Court rejects restitution order in fraud case

Wednesday, July 7, 2004 | 11:13 a.m.

CARSON CITY -- A federal appeals court Tuesday reversed the penalty of a man ordered to make $2.5 million restitution to victims of a stock fraud in Nevada.

The 9th U.S. Circuit Court of Appeals sent the case back to U.S. District Judge James Mahan of Las Vegas to determine the names of the victims and how much they were actually owed.

The defendant, identified only as "John Doe" in the decision, pleaded guilty to conspiracy to commit wire fraud and to money laundering.

The charges stemmed from the defendant's part in a conspiracy to sell shares of stock by making false representations to investors, manipulating the market to inflate the value of the stock and doctoring trading records to facilitate the fraud.

When asked why the convicted man was not being identified, Jason Carr, assistant federal public defender who argued the case before the appeals court, said the record is sealed by court order.

"I can't comment on any of this," Carr said.

In May 2002 the man was sentenced to 30 months in prison, but that was later reduced to eight months because he helped the government in an unrelated investigation in New York, according to the court records.

The man was also convicted in Utah and Michigan of charges similar to the Nevada stock fraud case.

The man appealed the portion of his Nevada sentence regarding the $2.5 million in restitution on the grounds the government did not establish specific losses and did not identify the victims.

The circuit court of appeals, in a decision written by Judge Warren Ferguson, said it has ruled in the past that "restitution ordered must be limited by the amount actually lost by the victims and that the (federal district) court must be able positively to identify each victim to whom restitution is due."

Ferguson said the U.S. attorney's office agreed that the case should be sent back to Mahan for these findings.

In the Nevada case the defendant was ordered to forfeit a Las Vegas home under the plea agreement. He argued that the value of the home should be deducted from the amount of the restitution that is to be ordered.

The appeals court said it has ruled previously that offsetting a restitution order by the value of forfeited funds is not permitted where victims have not received refunds from those funds.