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Attorney fees and accounting costs may be included in a restitution order under the Mandatory Victims Restitution Act, the Second U.S. Circuit Court of Appeals ruled on Aug. 21. Deciding a case of first impression, the court said that costs associated with fees and expenses incurred during the victim’s participation in the probe or prosecution of the offense qualify as “other expenses” under the act. The court upheld restitution of nearly $3.1 million in attorney fees and costs ordered by Southern District of New York Judge Laura Taylor Swain against two defendants convicted of fraud: John Fasciana, the legal counsel to FCI Inc., and Joseph Amato, a former shareholder and officer of FCI. Judges Richard Cardamone, Roger Miner and Rosemary Pooler decided the appeal in United States v. Amato, 06-5600-cr. Cardamone wrote for the panel. FCI was a small Manhattan consulting firm that was purchased by Electronic Data Systems Corp. in 1995 and incorporated into the company’s Global Securities Industry Group. Compensation for employees in the group was based on meeting performance targets linked to the group’s ability to help banks and brokerage firms minimize losses from escheatment, the process of turning over unclaimed or abandoned property to the state. Among those under the performance-based compensation scheme were Fasciana, Amato and Michael Reddy, FCI’s chief executive. Fasciana also served as personal attorney to Reddy. Their performance targets were not met, but prosecutors accused the three of pretending to meet them by deceiving Electronic Data Systems in several ways, including creating and submitting false claims to states for the return of escheated funds, recording income for nonexistent fees and misleading company auditors. Reddy died before trial, but Fasciana and Amato were convicted in 2006 of conspiracy to commit wire fraud and substantive mail fraud and wire fraud offenses. Swain sentenced Fasciana to four years in prison and Amato to one year and one day. She also ordered the two men to pay a total of $12.8 million in restitution to Electronic Data Systems, a figure that included the $3.1 million in attorney fees and accounting costs. At the court Cardamone said the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. §3663A, contains a provision requiring district courts to “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.” The term “other expenses,” Cardamone said, must include attorney fees and accounting expenses. “Our conclusion follows from the plain language of the statute,” he said. “That language gives the district courts broad authority to determine which of the victim’s expenses may be appropriately included in a restitution order.” The defendants had argued that only those expenses specifically mentioned in the statute, or ones similar to those specifically mentioned, should qualify: lost income, child care and travel expenses. They invoked the law of statutory construction ejusdem generis, under which Cardamone said “general terms that follow specific ones are interpreted to embrace only objects of the same kind or class as the specific ones.” Cardamone said, “It is true that our interpretation of the statute renders Congress’ reference to a child care and transportation expenses somewhat superfluous,” but the U.S. Supreme Court had “confronted the same dilemma … and did not find it to be a sufficient reason, standing alone, to invoke ejusdem generis” in Ali v. Fed. Bureau of Prisons, 128 S.Ct. 831 (2008). “The court reasoned that Congress might sometimes use specific terms not to limit the succeeding general ones, but instead simply to remove any doubt that the specific terms are included under the statute,” he said. “This reasoning is especially appropriate to §3663A(b)(4), the drafters of which may have feared courts would overlook child care and transportation expenses unless these items were specifically named,” Cardamone said. “Such fears would not likely have extended to attorneys and accounting costs because these expenses are so obviously associated with investigation and prosecution, particularly in the case of fraud offenses.” The court went on to reject the remainder of the defendants’ arguments and uphold both their convictions and the judges’ sentences. Joshua L. Dratel, Renita K. Thukral, Erik B. Levin and Aaron Mysliwiec represented Amato. Dratel said he will be consulting with his client to determine the next step, but he feels the restitution issue is one that the U.S. Supreme Court may be interested in considering. “It should be cert worthy because, even as the Second Circuit noted, the other circuits are all over the map on this. Either they haven’t taken a position or they have issued contradictory opinions.” Brian C. Wille and Usman Mohammad of Kostelanetz & Fink represented Fasciana. Assistant U.S. Attorneys Marcus A. Asner and Katherine Polk Failla represented the government.

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