United States District Court, D. Massachusetts
POST-REMAND MEMORANDUM & ORDER ON MANDATORY
Talwani United States District Judge.
the court is the government's request, on behalf of
Akebia Therapeutics (“Akebia”), for restitution
in this insider trading criminal prosecution of Defendants
Schultz Chan and Songjiang Wang. For the following reasons,
the court awards restitution in the amount of $170, 476.36
for Akebia's necessary expenses incurred during
participation in the investigation or prosecution of the
offense. Defendant Chan shall pay 90% of this amount, or
$153, 428.72, and Defendant Wang shall pay 10% of this
amount, or $17, 047.64.
2018, a jury convicted 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 Chan of these same 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,
Chan and Wang's purchases of stock of Akebia Therapeutics
(“Akebia”) while Chan was employed at Akebia.
September 2018 letter (the “original request”),
Akebia requested restitution pursuant to the Mandatory
Victims Restitution Act (“MVRA”), 18 U.S.C.
§ 3663A, in the amount of $306, 899.27. In support,
Akebia submitted to the probation officer conducting the
presentence report a spreadsheet for fees and costs for
outside counsel Ropes & Gray, LLP (“the Law
Firm”), spreadsheets for contract work performed by
Counsel On Call, invoices for technical support provided by
StoneTurn Group, LLP (“StoneTurn”), and a victim
impact statement from Akebia's General Counsel.
Defendants objected that recovery must be limited to
“‘necessary other expenses' incurred during
the government's investigation.” Defendants'
Joint Memorandum in Opposition to Akebia Restitution Request
[#363] at 1 (citing Lagos v. United States, 138
S.Ct. 1684 (2018)).
court held sentencing hearings for Chan on November 5, 2018,
and for Wang on November 13, 2018, in which terms of
imprisonment, supervised release, and mandatory assessments
were determined. The court held additional hearings (on
November 5 and 30), and reviewed the parties' written
submissions regarding forfeiture, restitution and fines prior
to issuing judgments. On December 3, 2018, the court entered
Judgment [#367] as to Chan and Judgment
[#369] as to Wang, stating in each that the determination of
restitution was deferred until January 16, 2019, and that an
amended judgment and schedule of payments would be entered
after the restitution issue was resolved. Both defendants and
the government filed Notices of Appeal [#371],
government and Akebia filed supplemental briefs, and
Defendants filed a reply letter. Government's Brief on
the Statutory Construction of 18 U.S.C. § 3663a(B)(4) in
Light of Lagos v. United States [#378]; Non-Party
Akebia Therapeutics, Inc.'s Supplemental Memorandum in
Support of its Request for Restitution [#380];
Defendants' Reply [#388].
court issued a Memorandum & Order on Mandatory
Restitution [#391], concluding that Akebia was entitled
to seek expenses for certain categories of work but not
others, and directing the government to submit a revised
request. Id. at 5; see also 18 U.S.C.
§ 3664(d)(4) (“[a]fter reviewing the report of the
probation officer, the court may require additional
documentation . . . .”). The government sought
clarification as to one category, noting that at the November
30, 2018, hearing, “the Court appeared to acknowledge
that Akebia was entitled to restitution for expenses incurred
as part of the restitution hearing itself, ” but that
the Memorandum & Order “does not appear to
permit Akebia to seek restitution of such expenses.”
Government's Motion for Additional Time to Respond to the
Court's Order on Mandatory Restitution, For Clarification
of that Order, and for Reconsideration [#392] (citing
Forfeiture Hr'g Trans. 19:9-11 (Nov. 30, 2018)). The
government also sought reconsideration of portions of the
court's order denying certain categories of expenses.
Id. at 1-2.
court issued an Amended Memorandum & Order on
Mandatory Restitution [#395], adding restitution to the
permissible categories of expenses for which restitution may
be sought, but otherwise denying reconsideration.
government subsequently filed its Revised Request for
Restitution and Objection [#398], requesting restitution
on behalf of Akebia in the amount of $312, 899.22.
Response to Court Order [#398]. Defendants filed
their Reply to Response [#399], noting, inter
alia, that the revised request was higher, not lower,
than the original request of $306, 899.27, and that certain
entries had been revised. Akebia filed its own Notice of
Request for Restitution [#400]. Akebia represented that
it had removed approximately $73, 000 in fees and expenses
that it had originally claimed, and that as to all of the Law
Firm expenses and some of the fees, the requests were
withdrawn, but that as to other removed fees, Akebia sought
reconsideration of the court's Order. Akebia did not
break down the amounts that had been withdrawn versus the
amounts for which Akebia sought reconsideration. Id.
Akebia also stated that “[c]ertain fee entries in the
revised submission were modified to more clearly recognize
that [DOJ and SEC were coordinating their efforts] by noting
that the documents reviewed and produced were going to both
the SEC and DOJ.” Id. at 3.
26, 2019, the court requested that the First Circuit remand
the case pursuant to Rule 12.1(b) for the court to issue an
order regarding restitution, and the government submitted an
assented-to motion for limited remand to the First Circuit.
On August 8, 2019, the First Circuit issued an order granting
Post-Remand Memorandum and Order is intended as the
court's final order, superseding the Memorandum &
Order on Mandatory Restitution [#391] and Amended
Memorandum & Order on Mandatory Restitution [#395].
The Mandatory Victim Restitution Act
Mandatory Victim Restitution Act (“MVRA”) applies
to certain offenses (including crimes of violence and
offenses against property under Title 18) in which an
identifiable victim has suffered a pecuniary loss. 18 U.S.C.
§§ 3663A(c)(1)(A)(ii), (B); see also S.
REP. 104-179, 19, 1996 U.S.C.C.A.N. 924, 932 (except in
circumstances relating to a plea agreement, the
“mandatory restitution provisions apply only in those
instances where a named, identifiable victim suffers a
physical injury or pecuniary loss directly and proximately
caused by the course of conduct under the count or counts for
which the offender is convicted”).
the MVRA applies, “the court shall order…that
the defendant make restitution to the victim of the
offense…” 18 U.S.C. § 3663A(a)(1). The MVRA
includes four categories of restitution: (1) in the case of
an offense resulting in damage to or loss or destruction of
property, return of the property or payment of the value of
the property; (2) in the case of an offense resulting in
bodily injury to a victim, pay equal to costs of necessary
medical care, therapy, rehabilitation, and lost income; (3)
in the case of an offense resulting in death of the victim,
the cost of necessary funeral and related expenses; and (4)
in all cases where the MVRA applies, reimbursement “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.
does not seek restitution for any loss of property caused by
the offense under 18 U.S.C. § 3663A(b)(1). Instead, the
claim for restitution for expenses “associated with the
Department of Justice's (‘DOJ') prosecution of
the Defendants” is made exclusively as a claim for
reimbursement under § 3663A(b)(4). Defendants do not
dispute that the offenses of conviction (securities fraud and
conspiracy to commit securities fraud) are offenses against
property and that Akebia is a victim, as defined by statute,
that has suffered a pecuniary loss caused by the offense.
Defendants dispute that all of the claimed expenses were
necessary expenses incurred during participation in the
investigation or prosecution or attendance at proceedings,
and they claim that the fees are not reasonable.
court starts first with the applicable standard, and then
turns to the individual categories of expenses at issue, the
appropriate hourly rates for the work, and the division of
the restitution award between the two defendants.
Burden of Establishing the Amount and Type of Restitution
Lies with the Government
MVRA provides that “[a]n order of restitution under
[the MVRA] shall be issued and enforced in accordance with
[18 U.S.C.] section 3664.” 18 U.S.C. § 3663A(d).
Under 18 U.S.C. § 3664(e), disputes as to the proper
amount or type of restitution are resolved by the court on a
preponderance of evidence, with the burden of demonstrating
the amount of the loss sustained by the victim “on the
attorney for the government.” At the same time,
“a sentencing court is not expected to undertake a
full-blown trial” and that “‘absolute
precision is not required' in calculating restitution
under the MVRA.” United States v. Naphaeng,
906 F.3d 173, 179 (1st Cir. 2018) (quoting United States
v. Mahone, 453 F.3d 68, 74 (1st Cir. 2006)).
“Necessary Expenses” Are Reimbursable
and the government have argued that the court should follow
the First Circuit's three-part test set forth in
United States v. Janosko, 642 F.3d 40, 42 (1st Cir.
2011). In Janosko, the court summarized that
expenses under 18 U.S.C. § 3663A(b)(4) “will pass
muster if they would not have been incurred in the absence of
the offense, ” id. (citing Hughey v.
United States, 495 U.S. 411, 416-18 (1990) and
United States v. Cutter, 313 F.3d 1, 7 (1st Cir.
2002)), “were ‘not too attenuated' in fact or
time from the crime, id. (quoting United States
v. Vaknin, 112 F.3d 579, 590 (1st Cir. 1997)), and were
reasonably foreseeable.” Id. (citing
United States v. Collins, 209 F.3d 1, 3-4 (1st Cir.
1999). In the cases cited in Janosko, the First
Circuit addressed financial loss resulting from the offense
itself. United States v. Janosko, 642 F.3d 40, 42
(1st Cir. 2011); see also United States v. Cutter,
313 F.3d 1, 7 (1st Cir. 2002); United States v.
Vaknin, 112 F.3d 579, 589-90 (1st Cir. 1997). In such
cases, the court “undertake[s] an individualized
inquiry: what constitutes sufficient causation can only be
determined case by case, in a fact-specific probe.”
United States v. Cutter, 313 F.3d 1, 7 (1st Cir.
2002) (quoting United States v. Vaknin, 112 F.3d
579, 589-90 (1st Cir. 1997)). In this inquiry, restitution
serves “as a mechanism for making a victim whole by
restoring the monetary equivalent of losses suffered in
consequence of the defendant's criminal activity.”
United States v. Salas-Fernandez, 620 F.3d 45, 48
(1st Cir. 2010).
Janosko and the cases it cites predate the Supreme
Court's decision in Lagos v. United States, 138
S.Ct. 1684 (2018). There the Supreme Court addressed whether
fees incurred during private investigations were reimbursable
expenses under § 3663A(b)(4). In the course of resolving
that question, the Supreme Court examined not only the phrase
“incurred during participation in the investigation or
prosecution of the offense or attendance at proceedings
related to the ...