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Victim Restitution: Attorneys' Fees for
Internal Investigations?
Updated June 5, 2018
UPDATE, 61512018: On May 29, 2018, the Supreme Court unanimously held that the Mandatory Victims
Restitution Act does not authorize restitution to cover the costs of a victim's private investigation
conducted before the government's investigation and prosecution of the defendant.
The original post from February 6, 2018, is below.
Does a statute that requires victim reimbursement for other expenses incurred during participation in the
investigation or prosecution of the [victimizing] offense cover costs that were neither required nor
requested by the government, including costs incurred for the victim's own purposes and unprompted by
any official action? That is the question that has bedeviled the lower federal courts and that the Supreme
Court has agreed to consider in a case styled Lagos v. United States.
The case began when Lagos executed a scheme that involved inflating the value of his company's assets
in order to maintain and increase a line of credit with General Electric Capital Corporation (GECC).
GECC sued, and the parties settled for $33.55 million and interest. Lagos was subsequently charged and
convicted of wire fraud for the scheme. In addition to restitution for the S I1 million of GECC's
remaining unrecovered loan losses, the U.S. District Court for the Southern District of Texas ordered
Lagos to pay restitution in amount of almost $5 million to cover the cost of GECC's internal investigation
- forensic experts, attorneys, consultants - and to cover the costs of attorneys' fees for representing
GECC in bankruptcy proceedings initiated by Lagos's company. Lagos appealed to the U.S. Court of
Appeals for the Fifth Circuit (Fifth Circuit). There, he argued that the order exceeded the trial court's
authority under the federal statute's other expenses section that compelled restitution to reimburse the
victim for lost income and necessary child care, transportation, and other expenses incurred during
participation in the investigation or prosecution of the offense or attendance at proceedings related to the
offense.
The Fifth Circuit panel affirmed relying on circuit case law that reads the other-expenses section broadly
to encompass reimbursement of victims for the costs of their internal investigations, including attorneys'
fees, and perhaps for consequential damages as well. One member of the panel concuTed on the basis
of precedent, but argued for a narrower interpretation of the other-expenses section. He found more
compelling the opinion of the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) in
United States v. Papagno that held that the other-expenses section does not embrace an internal
Congressional Research Service
https://crsreports.congress.gov
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