The Second Circuit previously took a broad view of the Mandatory Victims Restitution Act (MVRA), a federal law that factors into the sentencing of persons convicted of certain crimes. That broad view of the statute, however, would eventually collide with a portion of an intervening Supreme Court opinion that unanimously set forth some limiting principles for applying the MVRA. This latest decision by the Second Circuit applied those principles and concluded that a victim can still be reimbursed for attorney fees in appropriate matters but that reimbursement is unavailable for a victim’s participation in a civil SEC investigation. The case was ultimately remanded to the district court for further proceedings consistent with the Second Circuit’s revised interpretation of the MVRA (U.S. v. Afriyie, Pooler, R., February 25, 2022).
John Afriyie’s employer, MSD, participated in aiding another fund to obtain financing for the acquisition of ADT Corporation. MSD provided its employee with warnings about receiving confidential information about the proposed deal while also reminding its employees of the firm’s insider trading policy. Afriyie engaged in insider trading in violation of those policies and federal securities laws and, at one point, even impersonated his mother, in whose name he changed certain of his brokerage accounts, when talking to his broker. Afriyie was convicted of criminal securities fraud and wire fraud and separately found liable for civil securities fraud in a proceeding brought by the SEC.
The questions addressed by the Second Circuit regarding Afriyie’s restitution order involved the scope of MSD’s reimbursement under the MVRA for its expenses incurred in responding to the various government investigations of Afriyie. Specifically, the opinion addressed the attorney fees charged by Sullivan & Cromwell for aiding MSD with the U.S. Attorney’s Office’s and the SEC’s investigations, preparation of multiple MSD witnesses for trial testimony, and with representing MSD in post-verdict restitution proceedings.
Criminal procedure background. The MVRA, 18 U.S.C. §3663A, provides that, when imposing a sentence, a federal court also must order that a defendant who has been convicted of certain statutorily enumerated offenses make restitution to the victim or to the victim’s estate if the victim is deceased. Moreover, the statute allows a court to order that a victim be compensated for certain types of expenses. According to the statute: “The order of restitution shall require that such defendant- *** (4) in any case, reimburse the victim for lost income and 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.” Emphasis has been added to indicate the key words and phrases addressed by the Second Circuit’s opinion.
With respect to Afriyie’s insider trading case, the Second Circuit noted that it had previously held that “other expenses” included a victim’s attorney fees and that the statute applied to expenses incurred from privately investigating a defendant. However, an intervening Supreme Court opinion (Lagos v. U.S., 2018) interpreted the words “investigation” and “proceedings” and concluded that the statute should be limited to reimbursement for a victim’s participation in government investigations and criminal proceedings.
That left two questions for the Second Circuit to decide regarding Afriyie’s restitution order: (1) Post-Lagos, does “other expenses” still allow a victim to be reimbursed for attorney fees? and (2) Can a victim be reimbursed for participating in an SEC investigation? Footnote one to the Second Circuit’s opinion noted some dispute over whether criminal securities fraud charged under Title 15 (there also is a similar securities fraud crime under Title 18) is a covered offense for purposes of the MVRA, but the court sidestepped this issue because the parties did not raise it and because Afriyie was also convicted of wire fraud, which is a covered offense.
Attorney’s fees. The Second Circuit quickly rejected several arguments Afriyie made in opposition to an order of attorney’s fees. First, the court declined to allow Afriyie to reopen old arguments from another case (that had likewise rejected them) that the cannons of statutory construction require a holding that attorney’s fees are not similar enough to the specified expenses for child care and transportation to count as “other expenses” under the MVRA. The court instead concluded that attorney’s fees are implied by the MVRA and that attorney’s fees would fit within the statutory language, which refers to “necessary... expenses incurred.” The court further rejected Afriyie’s argument that the need for a court to review lengthy legal bills functioned as an administrative burden that counseled against allowing reimbursement of attorney’s fees.
SEC investigation. The Second Circuit held that the MVRA and Lagos disallow reimbursement for expenses incurred during civil investigations. The district court had concluded that such expenses were reimbursable because the civil SEC investigation of Afriyie was “parallel, coextensive, and symbiotic” with the U.S. Attorney’s Office’s criminal investigation of Afriyie.
The Second Circuit explained that this question of first impression could be resolved by looking closely at the language of the MVRA and Lagos, that is: an investigation and prosecution are of the same general type, which means that “prosecution” refers to a criminal prosecution and “investigation” likewise refers to a criminal investigation, which in turn means that for purposes of the MVRA and Lagos, Afriyie’s restitution order must be limited to the criminal investigation and criminal prosecution conducted by the U.S. Attorney’s Office.
The Second Circuit also noted that in the pre-Lagos world, it might have agreed with the district court, but that Lagos had made it clear that the MVRA should be narrowly construed. But the Second Circuit also noted that Lagos spoke only of “government investigations” and not criminal investigations; here, the panel cited dicta in Lagos that suggested the panel’s conclusion that “government investigations” should be understood to mean criminal investigations. Moreover, the panel said the MVRA is located within the criminal title of the U.S. Code and the MVRA applies in criminal sentencings, both facts leaning in favor of the panel’s interpretation.
After rejecting several other arguments in favor of the district court’s view, the panel offered one bit of practical advice: on remand the district court will have to parse Sullivan & Cromwell’s timesheets to separate out attorney’s fees allocable to the SEC’s investigation and the U.S. Attorney’s Office’s criminal investigation and prosecution.
The case is No. 20-2269-cr.
With respect to Afriyie’s insider trading case, the Second Circuit noted that it had previously held that “other expenses” included a victim’s attorney fees and that the statute applied to expenses incurred from privately investigating a defendant. However, an intervening Supreme Court opinion (Lagos v. U.S., 2018) interpreted the words “investigation” and “proceedings” and concluded that the statute should be limited to reimbursement for a victim’s participation in government investigations and criminal proceedings.
That left two questions for the Second Circuit to decide regarding Afriyie’s restitution order: (1) Post-Lagos, does “other expenses” still allow a victim to be reimbursed for attorney fees? and (2) Can a victim be reimbursed for participating in an SEC investigation? Footnote one to the Second Circuit’s opinion noted some dispute over whether criminal securities fraud charged under Title 15 (there also is a similar securities fraud crime under Title 18) is a covered offense for purposes of the MVRA, but the court sidestepped this issue because the parties did not raise it and because Afriyie was also convicted of wire fraud, which is a covered offense.
Attorney’s fees. The Second Circuit quickly rejected several arguments Afriyie made in opposition to an order of attorney’s fees. First, the court declined to allow Afriyie to reopen old arguments from another case (that had likewise rejected them) that the cannons of statutory construction require a holding that attorney’s fees are not similar enough to the specified expenses for child care and transportation to count as “other expenses” under the MVRA. The court instead concluded that attorney’s fees are implied by the MVRA and that attorney’s fees would fit within the statutory language, which refers to “necessary... expenses incurred.” The court further rejected Afriyie’s argument that the need for a court to review lengthy legal bills functioned as an administrative burden that counseled against allowing reimbursement of attorney’s fees.
SEC investigation. The Second Circuit held that the MVRA and Lagos disallow reimbursement for expenses incurred during civil investigations. The district court had concluded that such expenses were reimbursable because the civil SEC investigation of Afriyie was “parallel, coextensive, and symbiotic” with the U.S. Attorney’s Office’s criminal investigation of Afriyie.
The Second Circuit explained that this question of first impression could be resolved by looking closely at the language of the MVRA and Lagos, that is: an investigation and prosecution are of the same general type, which means that “prosecution” refers to a criminal prosecution and “investigation” likewise refers to a criminal investigation, which in turn means that for purposes of the MVRA and Lagos, Afriyie’s restitution order must be limited to the criminal investigation and criminal prosecution conducted by the U.S. Attorney’s Office.
The Second Circuit also noted that in the pre-Lagos world, it might have agreed with the district court, but that Lagos had made it clear that the MVRA should be narrowly construed. But the Second Circuit also noted that Lagos spoke only of “government investigations” and not criminal investigations; here, the panel cited dicta in Lagos that suggested the panel’s conclusion that “government investigations” should be understood to mean criminal investigations. Moreover, the panel said the MVRA is located within the criminal title of the U.S. Code and the MVRA applies in criminal sentencings, both facts leaning in favor of the panel’s interpretation.
After rejecting several other arguments in favor of the district court’s view, the panel offered one bit of practical advice: on remand the district court will have to parse Sullivan & Cromwell’s timesheets to separate out attorney’s fees allocable to the SEC’s investigation and the U.S. Attorney’s Office’s criminal investigation and prosecution.
The case is No. 20-2269-cr.