United States v. Scott, No. 08-1489-cr (2d Cir. April 14, 2009) (found here)
On appeal Scott contended that the district court incorrectly calculated the amount of restitution he owed his victims because it had included "lost investment returns, calculated as of the date of sentencing from funds that when stolen were invested in either a variable annuity or an IRA." More specifically, Scott argued that "his victims' losses would be fully compensated by an award of the nominal value of the property he stole from their accounts and that the district court therefore erred by including lost investment earnings in the restitution award."
The Second Circuit disagreed. It found that Scott had stolen from customer retirement accounts, and that "[h]ad the assets remained in those accounts, two of the three accounts would have increased in value by the date of sentencing. . . . Accordingly, the actual value of the stolen property, the funds in the retirement accounts, at the time of sentencing was the nominal value of the stolen funds plus the subsequent investment gains lost as a result of the theft."
Hmmm...In light of the performance of the financial markets in the past year, the Second Circuit's analysis begs an interesting question. Say a defendant steals money from a client's IRA account last June, and say that IRA account had a value of $100,000 on the date of the theft. Say further that the defendant is coming up for sentencing today, when the value of that IRA account -- if no theft had occurred -- would have dropped 40% because of the turmoil in the financial markets. Would that individual be responsible for: (A) the value of the account on the date of the theft ($100,000); or (B) the value of the account on the date of sentencing ($60,000)? In other words, is the Second Circuit giving an inadvertent windfall to those who have committed financial frauds in the past twelve months?