The United States Supreme Court chimed in this week to end the circuit split over the interpretation of the Mandatory Victims Restitution Act. The act requires individuals convicted of certain federal offenses to reimburse individuals who participate in the criminal investigation and prosecution for some reasonable costs related to the participation.
However, recently, the Fifth Circuit held that a private lender that spearheaded a $4 million investigation after a company they worked with filed for bankruptcy was entitled to restitution for those costs. Meanwhile, the D.C. Circuit in a different case had found that these costs were not eligible for restitution under the MVRA. SCOTUS sided with the D.C. Circuit, reversing the Fifth, and putting the circuit split to rest.
The Civil Criminal Distinction
After Sergio Fernando Lagos was convicted of defrauding the General Electric Capital Corporation out of more than $10 million, the federal district court ordered that he repay the money, plus the costs of the private lender's own (expensive) forensic investigation.
As Justice Breyer noted in the unanimous opinion, the big distinction to be drawn in the Lagos v. United States matter was between the civil and criminal phases of the case. Before the criminal prosecution began, Lagos was in bankruptcy, a civil proceeding. During that proceeding, the private lender whom he was later accused of defrauding, paid for the forensic investigation, which they later shared with the government.
Additionally, the Court explained that the language of the MVRA specifically called for restitution for rather specific expenses related to an individual's personal losses for participating in an investigation or trial, such as daycare and transportation costs, and lost income. That the information learned from the private investigation was shared with the government, Justice Breyer explained, would not justify including those costs in the narrow categories provided in the MVRA.