Sunday, February 27, 2011

Restoration Comedy

United States v. Pescatore, No. 10-0520-cr (2d Cir. February 23, 2011) (Kearse, Winter, Hall, CJJ)

In connection with a plea agreement that covered both a long-running chop-shop operation and an extortion scheme, Michael Pescatore agreed to accept a 132 month sentence, a $2.5 million forfeiture and “no less than $3 million” in restitution. The agreement specified that the prosecutors would recommend that the forfeited assets be transferred to the victims, a process known as “restoration,” but that the ultimate decision lay with the Department of Justice, which would “make its decision in accordance with applicable law.”

At Pescatore’s 2008 sentencing, the court imposed the agreed-upon sentence, including $3 million in restitution, to be paid in full by the end of 2009. The written Judgment reflected this order, but did not contain the names of the victims to whom Pescatore owed restitution or the amounts to which they were entitled. In early 2009, the government wrote to the district court and asked it to correct the Judgment to incorporate the victim-loss tables in the PSR, and the court granted the motion, filing an amended Judgment that incorporated this information.

In April of 2009, the government notified Pescatore that the DOJ had denied the restoration request. Six months later, he moved in the district court for “specific performance” of the restoration portion of the plea agreement, and also sought to be relied from the $3 million in restitution, arguing that the total loss to his victims was less than that amount. The district court held a hearing on these applications in January of 2010 and denied them both. It noted that Pescatore had not made any restitution payments even though the deadline had passed, and gave him thirty days to pay the $3 million. Pescatore then sought a stay of the restitution order from the circuit, which denied it. But he still never paid the money.

On appeal, Pescatore pursued these same claims. The circuit affirmed but, because it was true that the total loss to the victims was less than $3 million, the court remanded the case for further proceedings.

The court first found no merit to Pescatore’s complaint about the government’s decision to retain the forfeited assets instead of restoring them to his victims. The statute, 18 U.S.C. § 981(e), permits the Justice Department to do either based on an exercise of its own discretion. And there was nothing in Pescatore’s plea agreement that placed any constraints on that discretion. The line prosecutors were obligated only to “recommend” restoration, which they did, and the promise that the DOJ would act “in accordance with applicable law” was not a “promise to grant restoration so long as it is not prohibited.” Without deciding whether this type of decision is subject to judicial review, the appellate court noted that the government had put on the record a reason for the refusal - Pescatore “actually does have assets” - and that Pescatore did not contest this.

As for restitution, the circuit agreed that the true amount of the loss to Pescatore’s victims was not $3 million, it was more like $2.56 million, and rejected the government’s claim that the amended Judgment was already in this amount. While the amended Judgment incorporated the PSR’s victim-loss tables, those tables did not contain a total, and the total amount specified in the amended Judgment remained at $3 million.

But, because Pescatore did not object to this amount when he was originally sentenced, the circuit reviewed only for plain error and concluded that he met only three of the four parts of the plain error test. The incorrect restitution amount was an “error,” that was “plain,” and affected Pescatore’s “substantial rights.” But it did not “seriously affect the fairness, integrity or public reputation” of the proceedings because, as far as the circuit was concerned, Pescatore simply “flouted” the restitution order by refusing to comply with it without obtaining a stay.

Even after the circuit denied his application for a stay, he made no effort to expedite the appeal. To the contrary, he missed two filing deadlines that resulted in dismissals and reinstatements. His “election” to “disobey the Judgment” therefore caused him to flunk final prong of the plain error test.

Even so, the court sent the case back for further proceedings. Pescatore must now pay the full $3 million, and will be subject to statutory interest and financial penalties as a result of his tardiness. If the total of the principal, interest and penalties is less than $3 million he will be entitled to a refund of the difference.


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