United States District Court, D. Hawaii
Decided November 6, 2014
For USA, Plaintiff: Cynthia Lie, Edric Ming-Kai Ching, Office of the United States Attorney, Honolulu, HI.
ORDER REGARDING RESTITUTION CONDITION; EXHIBIT A
Susan Oki Mollway, Chief United States District Judge.
On October 30, 2014, this court, finding that Defendant Vance Inouye had lied to his Probation Officer about restitution payments, revoked supervised release and sentenced Inouye to one day in custody, followed by fifty-nine months of further supervised release. Inouye's original supervision term had been scheduled to expire in a few months, and the new supervision term was designed to allow the Probation Office to continue to monitor his substantial restitution obligation.
Inouye's sole objection to the revocation sentence was to the restitution condition. The Government joined in the objection. This court then announced that, because no party would be defending its restitution condition in the event of an appeal, the court would be filing a detailed written order concerning that condition.
As the court understands it, the parties object to the inclusion in the revocation sentence of any installment payment schedule for Inouye's restitution obligation. They argue that the court should have refrained from setting any schedule and should instead have waited until Inouye, who is unemployed, obtained a job and made more permanent living arrangements before ordering any particular payment. The court is required by 18 U.S.C. § 3664 to specify " the schedule according to which, the restitution is to paid, in consideration of . . . projected earnings and other income of the defendant." This court, reviewing Inouye's recent earnings history, his living circumstances, his undisputed employability, and the priority of his restitution obligation over his other debts, concluded that there was sufficient information in the record to allow it to project Inouye's income and to make an individualized determination as to what installment payments he should be ordered to make, subject, of course, to adjustment as future developments might warrant.
The parties' joint objection raises a question: If it is improper for the court to project Inouye's earnings based on the financial data before the court, when, if ever, may the court project a defendant's earnings? Pressed on this point, the parties identified no circumstance that would allow a court to project income.
II. BACKGROUND OF THE CASE
Beginning around 2008 and continuing over the next few years, the Government filed a number of cases in the District of Hawaii alleging mortgage fraud. Inouye's case was one such action; it related to a case, Criminal No. 09-00057, involving more notorious Defendants, John and Julie Anne Baludueza Dimitrion. The Dimitrions have been fugitives since they failed to appear at their sentencing hearing on July 6, 2010.
Inouye was a loan officer with a mortgage brokerage owned by the Dimitrions. He was charged with having conspired to commit wire, mail, and mortgage fraud, and with having actually committed wire fraud involving over $200,000. His conduct, as described in his Presentence Investigation Report, included having his wife offer to serve as a " straw buyer" of the home of individuals in financial straits. The individuals were told that they could continue to live in their home and later buy the home back. Inouye's wife submitted a loan application containing false statements in connection with her purchase of the home. After title to the home was conveyed to her, she obtained a
$100,000 home equity loan, then doubled the limit on that loan and borrowed the maximum amount. In the meantime, the original homeowners were being told that they had to vacate the property, which they refused to do. Civil litigation against Inouye ensued, as did this criminal action.
Inouye pled guilty to both charges with a plea agreement and was sentenced to one month of imprisonment, followed by supervised release that included 120 days of intermittent confinement. The judgment included a requirement that he pay restitution of $274,401, which included $74,401 payable to the original homeowners, owed jointly and severally by Inouye and the Dimitrions, and $200,000 owed by Inouye alone to the home equity lender. Because the Dimitrions have absconded, the joint and several portion of the restitution amount is being collected from Inouye alone. The restitution condition required that " [a]ny remaining balance upon release from confinement be paid during the period of supervision on an installment basis according to the collection policy of the Probation Office but at a rate of not less than 10 percent of his monthly gross income."
The Probation Office's collection policy referred to in Inouye's judgment had been adopted by the court in an order signed by the active district judges years before Inouye was sentenced.
Inouye's term of supervised release began on May 3, 2010. By now, the supervised release term on the conspiracy count has expired, and the supervised release term on the wire fraud count is scheduled to expire in about half a year.
Because his restitution payments were irregular, the Probation Office arranged for payments to be made by payroll deduction through Inouye's employer beginning in June 2011. The payroll deduction amount was 25 percent of his net pay, pursuant to the Probation Office's collection policy, which had graduated percentages beginning at 10 percent but increasing as income increased.
Inouye's employer and income changed over time. For some periods between July 2013 and May 2014, he earned considerably more than $2000, for others about $2000 per month. For some months, he was paying $700 or more per month in restitution, while for other months, he paid $500 per month in restitution. Beginning in November 2013, when payroll deduction appears to have ended, he stopped making payments. When questioned by his Probation Officer, he claimed more than once to have mailed in payments, but no payments were received.
The Probation Officer brought the matter to the court's attention, and the court issued a summons requiring Inouye to appear to show cause why supervised release should not be revoked.
The revocation proceeding caused the Federal Public Defender's Office, the United States Attorney's Office, and the court to focus on the restitution schedule. In the meantime, the court, taking into account financial difficulties Inouye was encountering, excused him for several months from making additional payments.
III. BACKGROUND REGARDING RESTITUTION CONDITION
Over the course of several hearings and meetings, the court participated in detailed discussions of the District of Hawaii's restitution practices. This discussion was not confined to what was occurring in Inouye's case, instead expanding to encompass a review of the District's longstanding restitution practices.
Because the Federal Public Defender, who was representing Inouye, had very specific concerns about the District's practices,
this judge asked the Federal Public Defender for a written statement of the issues he had identified. A copy of that statement is included in the record at ECF No. 54. Citing United States v. Gunning, 339 F.3d 948 (9th Cir. 2003); United States v. Gunning, 401 F.3d 1145 (9th Cir. 2005); United States v. Lemoine, 546 F.3d 1042 (9th Cir. 2008); and Ward v. Chavez, (678 F.3d 1042 (9th Cir. 2012), the Federal Public Defender's statement challenged the court's longstanding restitution payment practice as involving the delegation by the court to the Probation Office of the court's nondelegable duty to set a restitution payment schedule.
The merits of that statement are not in issue here, but the court mentions it because it provides part of the context in which Inouye's revocation sentencing proceeded. The Federal Public Defender's statement did not mention that a decade ago, the Ninth Circuit rejected a similar challenge to this District's practice. The Federal Public Defender may have felt prohibited from referring to that ruling because it was embodied in an unpublished (and thus nonprecedential) memorandum issued before the effective date of Rule 32.1 of the Federal Rules of Appellate Procedure, which provided that unpublished rulings could be cited. This court does not mention the unpublished ruling as authority for any matter in controversy here, but only as factual background (and therefore as arguably permitted under Ninth Circuit Rule 36-3(c) (ii)).
The unpublished ruling in issue is United States v. Estacion, 86 F.App'x 320 (9th Cir. 2004), in which the Ninth Circuit said:
Relying upon United States v. Gunning, 339 F.3d 948, 950 (9th Cir. 2003) (per curiam), Estacion contends that the district court plainly erred by delegating to the probation office the responsibility of determining the manner and schedule of her restitution payments. We reject this contention because we conclude that the district court's order did not assign full control of this determination to the probation office. Cf. id. (remanding because the district court assigned " full control" of the restitution payment schedule to a probation officer).
Id. at 320.
This judge shared the Federal Public Defender's statement with the United States Attorney's Office, with the other judges on the District Court bench, and with the Probation Office. A series of meetings and discussions followed, some occurring among only the judges, some with judges and the Probation Office, some between attorneys and the Probation Office, and some that included some judges, the Probation Office, the Federal Public Defender, and the United States Attorney's Office. These meetings and discussions spanned many weeks, during which various judges presided over hearings involving restitution issues in cases other than Inouye's. This judge herself had such hearings, including a hearing in another case in which the Federal Public Defender and the same Assistant United States Attorney assigned to Inouye's case were required to address the restitution issue.
It became unclear to judges and Probation Officers exactly what the United States Attorney's position was regarding the handling of restitution when defendants could not make lump sum payments satisfying restitution obligations in full. For that reason, this judge asked the United States Attorney to provide a written statement of her general position (as opposed to her position in any particular case). The United States Attorney's response is attached to this order as Exhibit A. Again, the merits of that position are
not directly in issue here, but understanding what the United States Attorney stated is likely to assist any understanding of what occurred in Inouye's case because that statement was repeatedly referred to during Inouye's revocation proceedings.
On October 2, 2014, a meeting was held that included judges, Probation Officers, and attorneys from the Federal Public Defender's Office and the United States Attorney's Office. At the conclusion of that meeting, the judges and Probation Officers in attendance believed that the Federal Public Defender and the United States Attorney were in agreement that installment restitution payments were not illegal just because they were stated in terms of ...