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Category: Restitution

AOL Outlaw Must Bear the Burden of Proving Who Pays the Price

On January 9, 2018, the Second Circuit (Kearse, Cabranes, Wesley) rejected a request by ex-AOL Inc. employee Jason Smathers to junk the restitution component of his sentence, which requires him to recompense the online service provider for the losses it incurred after Smathers sold 92 million AOL screen names to spammers in the early 2000s—one of the earliest large-scale data security breaches of the Internet age.  Smathers argued that his restitution award should be offset by damages later obtained by AOL in litigation against Smathers’s co-conspirators.

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Second Circuit Finds Death Extinguishes Trial Convictions and Related Restitution Order – But Tax Offenses and Bail Forfeiture Survive

In 2010, a federal jury in the Eastern District of New York convicted body-armor tycoon David H. Brooks of multiple counts of conspiracy, insider trading, fraud, and obstruction of justice for his role in a $200 million scheme to enrich himself from company coffers.  Brooks was the founder and former chief executive of DHB Industries, the leading supplier of bulletproof vests to police departments and the U.S. military.  Brooks later pleaded guilty to associated charges of conspiracy to defraud the IRS and filing false income tax returns that had been severed from the rest of the case.  While he appealed the result of his jury trial, he did not appeal the tax fraud convictions (pursuant to the terms of a plea agreement).  Brooks died in prison while his appeal was pending, forcing the Second Circuit to revisit an obscure area of law to decide what aspects of his convictions, if anything, survived his death.  Ultimately, Brooks’s death in prison led to the abatement of his trial convictions, and with that abatement, the erasure of significant restitution obligations that Brooks otherwise would have owed.

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Second Circuit Holds that District Court Orders Determining Restitution Credits are Final, Appealable Orders

In United States v. Yalincak, No. 11-5446 (2nd Cir. Apr. 10, 2017) (Calabresi, Raggi, Lynch), the Second Circuit addressed a complicated issue of appellate procedure in the course of a decision on the law of restitution.  Specifically, the Court weighed in on when a district court’s order crediting a defendant funds against his restitution obligations becomes a final, appealable order that cannot be revisited by the district court.

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