14-820-cr United States v. Stevens, Kinpit Assocs., L.P.

14‐820‐cr United States v. Stevens, Kinpit Assocs., L.P.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 26th day of June, two thousand eighteen.

PRESENT: RALPH K. WINTER, DENNY CHIN, CHRISTOPHER F. DRONEY, Circuit Judges.

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UNITED STATES OF AMERICA, Appellee,

v. 14‐820‐cr

TROY D. STEVENS, JR., Defendant‐Appellant,

KINPIT ASSOCIATES, L.P., Intervenor.

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x FOR APPELLEE: Martin E. Coffey, David C. James, Peter A. Norling, Assistant United States Attorneys, for Richard P. Donoghue, United States Attorney for the Eastern District of New York, Brooklyn, New York.

FOR DEFENDANT‐APPELLANT: Steven Y. Yurowitz, Newman & Greenberg, New York, New York.

FOR INTERVENOR: Richard H. Dolan (James C. Sherwood, on the brief), Schlam Stone & Dolan LLP, New York, New York.

Appeal from the United States District Court for the Eastern District of

New York (Irizarry, C.J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.

Defendant‐appellant Troy Stevens, Jr., a former general partner of Kinpit

Associates, L.P. (ʺKinpitʺ), appeals from the district courtʹs judgment ordering him to

pay $4,486,176.05 million in restitution to Kinpit under the Mandatory Victims

Restitution Act (ʺMVRAʺ), 18 U.S.C. § 3663A. By summary order dated October 25,

2016, we remanded the case to the district court to answer seven questions about the

restitution award. United States v. Stevens, 657 F. Appʹx 69 (2d Cir. 2016). The district

court answered these questions and adhered to its initial ruling on restitution. We

conclude that the district court did not abuse its discretion in determining that Kinpit

was entitled to restitution in the amount ordered. Accordingly, we affirm. We assume

2 the partiesʹ familiarity with the underlying facts, procedural history, and issues on

appeal.

Stevens was the general partner of Kinpit, a limited partnership formed to

own and operate apartment buildings in New York City. Between July 7, 2000 and May

16, 2003, without the knowledge or approval of the limited partners, Stevens

fraudulently obtained loans and mortgages for Kinpit using a forged partnership

agreement and consent form. Stevens then consolidated the initial four loans into a

single $4.6 million loan, issued by North Fork Bank and later acquired by Capital One

Bank NA (ʺCapital Oneʺ), and pledged Kinpitʹs buildings as collateral.

In 2005, Kinpitʹs limited partners filed suit against Stevens for breach of

contract, breach of fiduciary duties, misuse of partnership assets, and fraud. See Garber

v. Stevens, No. 601917/05,

(N.Y. Sup. Ct. 2005). In October 2012, the

parties settled the civil suit and Stevens conveyed his 50% interest in Kinpit to the

limited partners, in exchange for a release of all claims (the ʺSettlement Agreementʺ).

On August 22, 2013, Kinpit sold its buildings for $10.35 million. Shortly thereafter,

Kinpit paid off the Capital One loan in full, using proceeds from the building sale.

Stevens was indicted on multiple counts on October 2, 2012. On May 28,

2013, he pleaded guilty to bank fraud in violation of

(Count Two) and

filing a false tax return in violation of

(Count Six). On February 28,

2014, the district court sentenced Stevens to 63 monthsʹ imprisonment and three yearsʹ

3 supervised release, and ordered forfeiture of $150,000, a $200 special assessment, and

$4,486,176.05 in restitution to Kinpit. The district court found Kinpit to be a third‐party

compensator of the victim, Capital One, who was entitled to restitution pursuant to

(j)(1). Judgment was entered on February 28, 2014.

Stevens appealed, arguing inter alia that the district court erred in ordering

him to pay restitution to Kinpit. The government argued that restitution was properly

paid to Kinpit as a third‐party compensator and that Stevens should not be given a

credit towards his restitution obligation for surrendering his partnership.

By summary order dated October 25, 2016, we affirmed the sentence, but

remanded as to the district courtʹs restitution order, as we were ʺunable, because of a

lack of clarity in the record, to determine whether the district court properly appliedʺ

the principles applicable to restitution. Stevens, 657 F. Appʹx at 73. Accordingly, we set

forth seven questions for supplementation of the record. The summary order provided

that, following the district courtʹs decision on remand, jurisdiction would automatically

be restored to this panel.

On remand, the government changed its position with respect to

restitution, arguing that Stevens should be given credit for surrendering his partnership

interest. Kinpitʹs proceeds from the sale of its buildings were $10,350,000, and

$4,500,592.71 of that amount was used to pay off the Capital One loan in full. The

4 government argued that this amount should offset Stevensʹs restitution obligation of

$4,486,176.05, and that, accordingly, Stevens owes no restitution to Kinpit.

The district court rejected the argument and adhered to its prior

restitution order. On August 21, 2017, the district court filed its memorandum and

order responding to the seven questions posed by this Court and concluded that

restitution remained appropriate.1 The parties returned to this Court and submitted

supplemental briefing.

We review a district courtʹs order of restitution ʺfor abuse of discretion,ʺ

reversing its ruling only if it ʺrests on an error of law, a clearly erroneous finding of fact,

or otherwise cannot be located within the range of permissible decisions.ʺ United States

1 The questions posed to the district court and the courtʹs answers are summarized

below:

1. Was the district court treating Kinpit as a victim of Stevensʹs bank fraud for the purposes of the MVRA, or as a third‐party compensator? Third‐party compensator. 2. What were Capital Oneʹs ʺactual lossesʺ? $4,500,592.71. 3. Did the restitution award include compensation for Kinpitʹs losses (as opposed to Capital Oneʹs losses)? The award only included compensation for Capital Oneʹs losses. 4. Did the restitution award exceed the amount of Capital Oneʹs actual losses resulting from Stevensʹs bank fraud? No. 5. Were any of the loan proceeds diverted by Stevens, and, if so, how much went to Kinpit? The parties agreed that at least some of the loan proceeds were diverted by Stevens, but the parties disagreed on how much went to Kinpit. The district court found that none of the transfers of the loan proceeds made by Stevens from the Kinpit operating account were diverted to Kinpit. 6. Is Kinpit receiving a windfall (i.e., is Stevens being ordered to pay monies to Kinpit that he has already paid)? No. 7. Was the settlement agreement between Stevens and Kinpit intended to compensate Kinpit for its losses resulting from Stevensʹs bank fraud, and if so, to what extent? No.

5 v. Boccagna,

(2d Cir. 2006) (citations omitted). ʺWhen a defendantʹs

challenge to a restitution order raises an issue of law, we review that challenge de novo.ʺ

United States v. Thompson,

(2d Cir. 2015).

The MVRA makes restitution mandatory for certain categories of crimes,

including those that inflict property loss on their victims. 18 U.S.C. § 3663A(a). Only a

victim is entitled to restitution under the MVRA. See United States v. Maynard,

(2d Cir. 2014). A ʺvictimʺ for the purposes of the statute is ʺa person directly

and proximately harmed as a result of the commission of an offense for which

restitution may be ordered . . . .ʺ 18 U.S.C. § 3663A(a)(2). The MVRA thus aims to limit

restitution to those harms that ʺha[ve] a sufficiently close connection to the conduct at

issue.ʺ Robers v. United States,

(2014) (citation and internal

quotation marks omitted).

The primary goal of the MVRA is to ʺcompensate these victims for their

losses and to restore the[m] to their original state of well‐being.ʺ Thompson,

(quoting United States v. Qurashi,

(2d Cir. 2011)). To avoid

awarding the victim a windfall, ʺthe MVRA caps the restitution award at the actual

ʹamount of the victimʹs loss.ʹʺ

(quoting Boccagna,

). In cases involving

monetary loss, the actual loss calculation must take into account ʺthe value (as of the

date the property is returned) of any part of the property that is returned.ʺ 18 U.S.C.

§ 3663A(b)(1)(B)(ii).

6 Where, as here, a victim receives reimbursement for his or her losses from

a third party prior to the entry of a restitution order, the third‐party compensation is

irrelevant in calculating the defendantʹs total restitution. See

(f)(1)(B)

(ʺIn no case shall the fact that a victim has received or is entitled to receive

compensation with respect to a loss from insurance or any other source be considered in

determining the amount of restitution.ʺ).

Additionally, where, as here, a third party has assumed the victimʹs losses

by reimbursing the victim, the court must order a defendant to pay restitution directly

to that third party. See

(j)(1) (ʺIf a victim has received compensation

from insurance or any other source with respect to a loss, the court shall order that

restitution be paid to the person who provided or is obligated to provide the

compensation.ʺ). Any funds still owed to the victim, however, must be repaid in full

before any payments may be diverted to a third‐party compensator. Thompson,

. Moreover, because third‐party compensators are not themselves ʺvictimsʺ for

the purposes of the MVRA, ʺany losses suffered by those parties in the course of

compensating a victim cannot increase a district courtʹs calculation of the defendantʹs

restitution obligations under § 3663A(b).ʺ Id. at 279. ʺ[W]here a third party has already

reimbursed the victimʹs losses, § 3664(j)(1) simply shifts payment of the restitution

amount calculated under § 3663A(b) directly to that party.ʺ Id. (emphasis in original).

7 Here, Stevens and the government argue that Stevensʹs restitution

obligation should be offset by the 50% ownership interest Stevens gave up pursuant to

the Settlement Agreement. The district court determined, however, that Stevensʹs

relinquishment of his interest was not intended to compensate his limited partners for

the Capital One loan. Rather, the district court concluded that Stevensʹs relinquishment

of his ownership interest was to account for other liabilities to his limited partners, and

it awarded restitution to compensate Kinpit for its repayment of the Capital One loan.

The district courtʹs view is supported by the record: the Settlement

Agreement did not provide that Stevensʹs relinquishment of his interest was to account

for paying off the Capital One loan, the Settlement Agreement was silent as to who was

responsible for paying off the Capital One loan, and the Settlement Agreement

provided that Stevens would indemnify Kinpit against any liabilities incurred or to be

incurred by Kinpit by reason of any claim or suit. In addition, the settlement preceded

the repayment of the Capital One loan, Kinpit suffered additional losses (although not

attributable to Count 2, the count of conviction), and the restitution award did not

compensate Kinpit for its own losses. Thus, the district court did not err in finding that

Stevensʹs relinquishment of his 50% interest was not intended to compensate Kinpit for

repaying the Capital One loan.

The government rests its argument on general principle of equity,

claiming that even if it was not Stevensʹs intent that the proceeds from the sale of

8 Kinpitʹs buildings pay off the Capital One loan, ʺKinpit benefitted from Stevensʹs

actions, which facilitated and allowed for the . . . selling [of] its building, thereby

providing funds to Kinpit with which it could pay off the loans.ʺ Appellee Br. at 15.

This argument misses the mark. The district court found that ʺall transfers

of the loan proceeds made by [Stevens] from the partnership operating account were for

his personal benefit and that none of the loan proceeds were diverted to Kinpit.ʺ Dist.

Dkt. No. 63 at 7 (Memorandum and Order). As the government has acknowledged,

Stevens directed nearly $4.6 million to himself through Dawmich, his wholly‐owned

subsidiary. In addition, the record shows that Kinpit suffered more than $11 million in

losses and that, as the district court found, Kinpit is not receiving a windfall. Although

these losses are not entirely attributable to the crime of conviction, the district court did

not abuse its discretion when it determined that Stevensʹs relinquishment of his

partnership interest was not meant to compensate Kinpit for repayment of the Capital

One loan, but to account for other obligations, and that Kinpit was entitled, as a third‐

party compensator, to restitution in the amount ordered.

We have considered Stevensʹs remaining arguments and find them to be

without merit. Accordingly, we AFFIRM the judgment of the district court.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk

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