A federal judge has vacated a $5.4 million restitution order against a disbarred Long Island attorney, faulting the Eastern District U.S. Attorney’s Office for not identifying specific victim losses and the defendant’s lawyer for his failure to protest the assessment.
"The government has continually failed to produce evidence that would satisfy the requirements pertaining to identification of victims and accounting of their respective losses as required" under the Mandatory Victims Restitution Act, Eastern District Judge Arthur Spatt (See Profile), sitting in Central Islip, wrote in Carnesi v. United States, 11-cv-1044.
Moreover, Spatt observed, the "deficiencies" in the restitution order clearly violated the act, "and therefore, a rational defendant would want to seek an appeal. As such, the Petitioner’s defense-counsel violated his constitutionally-imposed duty to consult with his client about appealing" the restitution order.
Though granting Kenneth Carnesi’s petition for a writ of error coram nobis, Spatt said he would reinstate restitution within 60 days of the March 18 decision if Eastern District prosecutors submitted sufficient evidence on victims’ identities and amounts owed.
"The Government will be granted no additional opportunities to produce this evidence," the judge added.
From 1986 to 2001, Carnesi, a former attorney and president of business consulting firms, conspired with a counterpart in London to defraud European small businesses through the sale of bogus securities and fraudulent insurance offers.
In April 2004, he pleaded guilty before Spatt to conspiracy to commit money laundering.
The Appellate Division, Second Department, disbarred him in November 2004, accepting his resignation in the face of a pending disciplinary probe.
A presentence report noted that the prosecution had not yet provided information on names and addresses of victims or their losses, saying restitution should not be ordered where victims went unidentified.
As codified in 18 U.S.C. 3663A, the Mandatory Victims Restitution Act applies where "an identifiable victim or victims has suffered a physical injury or pecuniary loss."
Victims’ losses have to be determined and an order of restitution entered no more than 90 days after sentencing, according to 18 U.S.C. §3664(d)(5).
Here, the U.S. attorney’s office said at sentencing it had a list of almost 70 victims, most living in Mexico or Europe. The prosecution said it had notified victims of the sentencing but they could not attend. It recommended restitution, with the Probation Department being given individual victim particulars after sentencing in order to distribute any monies.
Carnesi said at the sentencing he was satisfied with his representation by J. Bruce Maffeo, who had his own firm at the time but is now with Cozen O’Connor. Spatt noted Maffeo "voiced no opposition" to the restitution order and neither Carnesi nor Maffeo appealed his imposition of restitution.
Carnesi was then sentenced to 70 months incarceration and 36 months of supervised release. Restitution was ordered to start 60 days after his release from prison in March 2012.
In November 2006, Carnesi filed a pro se habeas petition to vacate the order because of Maffeo’s alleged ineffective assistance of counsel by not appealing the order or taking steps such as calling for a hearing to determine victim identities and amounts owed.
Spatt denied the action. His ruling included the reasoning that a habeas petition could not be used solely to challenge restitution orders and that the order was "not so burdensome" that it restrained Carnesi’s liberty.
While still incarcerated, Carnesi in March 2011 filed the current pro se action seeking the order’s vacatur because the court failed to identify victims and amounts owed, as mandated. In the alternative, Carnesi pressed an ineffective assistance of counsel claim seeking either a retroactive grant of his right to appeal the order or a resentencing with a lawyer present.
Carnesi said in his petition he was not looking to "avoid or vitiate his obligation to pay restitution to any victim of his crime" and was "committed to making whatever reparations are required…based upon his legal and moral obligation to atone for his wrongdoing." But Carnesi said he was seeking a "clarification" on the order "pursuant to the dictates" of the Mandatory Victims Restitution Act.
The prosecution opposed the writ. The affidavits of loss had been mailed to government-identified victims, with copies of the mailings sent to the Probation Department, prosecutors said. Though the mailings were not done until after Carnesi’s sentencing, it was before restitution was due, prosecutors continued, thereby making the time lag "harmless error."
Spatt then asked for more information from the government, which produced information under seal that showed about 55 victim loss affidavits were emailed to victims in 2008. But the government noted it could not locate victim correspondence because the employee assigned to the task left the office in 2009. Moreover, other law enforcement agents who were on the case either had retired or were transferred.
Spatt noted he independently confirmed the Probation Department and Eastern District clerk’s office could not identify the victims or amounts owed.
In his decision, Spatt said he had to weigh three factors in the writ application: if the circumstances were "compelling…to achieve justice," if there were "sound reasons" why earlier relief was not sought, and if the petitioner would suffer "legal consequences" that could be remedied with the writ.
He noted the restitution payments and threat of incarceration for non-compliance established the "legal consequences" Carnesi faced.
Carnesi asserted the "sound reason" for not seeking earlier relief was the ineffective legal representation he received from Maffeo, who should have been aware of the procedural requirements for a restitution order under the Mandatory Victims Restitution Act—a point Spatt agreed with, calling the order’s flaws "obvious violations" of the statute.
Turning to the question of "compelling" circumstances, Spatt pointed to the government’s inability so far to provide identities and amounts owed. For instance, when he asked for more information under seal, "the Government only submitted a victims list, but not each victim’s actual loss."
Spatt also said that by ordering a lump sum restitution, he "erroneously delegated" authority to the Probation Department to determine amounts owed to each victim.
Nevertheless, the judge offered the government the 60 days to comply because failure to determine identifiable victim loss within 90 days of sentencing was "harmless error," he said.
Carnesi could not be reached for comment.
"Mr. Carnesi received a substantial reduction in his sentence… His focus and mine at the time of sentence were to limit his exposure to jail, which we succeeded in accomplishing," said Maffeo.
Eastern District Assistant U.S. Attorney Burton Ryan Jr. appeared for the government.
A spokesman said the U.S. attorney’s office is reviewing the decision and declined further comment.
@|Andrew Keshner can be contacted at firstname.lastname@example.org.