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United States v. Chan

United States District Court, D. Massachusetts

January 23, 2019

UNITED STATES OF AMERICA
v.
SCHULTZ CHAN, a/k/a Jason Chan, and SONGJIANG WANG, Defendants.

          MEMORANDUM & ORDER ON MANDATORY RESTITUTION

          Indira Talwani Judge

         I. INTRODUCTION

         A jury convicted Defendant Songjiang Wang (“Wang”) of one count of conspiring to commit securities fraud in violation of 18 U.S.C. § 371 and two counts of securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff(a) and 17 C.F.R. § 240.10b-5. The jury also convicted Defendant Schultz Chan (“Chan”) of these same three counts and an additional count of securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff(a) and 17 C.F.R. § 240.10b-5. The case involved, among other actions, purchases of stock of Akebia Therapeutics (“Akebia”), while Chan was employed there.

         In a September 21, 2018, letter to the court, Akebia requested restitution pursuant to the Mandatory Victims Restitution Act (“MVRA”), 18 U.S.C. § 3663A, in the amount of $306, 899.27. Akebia contends that this amount reflects fees and costs it incurred “associated with the Department of Justice's (‘DOJ') prosecution of the Defendants, ” and submitted in support of the request spreadsheets for fees and costs for outside counsel Ropes & Gray, LLP, and for contract attorneys from Counsel On Call, invoices for technical support provided by StoneTurn Group, LLP, and a victim impact statement from Akebia's General Counsel.

         Defendants objected to the requested restitution. See Def.'s Joint Memo. in Opp. to Akebia Restitution Request [#363]. The government and Akebia submitted briefing on the statutory construction of the applicable provision of the MVRA. See Gov.'s Br. [#378]; Non-party Akebia Therapeutics, Inc.'s Supplemental Memorandum [#380]. Defendant Chan submitted a brief reply. Reply Letter [#388].

         The court addresses here the disputed interpretation of the MVRA and directs the government to submit a revised request for mandatory restitution in light of this memorandum and order.

         II. STATUTORY CONSTRUCTION

         When sentencing a defendant convicted of an offense under Title 18, “the court shall order…that the defendant make restitution to the victim of the offense…” 18 U.S.C. § 3663A(a)(1); see 18 U.S.C. § 3663A(c)(1)(A)(ii). A “‘victim' means a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered.” 18 U.S.C. § 3663A(a)(2). The statutory provision applies to various offenses, including offenses against property under Title 18 in which an identifiable victim has suffered a pecuniary loss. Id. § 3663A(c)(A), (B). Defendants do not dispute that the MVRA applies to the offenses of conviction and that Akebia was a victim, as defined by statute, that has suffered a pecuniary loss.

         A victim's loss is eligible for restitution if it “would not have occurred but for the conduct underlying the offense of conviction” and “the causal connection between the conduct and the loss is not too attenuated (either factually or temporally).” United States v. Cutter, 313 F.3d 1, 7 (1st Cir. 2002). In order to determine how much, if any, restitution is required, the court “undertake[s] an individualized inquiry: what constitutes sufficient causation can only be determined case by case, in a fact-specific probe.” Id. (quoting United States v. Vaknin, 112 F.3d 579, 589-90 (1st Cir. 1997)). This individualized inquiry follows the familiar requirements of causation, necessitating “but-for” and “proximate” causation. “The basic question that a proximate cause requirement presents is ‘whether the harm alleged has a sufficiently close connection to the conduct' at issue.” Robers v. United States, 572 U.S. 639, 645 (2014) (quoting Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 132 (2014)). The costs incurred must also be “reasonably foreseeable.” E.g. United States v. Janosko, 642 F.3d 40, 42 (1st. Cir. 2011).

         III. ANALYSIS OF AKEBIA'S REQUEST FOR RESTITUTION

         Akebia is entitled to all reasonable and reasonably foreseeable “necessary…expenses incurred during [a] participation in the investigation or prosecution of the offense or [b] attendance at proceedings related to the offense.” 18 U.S.C. § 3663A(b)(4).

         A. Expenses Incurred Prior to Participation or Attendance Akebia's entitlement under 18 U.S.C. § 3663A(b)(4) applies only to expenses incurred in connection with the criminal investigation and prosecution, and not to expenses incurred prior to such criminal proceedings. Lagos v. United States, 138 S.Ct. 1684, 1688-1690 (2018). Accordingly, all expenses incurred prior to the start of Akebia's participation in the criminal investigation will be excluded from the mandatory restitution total.

         B. Expenses Incurred During Participation

         Akebia may recover under 18 U.S.C. § 3663A(b)(4) for participation costs directly tied to the government's investigation and prosecution. The costs of compiling and producing documents in response to government requests for those documents in connection with the criminal investigation, and the costs incurred in connection with Akebia employees' preparation for interviews by the government prosecutors for this case are proximately caused by the ...


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