Federal Restitution Order Not Subject To Categorical Approach, Fourth Circuit Decides

The "categorical approach" does not apply to federal restitution orders under the Mandatory Victims Restitution Act (MVRA), the U.S. Court of Appeals for the Fourth Circuit recently decided. In addition, the court held that a successor lender is entitled to restitution in an amount equal to the original face value of the debt minus any monies recovered even if the successor lender may have purchased the debt for pennies on the dollar. Timothy Ritchie was convicted of making false statements to HUD, a violation of 18 U.S.C. 1001(a)(2). Ritchie lied on a HUD-1 statement when purchasing a home. Countrywide Bank loaned Ritchie $2,445,102 to purchase the property. Ritchie eventually defaulted on the loan. The property was later sold for $1,106,000. Countrywide was bought by Bank of America (BofA) after the loan was originated. At sentencing, the Government argued that BOFA was now the "victim" of Ritchie's fraud under the MVRA for purposes of federal restitution. The sentencing court agreed and imposed restitution of $1,385,444, the difference between the amount of the original loan and what the property was later sold for after foreclosure. Ritchie argued on appeal that "because no element of 18 U.SC. 1001 requires that government property (or any other property) be involved in the ‘matter’ as to which the false statement is made,' it follows that § 1001 'categorically is not an ‘offense against property’' under subsection (c)(1)(A)(ii) of the MVRA, rendering restitution improper in his case. "

The Fourth Circuit disagreed.

As with any issue of statutory interpretation, 'we begin by analyzing [the MVRA’s] text.' The Supreme Court has instructed us to apply the categorical approach to statutory language that, when “read naturally, . . . refers to a generic crime as generally committed.” Nijhawan v. Holder, 557 U.S. 29, 34 (2009). Consistent with this premise, courts construe the sentence-enhancement provision of the Armed Criminal Career Act (“ACCA”) defining a generic “violent felony” as, inter alia, a crime that “has as an element the use, attempted use, or threatened use of physical force,” or “is burglary, arson, or extortion, or involves use of explosives,” to require application of the elements-based categorical approach.

Here, we do not read the relevant text—“any offense . . . that is . . . an offense against property under [Title 18]”—to refer to a generic crime as generally committed. In that regard, we note that subsection (c)(1)(A)(ii) of the MVRA contains no language suggesting that courts look only to the elements of Title 18 statutory offenses, nor does it provide an illustrative list of property offenses that “must refer to generic crimes.” See Nijhawan, 557 U.S. at 37 (approving application of categorical approach to 8 U.S.C. § 1101(a)(43)(A)’s list of the generic offenses of “murder, rape, or sexual abuse of a minor”).

The structure of the statutory text also counsels against Ritchie’s view. Subsection (c)(1)(A)(i) applies the MVRA to “a crime of violence, as defined in section 16,” 5 and, under 18 U.S.C.  16, we are required “to look to the elements and the nature of the offense of conviction, rather than to the particular facts relating to the crime.” Leocal v. Ashcroft, 543 U.S. 1, 7 (2004). Subsection (c)(1)(A)(ii) contains no such modifying reference. We think this “contrasting terminology” shows that Congress intended subsection (c)(1)(A)(ii) “to cover a broader range of prior offenses” than those reached by subsection (c)(1)(A)(i).

The Fourth Circuit also rejected, over a dissent, Ritchie's argument that his federal restitution should be limited to what BOFA paid for his mortgage from Countrywide.

The proper restitution award due in the context of a fraudulent mortgage transaction is a relatively simple calculation. The “owner of the property” that was lost (i.e., the money lent), or the person “designated by the owner” to receive it, is entitled to a restitution award that is equivalent to the outstanding amount of the money that remains due under the fraudulently obtained loan. 18 U.S.C. § 3663A(b)(1)(A). And because the money that was lent to the borrower is the “property” under the MVRA, that amount necessarily takes into account any portion of the money that was “returned” to the owner or its designee when the collateral that secured the loan was sold.

The court recognized that its decision on this issue created a split with the Ninth Circuit's decision in United States v. Luis, 765 F.3d 1061 (9th Cir. 2014). However, the Fourth Circuit concluded that it "declined to follow the Ninth Circuit’s contrary reasoning."

Ritchie's sentence and federal restitution order was accordingly affirmed in all respects. See: United States v. Ritchie, No. 16-4036 (4th Cir. 2017).