Second Circuit Criminal Law Blog

Second Circuit Concludes that Restitution Includes Losses from Wire Fraud Scheme that Occurred Outside the Limitations Period

In United States v. Parnell, 19-649-cr (May 19, 2020), the Second Circuit (Hall, Lohier, Park) affirmed a judgment ordering the defendant-appellant to pay restitution for the total amount of losses resulting from her crime of wire fraud, including losses that occurred outside the limitations period.

Between 2010 and 2016, Parnell—a former nurse at a Veterans Affairs hospital—submitted false expense-reimbursement forms totaling $72,207.16 to the Office of Worker’s Compensation Program.  Parnell was indicted in 2017 on several counts of wire fraud and pled guilty in 2018.  The statute of limitations for wire fraud is five years and the counts in the indictment related to false reports filed within that five-year period, which totaled only $2,269.64.  As part of her sentence, the United States District Court for the Northern District of New York (Hurd, J.) ordered Parnell to pay $72,207.16 in restitution, reflecting the total amount of fraudulent claims submitted by Parnell since 2010.

On appeal, Parnell argued that restitution was limited to losses that occurred within the five-year statute of limitations.  The Second Circuit disagreed with Parnell’s argument.  The Mandatory Victims Restitution Act of 1996 (“MVRA”), 18 U.S.C. § 3663A, requires the district court to “make restitution to the victim of the offense.”  Where the offense involves as an element a “scheme, conspiracy or pattern of criminal activity,” the statute defines a “victim” entitled to restitution as “any person directly harmed by the defendant’s criminal conduct in the course of the scheme, conspiracy or pattern.”  An element of the offense of wire fraud is indeed a “scheme or artifice to defraud.”

Joining several other Circuits to have addressed the issue,[1] the Court concluded that, based on the plain meaning of the MVRA, restitution includes losses that arose from criminal conduct in the course of a scheme, even if some of those losses occurred outside the statute of limitations period, as long as those losses are attributable to the same underlying scheme and at least part of that scheme falls within the statute of limitations.  In Parnell’s case, the improper reimbursements between 2010 and 2016 resulted from a single scheme comprised of a repeated pattern of conduct.  In addition, part of the scheme to which Parnell pled guilty fell within the limitations period.  The Court therefore concluded that the district court properly ordered Parnell to pay $72,207.16 in restitution, the total amount of losses resulting from Parnell’s scheme to defraud.  Defendants should therefore be aware that where the alleged crime involves a scheme or pattern of criminal activity, the victim may be able to obtain restitution for losses that occurred well outside the statute of limitations.  The Court took care not to resolve the question of whether wire fraud is a continuing offense.  The district court so ruled, but the panel concluded that it was not necessary to address this issue given its ruling that the MVRA permitted the order of restitution.

A footnote in the Court’s opinion offers a word of caution to defense counsel as well.  In addition to the restitution order, the district court entered a forfeiture money judgment for the same amount, which Parnell argued was also improper.  The notice of appeal, however, stated simply that it challenged “THE AMOUNT OF RESTITUTION ONLY.”  Because the Court’s jurisdiction is limited by the notice of appeal, the Court concluded that it lacked jurisdiction to consider the argument regarding the forfeiture order.  It may be safer practice to simply state on the notice of appeal that the defendant is challenging the “judgment” or the “conviction and sentence,” something that identifies the judgment being appealed but is broad enough to preserve all potential issues until the defendant perfects the appeal.  Limiting the scope of the appeal in the notice restricts the jurisdiction of the appellate court and its ability to hear argument on other, perhaps meritorious issues (as may have been the case here).

To be sure, the defendant did plead guilty to the offense and she admitted that her criminal conduct predated the period of time covered by the indictment.  However, it is somewhat anomalous for the government to be able to charge only $2,200 in the indictment due to the statute of limitations, and then to use this relatively modest, timely charge to receive $72,000 in restitution.  As the Court held, the operation of the MVRA allows the government to go beyond the statute of limitations with respect to this aspect of sentencing.

by Elena Steiger Reich and Harry Sandick

[1] See United States v. Ellis, 938 F.3d 757, 763–65 (6th Cir. 2019); United States v. Anieze-Smith, 923 F.3d 565, 573–75 (9th Cir. 2019); United States v. Dickerson, 370 F.3d 1330, 1341–42 (11th Cir. 2004); United States v. Williams, 356 F. App’x 167, 170 (10th Cir. 2009).