from the United States District Court for the Southern
District of Texas
PRADO and HIGGINSON, Circuit Judges. [*]
C. PRADO, Circuit Judge
Fernando Lagos challenges the district court's order of
restitution imposed following his guilty plea to one count of
conspiracy to commit wire fraud and to five counts of wire
fraud. See 18 U.S.C. §§ 2, 1343, 1349. He
contends that the Mandatory Victims Restitution Act
("MVRA") does not authorize restitution for the
legal, expert, and consulting fees incurred by the
victim-lender, General Electric Capital Corporation
("GECC"), in investigating the fraud or its legal
fees from the bankruptcy proceedings caused by the fraud.
the restitution ordered in this case is consistent with
payments upheld in our past cases, we affirm.
legality of a restitution award is reviewed de novo.
United States v. Espinoza, 677 F.3d 730, 732 (5th
Cir. 2012). The MVRA instructs a sentencing court to order
restitution for a victim's "actual loss directly and
proximately caused by the defendant's offense of
conviction." United States v. Sharma, 703 F.3d
318, 323 (5th Cir. 2012); 18 U.S.C. § 3663A(a)(2). This
includes "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. § 3663A(b)(4).
to Lagos, the forensic expert fees, legal fees, and
consulting fees incurred by GECC should not have been
included because they are "consequential damages."
His reliance on United States v. Schinnell, 80 F.3d
1064, 1070 (5th Cir. 1996), however, is misplaced because the
basis for the restitution award in that case was the Victim
and Witness Protection Act ("VWPA"), 18 U.S.C.
§ 3663(b)(1), not § 3663A(b)(4) and the MVRA.
Circuit, the scope of restitution under subsection
3663A(b)(4) is controlled by United States v.
Phillips, 477 F.3d 215 (5th Cir. 2007). In upholding an
award of restitution to the University of Texas imposed on a
computer hacker, this Court in Phillips cited §
3663A(b)(4), which authorizes restitution of expenses
incurred while participating in the investigation or
prosecution of the offense. 477 F.3d at 224. It concluded
that the University of Texas "was a victim, and it
collaborated with the investigation and incurred costs to
notify other victims of [the hacker's] data theft in
order to determine whether they had suffered further
damage." Id. As the Court explained, while
"consequential damages" are not properly
recoverable under Schinnell, that case did not
involve the application of § 3663A(b)(4). Id.
In distinguishing Schinnell, this Court gave a broad
reading to § 3663A(b)(4), allowing not only the cost of
the investigation but also the cost of contacting those whose
information was compromised to be included in the restitution
unpublished decisions following Phillips, this Court
has upheld restitution awards that encompassed attorneys'
fees and other expenses stemming from the investigation and
prosecution of the offense. United States v.
Herrera, 606 F.App'x 748, 752-53 (5th Cir. 2015)
(per curiam) (affirming investigative audit costs as part of
restitution where investigative audit was a fundamental
component of investigation of defendant's theft of
federal funds); United States v. Dwyer, 275
F.App'x 269, 271-72 (5th Cir. 2008) (affirming in the
restitution award costs of margin calls, attorneys' fees,
and accounting fees arising from defendant's bank fraud
under plain error standard of review).
admitted that for two years, he and his co-conspirators
misled GECC about the value of their accounts receivable to
induce GECC to increase the amount of the revolving loan and
to provide him and his co-defendants with uncollateralized
funds. Their wire fraud scheme caused GECC to employ forensic
experts to secure and preserve electronic data as well as
lawyers and consultants to investigate the full extent and
magnitude of the fraud and to provide legal advice relating
to the fraud. Fees incurred by GECC during the investigation
of the fraud were necessary and compensable in the
restitution award. See 18 U.S.C. § 3663A(b)(4).
the district court correctly included GECC's legal fees
incurred in the related bankruptcy proceedings in the
restitution award under subsections 3663A(a)(2) and (b)(4).
In its victim impact statements, GECC described how the
defendants' fraudulent scheme directly caused the
defendants' companies (the GECC borrowers) to file for
bankruptcy. The bankruptcy court ordered GECC to continue to
make advances to the defendants' companies during the
bankruptcy proceedings. Thus, the district court correctly
determined that the legal fees incurred by GECC during the
related bankruptcy proceedings were directly caused by the
defendants' fraud for purposes of restitution.
See 18 U.S.C. § 3663A(a)(2), (b)(4);
Sharma, 703 F.3d at 323 (authorizing restitution for
losses "directly and proximately caused by the
defendant's offense[s] of conviction").
that the D.C. Circuit takes a narrower view of restitution
under subsection 3663A(b)(4). United States v.
Papagno, 639 F.3d 1093 (D.C. Cir. 2011). Whatever the merits of the contrary
reasoning in Papagno, this panel is bound by ...