BOSTON – The U.S. Court of Appeals for the 1st Circuit last Friday waded into a growing circuit split over how tough judges can be on defendants accused of financial fraud.
At issue is whether judges should count people who are reimbursed for financial losses from criminal schemes as victims when deciding whether to increase a defendant’s sentence.
In a pair of opinions, Judge Kermit V. Lipez, writing for unanimous 1st Circuit panels, upheld 72-month sentences for defendants who were accused of stealing debit card numbers, personal identification numbers, credit card numbers, and ultimately money, from customers of Stop & Shop supermarkets in Rhode Island. The cases are United States v. Stephanian and United States v. Ter-Esayan.
Federal sentencing guidelines allow for a sentence enhancement for financial crimes like embezzlement and fraud if there are more than 250 victims. Regarding defendant Mikael Stephanian, Lipez concluded that “the card holders bore the first part of the total losses before the funds were restored” and were unable to access the money the defendants withdrew from their account for a period of time.
“We think the government has the better of the argument,” Lipez wrote. “To begin with, we agree with the government that the most natural reading of the phrase ‘sustain any part of’ in the application notes’ definition of ‘victim’ does not have a tem[p]oral limit or otherwise indicate that losses must be permanent.”
That’s in line with a 2005 ruling by the 11th Circuit in United States v. Lee, which considered reimbursed persons as victims. Lipez wrote that the court was rejecting the position of the 6th Circuit in a case, United States v. Yagar, that account holders did not suffer “actual pecuniary harm” because they got their money back. He noted similar rulings by the 3rd, 5th, 9th and 10 circuits.
Pat Harris of Los Angeles-based Geragos & Geragos, who represented Arman Ter-Esayan in the appeal, said he and his client are disappointed because so many circuits ruled the other way. “There’s a real split in the circuits,” Harris said. “I think at some time the Supreme Court is going to have to take a look at this. When you’ve got this prominent of an issue, at some point there’s going to have to be some clarification.”
Lou Matos, a spokesman with the U.S. Attorneys Office in the District of Rhode Island, said the office was “pleased with the results,” but declined make additional comments.
Stephanian’s attorney Barry E. Schulman of Brooklyn, N.Y. did not return a call for comment.