Lagos v. United States: Mandatory Victims Restitution Act does not require defendants to reimburse victims for expenses incurred in private investigations or civil proceedings
Sergio Fernando Lagos was convicted of defrauding General Electric Capital Corp. out of millions of dollars. GE spent about $5 million to privately investigate and discover the fraud, and participate in bankruptcy proceedings relating to it. Most of the $5 million was spent on accountants, consultants and attorneys.
The District Court ordered Lagos to reimburse GE for $5 million under 18 U.S.C. Sec. 3663A(b)(4), which provides that a defendant shall reimburse the victim for lost income, 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 Fifth Circuit affirmed.
But in a unanimous opinion, the Supreme Court reversed, and held that the expenses to be reimbursed “are limited to government investigations and criminal proceedings.”
The issue is primarily one of statutory construction, the Court said.
“The word ‘investigation' is directly linked by the word ‘or' to the word ‘prosecution,' with which it shares the article ‘the.' This suggests that the ‘investigation[s]' and ‘prosecution[s]' that the statute refers to are of the same general type,” the Court said. “And the word ‘prosecution' must refer to a government's criminal prosecution, which suggests that the word ‘investigation' may refer to a government's criminal investigation.”
A similar analysis applies to the word “proceedings,” the Court said.
The Court also considered the broader statute's reimbursement for lost income, child care and transportation. These are “precisely the kind of expenses that a victim would be likely to incur when he or she (or, for a corporate victim like GE, its employees)” miss work to talk to government investigators or attend criminal proceedings.
“At the same time, the statute says nothing about the kinds of expenses a victim would incur when private investigations, or, say, bankruptcy proceedings are at issue,” the Court said.
The Court rejected the Government's argument that Lagos should be required to reimburse GE for the expenses because GE shared the results of its private investigation with the Government.
“The short, conclusive answer to that claim, however, lies in the fact that the statute refers to … other expenses incurred during participation in the investigation or prosecution of the offense,” the Court said. “It does not refer to expenses incurred before the victim's participation in a government's investigation,” which is what Lagos was ordered to pay GE.
The Court noted, however, that it was not deciding whether the MVRA would cover expenses incurred during private investigation that was pursed at the Government's request.
The Court said that GE is not without recourse. It may sue Lagos civilly to recover the full extent of its losses.