Restitution order reversed for procedural error at fraud scheme sentencing

In U.S. v. Edwards, the defendant was convicted of wire fraud, mail fraud, and money laundering arising out of an investment scheme in which Edwards promised investors astronomical returns of 75% to 800 %. Edwards claimed to own the First National bank of Georgia and he pitched his investment scheme by packaging it as a special investment scheme reserved for high net worth investors. Edwards told his victims that he could allow multiple small investors to pool their money and access these investments through his banking connections. He guaranteed the high yields were completely risk free because the money was only pledged and would never leave the bank he owned. In reality, the investment proceeds were used by Edwards in this federal white collar crime for extravagant personal expenditures including houses, cars and cruises.

Edwards was convicted following trial. His presentence report recommended restitution of $6,820,620 for victims. On appeal Edwards challenges his restitution order claiming the trial court should have asked the court to consider his dependents and financial condition in determining the amount of restitution. Second, he claimed the court should not have included in the restitution amount restitution to victims whose counts were dismissed at trial, and third the trial court should not have included restitution for losses to a victim for an unrelated real estate investment scheme.

The court of appeals held that the trial court did not err in imposing the full restitution without considering Edward’s financial condition. It held the trial court is prohibited from considering Edwards financial resources when determining the amount of restitution under the Mandatory Victim Restitution Act (MVRA), which expressly requires the court to grant the “full amount of restitution.”

The court held that the trial court was correct in imposing restitution for a particular victim who was enticed to invest in a real estate transaction that was unrelated to the scheme charged in the indictment. Restitution may be ordered for a victim of an offense that does not result in a conviction. The court has authority to impose restitution for acts of related conduct for which the defendant was not convicted. The district court’s was upheld because the record shows the district court found the scheme was similar.

The court of appeals did reverse a restitution order to a particular group of victims “the Reece victims” because the district court failed to follow procedure for imposing restitution as to this group. The Reece victims were not mentioned in the presentence report. It only mentioned an amount of $850,000 to investor named Reece but gave no information about the four other alleged victims. The decision by the probation officer to transfer restitution from Reese to the other four alleged victims was not communicated to the court until the day before sentencing and was never communicated to Edwards. Furthermore the government failed to prove at sentencing that these individuals who were alleged victims were actually victims. Because the court of appeals found a procedural error, the court exercised its discretion in remanding the case to the district court for a hearing to determine whether the victims are entitled to restitution.