Feetotalers

United States v. Amato, No. 06-5600-cr (2d Cir. August 21, 2008) (Cardamone, Miner, Pooler, CJJ)

The defendants were the principals of a consulting firm that was purchased by EDS, a much larger company. Their compensation included an incentive plan that promised large bonuses if they helped their clients, financial services firms, avoid losses caused by escheatments. The defendants never met their goals, but devised a successful scheme to deceive EDS into believing that they had.

After a jury trial, the court sentenced both defendants to prison, then conducted a restitution hearing and concluded that they owed $12.8 million in restitution to EDS. This figure included more than $3 million in attorney and accountant fees that EDS had incurred as a result of its participation in the prosecution.

On appeal of this part of the restitution order, the circuit affirmed. It noted that the statute at issue, 18 U.S.C. § 3663A(b)(4) mandates reimbursement to the victim for “lost income and necessary child care, transportation, and other expenses incurred during participation in the investigation or prosecution of the offense or attendance at proceedings related to the offense.” The defendants argued that the phrase “other expenses,” did not include attorney and accountant fees, but the court disagreed, following the “plain language” of the statute.

It rejected several statutory interpretation arguments made by the defendants. First, they claimed that, under the principle of ejusdem generis, “other expenses” had to be limited to losses similar to those enumerated in the statute. Under ejusdem generis, “general terms that follow specific ones are interpreted to embrace only objects of the same kind or class as the specific ones.” But that canon is not applicable here; it is merely a “helpful guide” to legislative intent and is not entitled to “unthinking reliance.” Moreover, it only applies when the specific terms are clearly part of a common class. There is no common attribute of lost income, child care and transportation expenses that would exclude attorney and accountant fees.

The defendants also argued causation, claiming that the fees represented an “indirect” harm to the EDS, while the restitution statute is limited to “direct harm.” The court agreed in principle only. While it is true that the “link between an offense and the resulting restitution award may [not] be ignored,” here the requirement that the expense be a direct and foreseeable consequence of the offense was met.