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United States v. Carpenter

United States District Court, E.D. Missouri, Eastern Division

June 29, 2017

UNITED STATES OF AMERICA, Plaintiff,
v.
COLEMAN CARPENTER, Defendant.

          MEMORANDUM AND ORDER

          RODNEY W. SIPPEL UNITED STATES DISTRICT JUDGE.

         Defendant Coleman Carpenter pleaded guilty to one count of mail fraud in violation of 18 U.S.C. § 1341, a charge that arose from a scheme in which he overpaid for commodities while managing a grain elevator for Bunge of North America. I ordered Carpenter to pay $1, 561, 516.25 in restitution to Bunge, which included $87, 536.65 in attorney's fees and costs Bunge paid to outside counsel during the investigation and prosecution of Carpenter's scheme. Carpenter appealed the restitution award. The Eighth Circuit Court of Appeals affirmed the portion of the award that does not include attorney's fees ($1, 473, 980.00), vacated the portion awarding attorney's fees and expenses, and remanded the matter with instructions that I specifically address whether the attorney's fees incurred after the government initiated its own investigation were “necessary” under 18 U.S.C. § 3663A(b)(4). See United States v. Carpenter, 841 F.3d 1057, 1062 (8th Cir. 2016). After renewed review of the evidence and objections presented, I will award $74, 453.89 in restitution for legal fees and associated costs.

         BACKGROUND

         Carpenter managed a grain elevator owned by Bunge in Hickman, Kentucky. In that capacity, he bought agricultural commodities. He was authorized to purchase commodities “on the spot” and enter into futures contracts. Carpenter had limited authority to adjust the price Bunge paid in futures contracts. Between 2009 and 2013, Carpenter frequently entered into futures contracts that exceeded his price authority, meaning he contracted for Bunge to overpay for commodities. During the scheme, Carpenter received large payments of money from some of the grain elevator customers. In 2013, Bunge discovered Carpenter's fraud during an internal audit. Bunge, with assistance from its outside counsel, the Thompson Coburn law firm, reviewed Carpenter's unauthorized transactions and provided information to the United States Attorney. A federal grand jury returned an indictment against Carpenter on June 25, 2014.

         Carpenter pleaded guilty to one count of mail fraud in connection with this scheme. After sentencing, the parties filed briefs on the appropriate amount of restitution. The U.S. Attorney submitted a declaration from Bunge, dated September 8, 2015, that stated Bunge had incurred $97, 262.94 in attorney's fees and costs paid to Thompson Coburn. Carpenter objected to the attorney's fees, arguing the fees incurred after the government started its investigation were not necessary and that, even if some fees were necessary, the award should be reduced because some of the entries were redacted or otherwise did not show the requested fees were necessary. After considering the evidence, arguments, and objections, I reduced the attorney's fees and costs requested by 10% and found that the U.S. Attorney had shown by a preponderance of the evidence that the total restitution due from Carpenter to Bunge was $1, 561, 516.25, which included $87, 536.65 for attorney's fees Bunge paid to outside counsel.

         Carpenter appealed the restitution award. The Eighth Circuit affirmed the portion of the award that does not include attorney's fees, vacated the award of attorney's fees and expenses, and remanded the matter with an instruction that I specifically address whether the attorney's fees incurred after the U.S. Attorney initiated its own investigation were “necessary” under 18 U.S.C. § 3663A(b)(4). I held a status conference in this matter and set a schedule for the U.S. Attorney to file a brief on the necessity of the fees and for Carpenter to file a response.

         In its brief, the U.S. Attorney suggests that by considering Carpenter's arguments that all of the fees and costs were not necessary and then reducing the requested fee award by 10% for certain items not directly related to the investigation, I already considered whether the fees were necessary and, as a result, the amount I previously awarded was necessary. The U.S. Attorney again asserts, as it did at sentencing and in its prior brief, that the assistance of Bunge and their counsel was essential to the presentation of the case and its preparation for trial and sentencing, particularly as “this was a complex fraud scheme involving an arcane area of commerce.” ECF No. 118, at 2.

         Carpenter argues that the attorney's fees were not necessary and renews his specific objections to the request. He argues: (1) the U.S. Attorney has not explained why it needed private outside counsel to assist it in prosecuting this case, (2) even if some assistance by private counsel was necessary, Bunge's in-house counsel should have been able to handle it and private outside counsel was not necessary, and (3) even if there was a need for private outside counsel, the itemized attorney fee billing submitted includes a number of entries not shown to be necessary, including redacted and vague entries that do not contain enough information to show how the services at issue were necessary.

         LEGAL STANDARD

         Under the Mandatory Victims Restitution Act, an order of restitution shall require a defendant 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.” 18 U.S.C. § 3663A(b)(4). The Eighth Circuit has “‘specifically approved of the inclusion of attorney's fees and investigative costs in a restitution award when these losses were caused by the fraudulent conduct.'” Carpenter, 841 F.3d at 1062 (quoting United States v. DeRosier, 501 F.3d 888, 897 (8th Cir. 2007)). “The government bears the burden of proving the amount of restitution based on a preponderance of the evidence” and must satisfy “the statutory requirement of showing such costs were necessary . . . expenses incurred during participation in the investigation or prosecution of the offense.” Id. at 1060, 1062 (quotation marks omitted).

         ANALYSIS

         Bunge's September 8, 2015 declaration stated it had incurred $97, 262.94 in attorney's fees and costs paid to Thompson Coburn. On renewed review of the itemized billing invoices in the record, I note that the invoices only include charges incurred through July 31, 2015, and the sum of the amounts requested in those invoices is only $88, 453.89. Though Carpenter did not bring this to my attention in his objections, I conclude the lack of itemized billing invoices or other specific information about the charges incurred after July 31, 2015 makes it impossible for me to determine whether charges incurred during that time were necessary. As a result, I will use $88, 453.89 as the starting point for attorney's fees and costs.

         1. Use of private outside counsel

         As the Eighth Circuit explained in the appeal in this case, this circuit is among those that take a “somewhat broader view” of the loss allowed in a restitution award and has “‘specifically approved of the inclusion of attorney's fees and investigative costs in a restitution award when these losses were caused by the fraudulent conduct.'” Carpenter, 841 F.3d at 1062 (quoting DeRosier, 501 F.3d at 897).[1] The MVRA authorizes reimbursement of “necessary . . . expenses incurred during participation in the investigation or prosecution of the offense.” 18 U.S.C. § 3663A(b)(4) (emphasis added). Bunge is entitled to restitution for attorney's fees and expenses it had to incur to advance the investigation or prosecution of Carpenter's fraudulent scheme, both before the government became involved and after. See United States v. Nosal, 844 F.3d 1024, 1047 (9th Cir. 2016) (explaining the government must present evidence showing “it was reasonably necessary for [the victim] to incur attorneys' and investigator's fees to participate in the investigation or prosecution of the offense” (quotation marks omitted)); United States v. ...


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