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 downloaded from the attachments above.
In essence what Senator Kyl said yesterday echos what we have been saying all along in my client, Ritchie Capital Management’s, 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.
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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 (“MVRA”) and the Crime Victims Rights Act of 2004 (“CVRA”) 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 crimePetters’ 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 sentencingUnder 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 deniedWhen 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. [The Supreme Court asked for additional briefing but eventually denied certiorari.]
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.