Restitution In Corporate Criminal Cases: An Underappreciated But Effective Remedy

• Published date: 19 September 2023
• Subject Matter: Corporate/Commercial Law, Criminal Law, Compliance, Corporate and Company Law, Corporate Crime, Shareholders
• Law Firm: Winston & Strawn LLP
• Author: Seth C. Farber, Marcelo Blackburn and Sarah Viebrock

This article was originally published in New York Law Journal. Any opinions in this article are not those of Winston & Strawn or its clients. The opinions in this article are the authors' opinions only.

Victims of corporate misconduct have traditionally relied on civil litigation to force corporate wrongdoers to make them whole. While our civil justice system has been an effective vehicle for compensating victims, that system has drawbacks, including the time and expense involved in litigating a case to conclusion.

However, when corporate misconduct rises to the level of a crime, and when that crime results in a federal criminal conviction, victims have an alternative: an order of restitution as part of the corporate defendant's criminal sentence. As discussed below, victims enjoy several strategic advantages in a restitution proceeding that they do not in civil litigation.

In addition, the time and expense for a victim to pursue a restitution application are generally a fraction of what would be required to litigate a claim. Attractive as the option of a restitution claim may be, pursuing a restitution claim remains a relatively underutilized alternative, likely because victims' rights to restitution, and the procedures for obtaining restitution through the federal criminal justice system, are not widely understood (or at least not as well understood as the procedures for filing and litigating a civil complaint).

This article first explains those restitution rights and the procedures for vindicating them and then discusses the advantages that a restitution application offers. In particular, it begins by outlining the statutory framework for seeking restitution in a criminal proceeding and the common issues that arise within that framework.

The article then explains how the restitution process works in practice and highlights several cases that illustrate the importance of a victim's ability to claim restitution on the victim's own behalf.

Finally, the article discusses a number of advantages of asserting a claim for restitution over filing a civil complaint.

STATUTORY FRAMEWORK FOR SEEKING RESTITUTION IN A CRIMINAL PROCEEDING

The statutory framework for seeking restitution has both substantive and procedural components. A victim's substantive right to restitution can be found in either the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. '3663A, or the Victim and Witness Protection Act (VWPA), 18 U.S.C. '3663. The Crime Victims' Rights Act (CVRA), 18 U.S.C. '3771, which is implemented by the Federal Rules of Criminal Procedure (Fed. R. Cr. P.), provides victims with procedural mechanisms to vindicate their substantive rights.

Altogether, this framework gives victims a roadmap for when and how to assert restitution claims in criminal proceedings.

MVRA: The MVRA requires that a court order restitution payments to victims of specified crimes without consideration of the defendant's economic circumstances. 18 U.S.C. '3663A(a)(1) ("Notwithstanding any other provision of law, when sentencing a defendant convicted of an offense described in subsection (c), the court shall order, in addition to, or in the case of a misdemeanor, in addition to or in lieu of, any other penalty authorized by law, that the defendant make restitution to the victim of the offense or, if the victim is deceased, to the victim's estate.").

There are three primary considerations to determine whether a crime victim qualifies for restitution under the MVRA: (1) whether the defendant committed a qualifying offense; (2) whether the crime victim is a "victim," as defined in the MVRA; and (3) whether the crime victim has suffered physical injury or pecuniary loss. 18 U.S.C. ' 3663A(a)(1), (c)(1)(A), (c)(1)(B)); United States v. Archer, 671 F.3d 149, 169 (2d Cir. 2011).

As to the first issue, the MVRA sets forth the types of offenses which trigger a restitution obligation: (1) crimes of violence as defined in 18 U.S.C. ' 16; (2) offenses against property under Title 18 or under section 416 of the Controlled Substances Act, including any offense committed by fraud or deceit; (3) offenses described in section 3 of the Rodchenkov Anti-Doping Act of 2019; (4) offenses described in 18 U.S.C. '1365 (relating to tampering with consumer products); and (5) offenses under 18 U.S.C. '670 (relating to the theft of medical products). 18 U.S.C. ' 3663A(c)(1)(A).

As to the second issue, the MVRA broadly defines "victim" to mean "a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered including, in the case of an offense that involves as an element a scheme...