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Federal statutory rights of crime victims and how they are not being implemented:
a pronouncement made to Congress on June 8 by Senator Kyl, sponsor of the Crime Victims Rights Act
by Brenda Grantland 6-9-2011
(c) 2011, Brenda Grantland, Esq.
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Senator Kyl's letter to Attorney General Holder, read into the Congressional Record yesterday, June 8, 2011 can be read in its entirety here.
In essence what Senator Kyl said yesterday echos what we have been saying all along in Ritchie Capital Management's victim motions in the Thomas Petters fraud case: some
federal courts are not implementing the Crime Victims Rights Act, and
the Department of Justice is not doing its statutorily mandated duty of
using its best efforts to make sure the law is enforced, but instead is
litigating against crime victims when they try to assert their
statutory rights.
First, a little background for those of you who haven't followed the Petters case.
The Minnesota federal fraud case against Thomas Petters and his co-conspirators was reputedly the biggest
federal Ponzi scheme prosecution in U.S. history when the news first
broke in October 2008 -- until news of the Bernard Madoff Ponzi scheme
case kicked it off the charts a few weeks later.
Thomas
Petters had developed his reputation as an astute businessman in
the wholesale “diverting” industry, which basically means buying
large quantities of consumer merchandise at a discount and reselling it
to retail sellers at a profit. Petters' fraudulent conduct
involved
borrowing huge sums of money, often on the pretext that the money would be used to finance the purchase
of wholesale quantities of consumer goods which his company PCI
allegedly resold
to big box retailers. As it was later revealed Petters and his
co-conspirators were using funds borrowed from one lender to pay
debts owed other lenders. Petters had built a reputation as a
successful businessman in the wholesale diverting industry over many
years, but
for the last decade Petters and his conspirators were only pretending
that PCI was buying consumer products at cut rate prices and reselling
them to retailers at a profit. He and his coconspirators were
creating
phony invoices and other documentation to show lenders, and wiring
large sums back and forth between PCI bank accounts and the accounts of
other co-conspirator's companies to create the appearance that products
were
being bought and resold.
When Petters was indicted, all of his assets and his codefendants
assets and their companies' assets were frozen. In actuality
these were all assets belonging to the victims, if it was a Ponzi scheme as the
government charged. Nevertheless a receiver was appointed, and a
litigation stay was imposed preventing all creditors and victims from
suing Petters, his codefendants, or any of their companies. All
of the assets being managed by the court appointed Receiver went into a
fund purportedly being held "to pay victim restitution" back
in October 2008. Since then that fund has been used to pay the
attorneys and other professions hired by the Receiver (at a cost of
over $1.2 million per month for the receivership case alone.
Total legal and professional fees spent in all receivership and
bankruptcy cases now exceed $49 million since October 2008).
Today, almost 3 years later, Petters' victims have not yet been paid
anything at all in restitution, and most of them have still received nothing from the bankruptcy courts.
Despite this grim performance, victims of the Thomas Petters fraud scheme -- as well as all victims of federal crimes -- have actual rights in the criminal justice process, under two federal statutes. The Mandatory Victim Restitution Act of 1996 and the Crime Victims Rights Act of 2004
made revolutionary changes in the way business is done in criminal
cases -- or that's what the statutes do when they are enforced by
the courts. Although these statutes are the law of the land, they are not
being enforced in some courts, as victims discovered in the Petters case.
Crime Victims' Rights Act of 2004
18
U.S.C. § 3771(a) gives federal crime victims these specific rights:
(1) The right to be reasonably
protected from the accused.
(2) The right to reasonable, accurate, and timely notice of
any public court proceeding, or any parole proceeding, involving the crime or
of any release or escape of the accused.
(3) The right not to be excluded from any such public court
proceeding, unless the court, after receiving clear and convincing evidence,
determines that testimony by the victim would be materially altered if the
victim heard other testimony at that proceeding.
(4) The right to be reasonably heard at any public proceeding
in the district court involving release, plea, sentencing, or any parole
proceeding.
(5) The reasonable right to confer with the attorney for the
Government in the case.
(6) The right to full and timely restitution as provided in
law.
(7) The right to proceedings free from unreasonable delay.
(8) The right to be treated with fairness and with respect
for the victim's dignity and privacy.
The victims of Thomas Petters and his co-conspirators were denied rights (2), (3), (4), (5), (6) and (8).
- right to reasonable advance notice of any public court
proceedings involving the crime
Petters' victims were first informed of their CVRA rights and given the notices
of public court proceedings required by CVRA, in January 2010, after Thomas
Petters' jury trial and conviction, and after the codefendants had all entered guilty pleas. By Order filed 1/6/2010, Doc. 365, the
criminal judge granted the government's motion
asking that the CVRA notices be given by posting on the Minnesota U.S. Attorney's Office website. Some time in January 2010, the U.S. Attorney's Office set up a special section on its website where it posted CVRA notices on the Petters case. Even then, several important court proceedings occurred without reasonable advance notice to victims.
- right to notice of, and to confer with the prosecutor regarding change of plea hearings
Under
the CVRA, victims had the right to notice of change of plea
hearings
and the right to be heard before plea bargains were accepted by the
court. The plea bargains of Petters' codefendants -- Deanna
Coleman, Robert White, Michael Catain, Larry Reynolds, James Wehmhoff,
Greg Bell, Harold Katz -- were all negotiated and accepted by the
court without any input from victims (despite victims' rights to be
heard at the change of plea hearings). Because the pre-indictment
plea bargaining was done in secret and the change
of plea hearings were held without any notice to victims, victims
were denied their rights to have their input considered by the
prosecutor before making the plea decision, as well as their rights to
be present and to be heard when the court
accepted the plea bargains of the
codefendants.
- right to participate and be heard in the restitution phase of sentencing
Under the Mandatory Victim Restitution Act (18 U.S.C. § 3663A)
Ritchie and all of Petters other direct and proximate victims (as
defined by the statute) had a right to mandatory restitution for the
full amount of their losses notwithstanding the defendant's inability
to pay out of currently held assets. And under the CVRA, they had
a right to be heard with regard to restitution, including the right to
be heard live in open court. All of Petters' and his
codefendants' victims were summarily denied these rights when the
sentencing judge abruptly aborted the restitution process, just days
before the long-scheduled restitution hearing, sua sponte
declaring the restitution issue too complex because there were other
procedures victims might pursue to obtain some compensation for their
losses -- the bankruptcy cases of one of Petters' companies or
petitions for remission seeking compensation from the funds forfeited
to the government.
- right to appellate review of orders denying victims their CVRA rights including a written opinion if appellate relief is denied
When the district judge aborted the restitution
process and denied all restitution, we filed a petition for mandamus
under the CVRA, 18 U.S.C. § 3771(d)(3),
seeking appellate review. In the days that followed, the district
judge issued two other orders, denying restitution as to all of the
codefendants, again without any hearings. The CVRA requires victims to
file petitions for mandamus within 14 days after entry of an order
denying a CVRA right, so we had to file two more separate mandamus
petitions. When the judge finally denied our motion for
reconsideration, which we had submitted to the district court for
filing but the clerk had refused to docket for several months, we filed
a fourth mandamus petition. Our mandamus petitions fared no
better than our district court motions. The Eighth Circuit Court of
Appeals never even required the government to respond to any of
the issues we presented in our petitions. Instead, it simply
denied all four our mandamus petitions without any written opinion or
statement of reasons at all. This defies the CVRA's requirement that
if the court of appeals denies a crime victim's petition for mandamus
review it must state the reasons in a written opinion. 18 U.S.C. § 3771(d)(3).
We filed a petition for certiorari to the U.S. Supreme Court challenging the courts' refusal to afford crime victims their rights under the CVRA and MVRA. That petition is pending.
Many of the issues we complained about in our Petters victim litigation were
mirrored in Senator Kyl's letter to Attorney General Eric Holder which
was read into the Congressional Record yesterday, June 8. Of
particular relevance is what Senator Kyl said about pre-indictment plea
bargaining that excludes crime victims from the process (bottom of
middle column on S3608), and especially pertinent is the passage on
"Crime Victims' Right to Appellate Protection" (beginning in the upper
right column on p. S3608). Senator Kyl unequivocably states that
Congress intended that crime victims' CVRA mandamus petitions be
decided under the ordinary standards of appellate review, and that
appellate courts "must review these cases."
Given Senator Kyl's remarks, I think he would be outraged to hear what
happened to us.
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