Victim Restitution
for Financial and Emotional Suffering
from Fraud

The principle of restitution is an integral part of virtually every formal system of criminal justice. It holds that, whatever else society does to punish its wrongdoers, it should also insure that the criminal is required, if possible, to restorethe victim to his or her prior state of well-being.

The payment of restitution by perpetrators can mark the end of a financial nightmare for fraud victims. It not only serves to right a wrong, it often allows them to return to whatever level of financial security they enjoyed before the crime. The biggest dream for those who have suffered from financial crime is getting some money back, preferably from the people who stole it from them.

However, in reality, very few fraud perpetrators actually pay restitution. Many perpetrators will have spent the money and have no discernible resources with which to repay victims. In other cases, perpetrators will have placed assets in the names of others or hidden money in offshore accounts, so victims usually collect only pennies on the dollar of what they are owed, or get nothing at all.

One telemarketer recently told a prosecutor:

'I'd rather spend a million dollars fighting extradition than paying it back in restitution to the victims'.

There have been attempts to deal with this problem by assigning fraud investigators to track the assets of suspected perpetrators before they are indicted.

Most restitution payments begin only after the defendant is released. So even if the court orders full restitution to victims, the collection and distribution of payments is often difficult, especially if perpetrators are sentenced to long periods of incarceration.

Additionally, victims not officially included in formal indictments are ineligible to receive any restitution unless their repayment is part of a plea negotiation.

Some losses may at least be tax-deductible so consult a qualified tax advisor or the taxation department to see if your losses qualify.

Court-Ordered Restitution.

U.S. courts must order restitution for federal fraud crimes committed after April 24, 1996, regardless of the defendant's ability to pay. The court sets the amount of restitution, the order in which victims will be paid (if there are multiple victims, usually those with the most pressing financial needs are paid first), and conditions for repayment. Even the process of having to notify all the victims in a big fraud case is an overwhelming undertaking.

You will be required to submit a documented account of your financial losses before the judge orders restitution. So the first thing you should do is collect and save any paperwork that directly relates to your loss.

Settlements

Seasoned litigators know that it is one thing to obtain a judgment and quite another to collect it.

As a tool to preserve wealth, offshore trusts are effective because a creditor with a U.S. judgment will still face significant hurdles before actually being able to get any of the trust's assets. Because some jurisdictions will not recognize foreign judgments, the creditor may be forced to re-litigate its entire case against the trust locally.

Also restrictive for a creditor is the fact that these havens do not allow lawyers to take matters based on a contingency fee. Worse still, they then provide that the losing party to a lawsuit must pay all of the victor's expenses, including attorneys' fees.

As such, the process may prove prohibitively expensive for an individual creditor when the potential reward is so uncertain. The effectiveness of offshore trusts for asset protection purposes remains clear and explains how settlements, if offered at all, range from only 20-50 cents on the dollar.

Seizure and Forfeiture of Assets.

Within the federal prosecutor's office, the Financial Litigation Unit (FLU) works to uncover any assets the crook may have that could be sold, seized, or forfeited to satisfy the restitution debt. Liens on assets are enforceable for twenty years from the time they are released from prison. Some scammers try to use bankruptcy protection to make it harder for their victims to collect anything but under federal law, they cannot file bankruptcy to discharge their legal obligation to pay court-ordered restitution or civil judgments.

What is civil forfeiture?

There are two kinds of forfeiture: criminal and civil. The former is part of a criminal case against a defendant. The other is an entirely separate civil action.

While there is a parallel criminal arrest and prosecution, in the overwhelming majority of civil forfeiture cases, there are important reasons why the government must have civil forfeiture, in addition to criminal.

First, criminal forfeiture is unavailable if the defendant is dead or is a fugitive. There is simply no criminal case in which to pursue forfeiture.

Second, a majority of forfeiture cases are uncontested, often because the defendant sees no point in claiming property that connects him to the crime. Civil forfeiture allows disposal of these cases administratively.

Third, criminal forfeiture statutes are not comprehensive. Some cases must be done civilly simply because there is no criminal forfeiture statute.

Fourth, criminal forfeiture in a federal case requires a federal conviction. If the defendant was convicted in a state case, the federal forfeiture must be a civil forfeiture.

Fifth, criminal forfeiture is limited to the property of the defendant himself, not associates or family members who may have taken possession of the assets.

Civil Recovery for Fraud Victims

Although many crime victims and their families have some knowledge about the legal system, they are often unaware that there are two systems of justice available in which to hold the offender accountable—the criminal justice system and the civil justice system.

Civil recovery is another option for recovering your financial losses, especially those not considered in the criminal justice system. Civil recovery is an action separate from the criminal prosecution, and filing a civil action does not preclude you from requesting restitution in the criminal case. So, if you believe the fraud perpetrator has assets, you may be able to recover some losses through a civil lawsuit.

Civil cases are private matters. You have to initiate the action and hire a lawyer at your own expense. Contact your state or local bar association or the National Crime Victim Bar Association www.victimbar.org for the names of attorneys who specialize in this area of law to determine if your case is appropriate for civil action.

Unlike the criminal justice process, the civil justice system does not attempt to determine an offender’s guilt or innocence, or to incarcerate the offender. Rather, civil courts attempt to ascertain whether an offender or a third-party is civilly liable for the injuries sustained as a result of the crime.

The civil legal system offers crime victims another opportunity to secure what they seek most – justice. Regardless of whether there was a successful criminal prosecution–or any prosecution at all–victims can bring their claims before the court and ask to have the responsible parties held accountable. In the civil justice system, offenders are held accountable, not to the state, but to the victims who suffered the direct impact of the crime. While money awarded in civil lawsuits can never fully compensate a victim for the trauma of victimization or the loss of a loved one, it can provide valuable resources to help crime victims rebuild their lives.

If your loss is small, you may want to investigate filing a claim in small claims court where you do not require a lawyer.

Three Day Rescission Law

There is a common thread that links many 'membership' businesses such as campground membership resorts, resort membership resale businesses, travel clubs, video dating services and some 'business opportunities'.

The consumer is sold a future service contract (membership) and told that they have three days in which to cancel.

Actually, where there is a statutory cancellation period, the statute allows the consumer to cancel within 3 (or 7 or 10 depending on the statute) without paying ANY damages whatsoever. The 3-day period is a 'super remedy' that doesn't allow the business to keep any money. After three days, normal contract damage law still applies.

If the consumer hasn't caused $5,000 in damages, they are not obligated to pay a $5,000 sales price, or the business is not allowed to keep the full $5,000 if already paid. The business can only keep actual damages (for instance, the cost of a 1 hour sale pitch and a glossy brochure).

Many consumers are really beat up with this misrepresentation. Many state Assistant AGs, and at least one FTC attorney, has said that after three days, that's it, you lose everything.

Mark Fleming, a class action attorney from Seattle has yet to find a judge that agrees.

Leisure Time Resorts of America (now Thousand Trails), paid out over $1,000,000.00 in consumer refunds in a class action lawsuit he finished last year. LTRA said the consumer had to pay the full sales price whether the consumer wanted to keep the membership or not.

The judge disagreed and the consumers won.

The court ruled that a business that requires full forfeiture on a future services contract has engaged in a deceptive trade practice.

As a matter of common sense, the business has been relieved from performing years of membership services. Therefore, how can it be entitled to full payment?

Nor does it make sense for the business to argue that the consumer should be forced to remain a member against their will. Unfortunately, we are used to the concept of having to pay in full on a contract because we have driven the vehicle off the lot, taken the TV home, etc.

When 'you have the goods,' you pay the price. When it's a future services contract, you only pay the damages (if any).

It was discovered from reviewing financial statements that the campground membership industry considers its satisfied customers as 'loss leaders.' The profit is in the ones who are disgusted with misrepresentations made at the point of sale, or move, and simply walk away from their money because of the 'no refund' language in the contract.

Fleming feels that one area that doesn't get enough press is the successful individual consumer lawsuit. If an individual sues, proves a deceptive trade practice, and gets their money back, nobody really knows.

Only appellate cases are reported so that other attorneys can find them, and a business is not likely to appeal and have everyone know that one of its business practices is deceptive.

Consumers are constantly 'reinventing the wheel' when it comes to proving that a particular business practice is illegal. Many 'traditionally suspect businesses' (membership sales, furnace installers, dating services, etc.) do not even show up to defend a lawsuit.

They will pound their chests until the day of trial and then not show.