SYLVIA H. RAMBO, District Judge.
In this criminal case arising out of the misappropriation and laundering of federally funded loans, Defendant pleaded guilty to two substantive counts of an eleven count indictment. Presently before the court is the Government's request for the court to order restitution pursuant to the provisions of the Mandatory Victims Restitution Act, codified at 18 U.S.C. § 3663A. The issue presented herein is whether the entities claiming restitution, many of whom contracted construction work on the multimillion dollar project receiving federal funds for which Defendant assumed the roles of owner, project manager, and architect/engineer,
This case involves a complex scheme orchestrated by Defendant, David R. Dodd II, over a four year period. In short, Defendant structured transactions to self-deal in relation to a construction project that received federal funds, whereby he profited in excess of $1.1 million. By doing so, Defendant misappropriated funds from the Department of Housing and Urban Development that were intended for the Capital View Commerce Center ("CVCC") project located in the Middle District of Pennsylvania. The CVCC was planned to be a 215,000-square-foot printing, office, and retail facility, located in an economically disadvantaged area of Harrisburg, Pennsylvania, that was also subject to a Brownsfield Economic Development Initiative Grant. (Tr. 90.)
The Government identified twelve entities that claim they qualify as victims and are owed restitution under the Mandatory Victim Restitution Act, 18 U.S.C. § 3663A ("MVRA"), due to Defendant's actions related to the offenses of conviction, and the parties have stipulated the amount of restitution claimed to be $21,487,057.58. (See Doc. 64.) While the Government argues that the court should award the full stipulated amount, Defendant contests his obligation for any amount, arguing that his actions were not the direct and proximate causes of these entities' losses. He reasons, therefore, that he does not owe any restitution to these entities. Thus, the point of contention, and the only issue before the court, is whether Defendant's actions were the direct and proximate cause of the losses suffered by the identified entities. As part of the court's determination rests on amounts identified in the parties' February 6, 2013 stipulation, the court believes it helpful to set forth the pertinent procedural history in this matter before discussing the evidence presented in support of an order of restitution.
On June 9, 2010, Defendant was charged in an eleven-count indictment, which included three counts of theft of government funds, in violation of 18 U.S.C. § 641 (Counts I, III & V), three counts of misappropriation of funds from a program receiving federal funds, in violation of 18 U.S.C. § 666(a)(1)(A) (Counts II, IV, VI), two counts of money laundering, in violation of 18 U.S.C. § 1956 (Counts VII & VIII), one count of misrepresentations to influence a financial institution, in violation of 18 U.S.C. § 1014 (Count IX), and one count of bank fraud, in violation of 18 U.S.C. § 1344 (Count X), as well as a forfeiture allegation (Count XI). On November 15, 2011, Defendant appeared before the undersigned and pleaded guilty, pursuant to an agreement (Doc. 38), to Counts II and VII, as well as the civil forfeiture count at Count XI
On January 25, 2012, the United States Probation Officer prepared a draft presentence report ("PSR"). It is the Probation Office's practice to submit to the parties "draft" PSRs before sentencing hearings so that parties have notice and opportunity to object. See LCrR 32.1. Relevant to the issue sub judice, the draft PSR identified thirteen entities that maintain they are owed restitution.
On October 31, 2012, the court commenced a hearing restricted to the issue of whether restitution is owed. (Docs. 48 & 49.) Assistant United States Attorney William A. Behe represented the Government, and Attorney Jordan D. Cunningham represented Defendant, who was personally present. At the hearing, the court afforded the parties the opportunity to present evidence on the issue of restitution. The hearing lasted five days.
(Id.) The Exhibit attached thereto included nine contractors that claimed they were entitled to restitution due to Defendant's failure to pay for work performed on the
The facts relevant to the court's determination of whether Defendant should be ordered to pay restitution are as follows. Defendant owned and operated several companies, namely: (1) Advanced Communications Agency ("Advanced Communications"), a commercial printing business; (2) Cameron Real Estate, LP ("CRE"), the "Owner" of the CVCC project; (3) Cameron Management ("CM"), the project manager of the CVCC project; and (4) Industrial Design and Construction ("IDC"), a company that supplied the pre-cast concrete beams to be used in the project. In addition to funding provided by Advanced Communications, Defendant obtained funds for the CVCC project through various sources, including Pennsylvania state grants and loans, private bank loans, assistance from Harrisburg City, grants issued by the Community Action Commission that were funded by the United States Department of Health and Human Services, and Harrisburg City and Dauphin County grants and loans funded by the Department of Housing and Urban Development. (Tr. 88-90.) In total, the project was scheduled to receive over $24 million in funding. Because much of that funding was through state and federal loan and grant programs,
Specifically, CRE, as the Owner of the project, contracted with multiple entities to perform work on the CVCC project. Douglas Aldinger, who was employed by Erdman Anthony, an engineering firm that Defendant engaged to assist with the CVCC project, testified that the firm participated in drafting the Contract Documents that were given to each contractor.
(Id. at § 9.4.1 (emphasis supplied).) The Contract Documents explained the significance of a Certificate for Payment as follows:
(Id. at § 9.4.2 (emphasis supplied).) The Contract Documents set forth the bases upon which the Architect/Engineer could withhold a Certificate for Payment as follows:
(Id. at § 9.5.1 (emphasis supplied).) However, withholding a Certificate for Payment was not unrestrained, as Section 9.5.2 provided that Certificates for Payment must be issued for amounts previously withheld once the reasons for initially withholding certification were removed. (See id. at § 9.5.2.) Upon the Architect/Engineer's issuance of a Certificate for Payment, the Owner was required to remit payment to the Contractor. (Id. at § 9.6.1.)
Defendant bases his argument in opposition to restitution upon the obligations set forth in the Contract Documents related to the Contractors' compliance with the Federal Buy America Act, codified at 23 U.S.C. § 313 and 23 C.F.R. § 635.410, and the Pennsylvania Steel Products Procurement Act ("Steel Act"), codified at 73 P.S. §§ 1881-1887. The provision pertaining to the Buy America Act was set forth in the Contract Documents as follows:
(J. Ex., § 3.9(A).) In addition to the Buy America Act reference, the Contract Documents incorporated provisions of the Steel Act, which required that:
73 P.S. § 1884. The Steel Act further defined "public works" as: "Any structure, building, ... or other betterment, work or
(J. Ex., § 3.9(C) (emphasis supplied).)
The public funding portion of the project was largely by way of reimbursement programs. George Conner, the deputy director of the Dauphin County Economic Development Department, explained that the funds were distributed by way of reimbursements, inasmuch as the Owner would submit to the Funding Agencies an invoice for the actual construction costs, which would identify the name of the vendor that performed the work and the work that was completed. (See Tr. 94-104.) The Funding Agency paid the Owner the exact amount listed on the invoice. The Owner, in turn, was required to pay the vendor for the amount submitted to and paid by the Funding Source. (See Tr. 93, 134.) Conner unequivocally testified that the Owner was not to use the funds for any purpose other than paying the specific vendor identified on the invoices
The record demonstrates that, based on Defendant's representations, the Funding Agencies paid him the amounts he represented were owed to the Contractors for eligible expenses. In fact, payments to Defendant were in the exact dollar amount for which he requested payment. (See, e.g., Gov. Exs. 8-16.) Such a process was clearly contemplated by the application and certificate for payment, which provided as follows:
(See, e.g., Gov. Ex. 16.) Despite these representations, which resulted in the Funding Agency's disbursement of funds directly to Defendant for the payment of the entities represented on the applications, Defendant withheld the payments earmarked for the Contractors, and instead used the money to pay other "eligible expenses," including payments to companies in which he had a personal stake, such as IDC and CM. (Tr. 305, 388-90; Def. Ex. 79.)
The gravamen of Defendant's position that the Contractors were not owed payment rests on the premise that the Contractors had not perfected their contractual obligations due to their failure to comply with the steel certifications.
It is uncontested that the contractors submitted standard-form payment applications to CRE and that Defendant, in his role as Architect/Engineer, issued Certificates for Payment.
(E.g., Gov. 37, p. 2.) Although the Funding Agency would then remit payment directly to CRE in the exact amount requested, the record clearly demonstrates that the payments were intended to be paid to the Contractors represented on the applications. (See, e.g., Tr. 92-93.) Defendant, however, did not pay the identified contractors the amounts he received from the Funding Agencies.
Defendant explained that each of the unpaid Contractors failed to submit the proper steel certifications, and therefore, failed to comply with the federal and state regulations imposed by the Contract Documents. (Tr. 302.) According to Defendant, he refused to pay the non-complying Contractors any amount for the submitted — and approved — payment applications in an attempt to ensure compliance with the statutory requirements. (Id.) Defendant argued that he was not required under the Contract Documents to hold the funds disbursed to him through the Funding Agencies, but could rather use those funds on any eligible expenses, including to pay the companies in which he had an interest, so long as the payments were for "costs related to new construction."
In support of his position, Defendant testified that he repeatedly requested that the Contractors submit proper documentation certifying the steel they used in the CVCC project was entirely American-manufactured. Scott Davis, the former project manager of CM, testified that his job involved his collecting the paperwork from the vendors to submit to the different Funding Sources for payment. (See Tr. 50-52.) Davis collected the appropriate supporting documentation from the Contractors and vendors and forwarded those documents to Defendant for submission to the Funding Sources. (Tr. 54.) Davis testified that Defendant would continually request steel certifications that had been previously submitted. (Tr. 55.) Defendant frequently told Davis that the submitted steel certificates were rejected by the Funding Agencies. (Tr. 57.) This, of course, was belied by the fact that the Funding Agencies were satisfying Defendant's payment applications as requested.
Defendant concealed from both Davis and the Contractors the fact that he was receiving payments from the Funding Sources. (See Tr. 58-59.) Instead, Defendant shifted the blame for the Contractors' nonpayment away from the actual cause
Other than Defendant's own testimony, which the court found disingenuous, there was no evidence supporting the claim that Defendant was directed by the Funding Agencies to withhold payment from the Contractors. For example, Defendant testified as follows regarding his ability to satisfy the Contractors' payment applications despite their failure to submit complying steel certifications:
(Tr. 297.) Defendant explained his reason for withholding payment as follows:
(Tr. 302.) Kaye Goodman, who is employed by an engineering firm that provided consultant services to the Pennsylvania Office of the Budget in connection to the RACP's funding of the CVCC project, directly contradicted Defendant's testimony related to her advising Defendant not to pay the Contractors. Specifically, Goodman testified that steel certificates, or lack thereof, were never included as a "report finding," and testified that, as of May 2008, it was her position that the steel certificates were in compliance. (See Tr. 618.) Moreover, Goodman unequivocally denied that she ever advised Defendant to withhold payment or chastised him for issuing payment to a contractor despite its noncompliance (Tr. 619-21), and further explained that she did not even possess the authority to do so (Tr. 647-48).
Defendant presented evidence tending to establish that foreign steel was used in the CVCC project (see Def. Exs. 86 & 87); however, he was unable to identify which specific contractor was using the foreign steel (Tr. 363). Nevertheless, despite his uncertainty as to the identity of the allegedly offending contractor, Defendant withheld payment in its entirety from each Contractor.
Defendant continued to withhold entire payments despite the Contractors' repeated requests to be paid. According to the parties' stipulation,
Once the Funding Agencies learned Defendant was withholding payment from the contractors, they refused to honor additional payment applications. Moreover, certain Contractors did not have the opportunity to submit payment applications for portions of the work they had already completed. As guarantor of the loans fraudulently obtained through this scheme, both Harrisburg City and Dauphin County became required, as guarantors of the loan, to satisfy Defendant's defaulted obligations to repay the Section 108 money. (Tr. 105, 117.)
Preliminarily, the court must highlight and define the contours of the issue presented herein, i.e., whether the entities claiming restitution are "victims" under the MVRA. Stated differently, the court must determine whether Defendant's conduct was the direct and proximate cause of the losses suffered by the entities claiming restitution. This is not a case, as Defendant suggests, revolving around whether Defendant paid anything other than "eligible expenses" with the money given to him by the funding agencies. Indeed, the court is cognizant that the loan proceeds were distributed to pay other expenses, such as those submitted by IDC, and although IDC may be an "eligible expense," it was also a company in which Defendant had a significant interest. Rather, the question is whether Defendant's actions caused the ultimate failure of the CVCC
The MVRA applies only to certain types of crimes, including an offense "in which an identifiable victim ... has suffered a physical injury or pecuniary loss." 18 U.S.C. § 3663A(c)(1)(B). Under the MVRA, the "term `victim' means a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered." 18 U.S.C. § 3663A(a)(2). Moreover, the statute provides that, "in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity, [a victim includes] any person directly harmed by the defendant's criminal conduct in the course of the scheme, conspiracy, or pattern." Id. Additionally, the statute contemplates expanding the definition of victim, mandating the court order restitution to persons other than the victims of the offense if so agreed to by the parties in a plea agreement. 18 U.S.C. § 3663A(a)(3).
Nevertheless, the definition of victim under the statute is not so broad that it permits the court to order restitution to anyone harmed by any activity of the defendant related to the scheme, conspiracy, or pattern. See United States v. Kones, 77 F.3d 66, 70 (3d Cir.1996).
After defining the victims entitled to restitution, the court must "order restitution to each victim in the full amount of each victim's losses ... without consideration of the economic circumstances of the defendant." 18 U.S.C. § 3664(f)(1)(A). The "proper amount of restitution is the amount wrongfully taken by the [d]efendant." United States v. Bryant, 655 F.3d 232, 254 (3d Cir.2011). The Third Circuit has interpreted the MVRA not to authorize consequential damages. United States v. Quillen, 335 F.3d 219, 222 (3d Cir.2003) (citing United States v. Simmonds, 235 F.3d 826, 833 (3d Cir.2000)). Instead, restitution must be
Based on a review of the record, the court finds that the claiming entities were directly and proximately harmed by Defendant's conduct, and concludes that these entities are victims and therefore entitled to restitution.
It is uncontested that Defendant submitted payment applications for the aforementioned Contractors for specific work they had performed on the CVCC project, received money from the Funding Agencies in the amounts requested in the payment applications, and withheld the money from the Contractors. However, Defendant contends that the Government failed to prove the Contractors met the "mandatory contractual regulatory conditions precedent to perfect their contractual right to receive payments" for the construction work performed pursuant to the Contract Documents. (Doc. 81, p. 13 of 31.) Defendant reasons that, because the Contractors used foreign steel in the CVCC project or otherwise failed to submit appropriate steel certifications, they were not entitled to receive payment and therefore, did not have a property interest harmed by Defendant's refusal to remit payment. (See id.)
The Government presented evidence to prove the complaining Contractors performed the work on the contract. Specifically, the stipulation states that the witnesses for each contractor would testify to the authenticity of the payment applications and total amounts outstanding. (Doc. 64.) The payment applications each contain the following certification:
(See, e.g., Gov. Ex. 37, p. 3.) Thus, the stipulation alone provides a sufficient basis to find that the Contractors performed work according to the Contract Documents and that they were rightfully owed the amounts claimed. However, Defendant maintains that, because the Contractors failed to comply with the steel and wage regulations, the amount outstanding was, in fact, never owed. The court does not find this argument convincing.
Certainly, Defendant presented evidence that could support a finding that foreign steel was present on the CVCC project (see Gov. Exs. 86 & 87) and testified that certain contractors failed to submit proper steel certifications (see, e.g., Tr. 293-94). Nevertheless, Defendant did not — indeed, he could not — identify which Contractor had used foreign steel. (Tr. 363.) Moreover, the record is devoid of any credible evidence demanding a finding that any one of the Contractors used foreign steel. Rather, the record establishes that, before the CVCC project lost funding, both an
Even assuming, arguendo, that the Contractors did incorporate some foreign steel into their work on the project, the Contract Documents did not entitle Defendant to withhold entire payments from Contractors. The provision cited by Defendant in support of his actions provides that the Owner may withhold payments for the steel or cast iron product that has an outstanding certification. (J. Ex. 1, § 3.9.) Contrary to Defendant's assertion, this provision does not entitle the Owner to withhold entire payments that he otherwise accepted and certified to the Funding Agencies as being owed to the Contractors. Based on the record, the court finds that the Contractors had an interest in the amounts applied for, and certified as due by, Defendant. Therefore, the court concludes that Defendant's decision to pay other "eligible expenses," namely those expenses allegedly incurred by companies in which Defendant had an interest, was the reason the money was diverted from the Contractors that the money was intended to pay.
The record further established that, after numerous unsuccessful attempts by the Contractors to collect the outstanding payments, they terminated their work on the project and, at least some, filed mechanic's liens. (See Tr. 677-78.) The filing of the mechanic's liens alerted the Funding Agencies that Defendant was not remitting payment to the Contractors, which was a violation of certain agreements. (Gov. Ex. 29.) This caused the Funding Agencies to issue default notices to Defendant, and ultimately, withhold further payment on certified payment applications. (See id.) The stoppage of funding caused the project to come to a halt and resulted in the Funding Agencies, namely Harrisburg City and Dauphin County, to be directly obligated to repay the Section 108 funds they disbursed to Defendant, meaning that HUD will reduce future funding by the amount that the department is not being repaid.
Additionally, Defendant concealed his actions by continuing to misrepresent to the Funding Agencies that the Contractors were being paid, and misrepresent to the Contractors that funding to him was being withheld by the Funding Agencies. Without these misrepresentations, the Funding Agencies would have learned of Defendant's actions earlier. Thus, because the parties stipulated that, if called, witnesses would support the total amount claimed as set forth in the exhibit, and because the court finds that the failure of the CVCC project was caused by Defendant's illegitimate withholding of funds from the Contractors, the court concludes that Harrisburg City and Dauphin County have suffered the losses as reflected on the stipulation as they are now obligated to assume the repayment of the publicly funded loans.
The court would be remiss not to address Defendant's position that the cause of the project's failure, the Contractors remaining unpaid, and the funding
The court has little trouble determining that Defendant's inappropriate misappropriation of funding from Harrisburg City and Dauphin County caused the Contractors to remain unpaid for amounts to which they were entitled. The court further finds that it was reasonably foreseeable for several Contractors to stop work and file mechanic's liens against the subject property due to Defendant's continued failure to pay. The court does not find convincing Defendant's disingenuous, post-hoc excuse that he withheld payment from the Contractors due to their noncompliance with the federal regulations and instead paid other eligible expenses. Thus, the court concludes that Defendant's misappropriation of funds caused the CVCC project to fail, caused the Contractors to suffer losses for amounts expended on the project, and caused the Funding Agencies to be responsible for the repayment of amounts loaned to Defendant for the project. Thus, each of the entities identified on the stipulation is a victim under the MVRA.
Despite the parties' stipulation as to the amounts the entities claim they lost as a direct and proximate result of Defendant's conduct, the court will enter an order of restitution for $20,943,635.13 rather than the $21,487,057.58 as claimed on the stipulation. The ordered amount excludes losses that are unsupported by the record to be directly and proximately caused by Defendant's conduct.
Initially, the court notes that Defendant does not challenge the accuracy or veracity of any amount claimed by the victims. Rather, Defendant simply argues that his actions were not the direct and proximate cause of the harms. Thus, in light of the stipulation, Defendant apparently concedes that, if the Contractors and lenders are determined to be victims under the MVRA, they are entitled at least to the disbursed payments or amounts claimed for work done on the CVCC project. Based on the foregoing discussion, the court finds that the non-repayment of principal
Defendant does, however, challenge several of the contractors' claims for attorneys' fees. (See, e.g., Doc. 84, ¶¶ 41-45.) Specifically, Weaver Glass claims it is owed $47,561.29 for attorneys' fees, Stong Fire Protection claims it is owed $84,332.50 for attorneys' fees, and Herre Brothers, Inc., claims it is owed $194,198.79 for attorneys' fees. (Doc. 64-1.) Defendant argues that their claims for attorneys' fees are incidental and consequential damages, and are otherwise not collectible under the MVRA. (Doc. 84, ¶ 45.)
The Third Circuit has interpreted the MVRA as not authorizing consequential damages. Quillen, 335 F.3d at 222 (citing Simmonds, 235 F.3d at 833). Defendant cites Gov't of V.I. v. Davis, 43 F.3d 41, 46 (3d Cir. 1994) (applying the VWPA), and Simmonds, 235 F.3d at 833, for the proposition that attorneys' fees are consequential damages, and are, therefore, not recoverable under the MVRA. Defendant's argument assumes the existence of a bright-line rule prohibiting restitution for attorneys' fees. Such a rule does not exist.
Initially, the court highlights that the proper question is not whether attorneys' fees can be the subject of an award, but whether the attorneys' fees incurred were a loss directly resulting from the offense, or a consequential loss.
In United States v. Amato, 540 F.3d 153, 159-60 (2d Cir.2008), the Second Circuit held that, "necessary ... other expenses" contemplated by Section 3663A(b)(4) may include attorneys' fees, provided that the court finds, by a preponderance of the evidence, that: (1) such expenses were necessary; (2) they were incurred while participating in the investigation, prosecution, or attendance at proceedings regarding the offense; (3) they were incurred by a victim as defined by the MVRA; and (4) they do not require unduly complicated determinations of fact. See United States v. Gupta, 925 F.Supp.2d 581, 584 (S.D.N.Y.2013) (citing Amato, 540 F.3d at 160). The court will adopt this test for purposes of determining whether the record establishes that the Contractors are entitled to the attorneys' fees requested.
In the instant case, while the stipulation provides that, if called, a witness of Herre Brothers, Weaver Glass, and Stong Fire Protection would testify that the company expended the amounts on attorneys' fees, the record lacks any evidence tending to establish whether these figures represent necessary expenses incurred while participating in the investigation, prosecution, or attendance at proceedings regarding Defendant's conduct. In short, while the amount of attorneys' fees is not at issue, the nature of the fees remains unclear. Based on the record established as a result of multiple days of hearing, the court cannot determine the basis for these attorneys' fees, let alone whether these fees were necessarily incurred as a result of Defendant's conduct.
In challenging certain claims, Defendant merely argues that he was not the direct and proximate cause of the claimed harm, and stresses that consequential and incidental expenses are not recoverable. For example, Defendant simply argues that the $68,328.54 claimed as MOED loan interest by the City of Harrisburg and the $2,100,071.08 claimed as interest by Metro Bank represent amortized interest and are incidental and consequential damages, and thus not collectible under the MVRA. (See Doc. 84, ¶¶ 46 & 47.) The court disagrees.
The MVRA aims to provide victims with full and fair compensation for their losses. Limiting restitution to the return of the principal loan amount would be inadequate, because "[f]oregone interest is one aspect of the victim's loss."
The same cannot be said for the $217,329.87 claimed by Metro Bank for late charges. The record is entirely undeveloped with regard to the basis of Metro Bank's claim for late charges. Moreover, unlike receiving interest payments, late charges are not the reason a lender makes a loan. The court cannot conclude, based on the facts presented herein, that the late charges resulted from Defendant's conduct with relation to the improper usage of the loaned funds, and the court will not include that claim in the restitution award.
Defendant also challenges Metro Bank's claims of $818,850.00 for maintenance and security costs, and $547.00 for recording fees, arguing that these amounts represent incidental and consequential damages. The court disagrees.
The MVRA requires that the district court "shall order ... that the defendant make restitution to the victim of the offense." 18 U.S.C. § 3663A(a)(1). Here, Defendant misappropriated money from the Funding Agencies, and as a consequence, failed to pay the Contractors, causing the project to come to a halt and causing Metro Bank, as mortgagee, to foreclose on the property. It is reasonably foreseeable that Metro Bank necessarily incurred expenses in its attempt to mitigate its losses by foreclosing on collateral. Certainly, Metro Bank would not have incurred these particular losses but for Defendant's default on the mortgage, caused by the project's cessation due to Defendant's failure to remit payment to the Contractors. As the stipulation represents Defendant's concession that, if called, a witness for Metro Bank would testify to the accuracy of the amounts Metro Bank claims it lost for maintenance and security costs and recording fees incurred by foreclosing on the CVCC property, the court will award Metro Bank $819,397.00 as the stipulated amount of expenses incurred as a result of Defendant defaulting on the CVCC mortgage obligations.
Defendant argues that, because "[t]here is no evidence as to the value of the land and structure" (Doc. 84, ¶ 54), it "would be
As stated, in the case of a crime "resulting in damage to or loss or destruction of property of a victim," the MVRA provides that the order of restitution shall require the defendant to:
18 U.S.C. § 3663A(b)(1). Thus, the plain language of the MVRA provides that the restitution award is reduced by "the value (as of the date the property is returned) of any part of the property that is returned." 18 U.S.C. § 3663A(b)(1)(B)(ii) (emphasis supplied). Read in the context of the statute, "the property" means the property originally taken from the victim. Where, as here, cash is the property taken, the restitution amount is reduced by the eventual cash proceeds recouped once any collateral securing the debt is sold, because only when the collateral real estate is sold does the victim mortgagee receive money (proceeds from the sale) which was the type of property lost. Accordingly, the amount of restitution owed to any mortgagee, namely Metro Bank as primary holder and Harrisburg City and Dauphin County as secondary holders, will be reduced by the eventual offset value from a foreclosure sale on the subject property. See United States v. Himler, 355 F.3d 735, 745 (3d Cir.2004) (affirming district court's order of restitution in the amount of victim's loss minus the amount that would eventually be recouped from the future sale of the condominium).
Based on the foregoing, the court finds that Defendant's conduct was the direct and proximate cause of the failure of the CVCC project, and therefore, of the losses suffered by the Contractors, Metro Bank, and municipal Funding Sources. Because the court concludes that the Contractors were entitled to payments for the work they performed on the project, the court will order Defendant to pay restitution in the amounts reflected on the stipulation. However, the court concludes that the record does not support a finding that Defendant's conduct caused the claimed attorneys' fees. For these reasons, the court will award restitution to: (1) H & R Mechanical in the amount of $1,255,468.62;
With regard to restitution claimed by Metro Bank, the court concludes that Defendant's conduct underlying the offenses was the direct and proximate cause of his default on the mortgage, and that Metro Bank suffered losses in the form of disbursed principal, lost interest, expenses, and fees. However, the court does not find that Defendant's conduct was the direct and proximate cause of the late charges claimed by Metro Bank. Accordingly, the court will award restitution to Metro Bank in the amount of $9,489,864.88,
Lastly, because the court finds Defendant's conduct was the cause of the CVCC's failure and Defendant's inability to repay the Section 108-backed loans, it will award restitution to Dauphin County in the amount of $2,752,450.64
(Tr. 92-93 (emphasis supplied).) The court notes that the payment provision contained at Paragraph II.D of the Loan Agreement between Dauphin County's Office of Community and Economic Development and CRE can be read to permit payment of all eligible expenses from Section 108 funds. (See Def. Ex. 56, ¶ II.D.) However, the issue is not whether Defendant used the Section 108 Funds to pay ineligible expenses, but rather whether Defendant's failure to pay the Contractors was the direct and proximate cause of the Contractors' losses. Thus, whether Defendant acted pursuant to the agreement between CRE and Dauphin County by using the Section 108 Funds to pay expenses other than the Contractors is not a dispositive issue.
(Tr. 120.)
(See, e.g., Gov. Ex. 37, p. 3.) Accordingly, the court accepts the stipulation as standing for the proposition that the Contractors claimed they performed the work in accordance with the Contract Documents and were entitled to payment thereon.
(Gov. Ex. 29.)
