United States District Court, S.D. Texas, Houston Division
ORDER ON THE DEFENDANTS' MOTIONS TO
Rosenthal Chief United States District Judge
United States submitted a consolidated response to Joe B.
Phillips's and Dorothy B. Phillips's Motions to
Clarify/Modify Restitution Order. (Docket Entry Nos. 190-91,
194-95.) The United States did not oppose the defendants'
requests for adjustment of their restitution payment
schedules, but asked the court to require them to pay no less
than $100 per month combined. The court grants the motions in
part and denies them in part for the reasons set out below.
defendants were prosecuted for their roles in a
four-year-long fraudulent scheme to embezzle and
misappropriate benefits paid to veterans who were incompetent
to manage their own affairs and for whom Mr. Phillips acted
as guardian or fiduciary. (Docket Entry No. 99, at ¶ 14;
Docket Entry No. 122 at ¶ 14.) Both defendants pleaded
guilty to conspiracy to misappropriate veterans benefits by a
fiduciary, and to filing a false federal income tax return.
(Docket Entry No. 99 at ¶ 1; Docket Entry No. 122, at
¶ 1.) The remaining counts against them were dismissed.
(Docket Entry Nos. 138, 147.)
Phillips was sentenced to serve 46 months in prison and 3
years on supervised release, and to pay $200 in special
assessments. She was also required to pay $2, 352, 107.84 in
restitution to the Veteran's Administration, making $250
in monthly payments beginning 60 days after her release from
incarceration. (Docket Entry No. 140; id. at 7.)
Phillips received a 46-month prison term and a 3-year
supervised-release term. He was ordered to pay $200 in
special assessments and also to pay $2, 352, 107.84 in
restitution to the Veteran's Administration, jointly and
severally with his wife. (Docket Entry No. 150.) He too was
ordered to make $250 monthly payments beginning 60 days after
his release from incarceration. (Id. at 7.)
restitution imposed was mandatory under the Mandatory Victims
Restitution Act. It is the amount the Veteran's
Administration lost as a result of the defendants' fraud.
See 18 U.S.C. §§ 3663A(c)(1) &
3664(f)(1)(A). The court took account of the defendants'
financial resources and obligations when it established the
payment schedules. See 18 U.S.C. § 3664(f)(2)
(listing factors for consideration); 18 U.S.C. §
3572(d)(2) (restitution payment plans should allow no longer
than reasonably necessary to accomplish full payment). Even
when full payment of restitution is unlikely, a payment
schedule should require a defendant to pay as much as his or
her individual financial circumstances reasonably allow.
defendants ask the court to reduce their monthly restitution
payments under 18 U.S.C. § 3664(k), which permits
adjustment when the court is notified of “any material
change in the defendant's economic circumstances that
might affect the defendant's ability to pay
restitution.” During their respective terms of
supervised release-which began on May 19, 2016 for Mrs.
Phillips and on May 27, 2016 for Mr. Phillips-each defendant
made monthly restitution payments of between $10 to $50. In
addition to these payments, both defendants were enrolled in
the Treasury Offset Program, which began offsetting Mr.
Phillips's monthly civil service annuity payments on
March 1, 2017, applying $212 to pay his restitution debt.
defendants received early termination from supervision on
March 31, 2017. (Docket Entry Nos. 192, 193.) As soon as the
Financial Litigation Unit of the U.S. Attorney's Office
learned of the termination-in mid-April 2017-it sent
financial disclosure forms, which the defendants returned in
early May. The defendants met with members of the Financial
Litigation Unit in June 2017 to discuss their disclosures and
clarify certain expenses. Shortly after this review, the
United States removed the defendants from the Treasury Offset
Program. This action was based on the defendants' present
fixed incomes and documented living expenses. There is some
procedural delay before offsets cease, but that action has
following table summarizes the financial documents the
United States Civil Services Annuity (Joe Phillips)
Social Security (Joe Phillips)
Social Security (Dorothy Phillips)
Recurrent Living Expenses (on an average,
Property taxes on homestead
Utilities on homestead (trash, electricity, gas,
sewer /water, landline telephone, internet, and home
Homeowners insurance on homestead
Home repairs on homestead
Auto insurance and operating costs for two vehicles
(tolls not included)
Health insurance, life insurance, and out-of-pocket
Food, groceries, and other incidentals
United States does not oppose the defendants' request to
reduce their monthly restitution payments under 18 U.S.C.
§ 3664(k), to a combined payment of no less than $100.
The court agrees and modifies the amounts to require $50 from
each defendant each month.
defendants' proposed amount of $10 from each is both
inadequate and less than the defendants are able to pay on a
monthly basis. As the government notes, the defendants'
discretionary spending includes at least $100 per month for
cable television; $80 per month on utilities for a second
property in Crockett, Texas, that is apparently shared by
members of the defendants' extended family; and $200 per
month to a company known as “Tax Defenders.” In
return for this monthly fee-which is automatically debited
from defendants' bank account and is scheduled to
continue until 2019-“Tax Defenders” apparently
monitors the IRS to ensure that it does not pursue
enforcement against the defendants for past-due income taxes.
The defendants began this $200 monthly payment in 2016 to
protect their own financial interests.
Phillips suggests that the court should direct the United
States to place her debt in suspense, under U.S.
Attorneys' Policy and Procedures 3-12.400.001. (Docket
Entry No. 194, at 3.) The Financial Litigation Unit placed
both the defendants' restitution debts in suspense in
2013. This internal accounting designation does not mean that
the United States ceases ...