution – The MVRA requires that restitution be ordered to “reimburse the victim for… expenses incurred during participation in the investigation or prosecution of the offense…”
Restitution – “Participation in the investigation or prosecution of the offense” is limited to expenses incurred during participation in government investigations and criminal proceedings
Restitution – Pre-Criminal Investigation – A victim can’t be reimbursed for “preparticipation expenses” resulting from a preliminary investigation before law-enforcement became involved
From the Case: “This interpretation does not leave a victim such as GE totally without a remedy for additional losses not covered by the Mandatory Victims Restitution Act. GE also brought a civil lawsuit against Lagos for the full extent of its losses, and obtained an over-$30 million judgment against him. The Government says that GE has largely been unable to collect on that judgment, but there is no reason to think that collection efforts related to a criminal restitution award would prove any more successful.” The Court noted in general that “more than 90% of criminal restitution is never collected.”