Maximizing Restitution in Light of Lagos v. United States
We are often called upon to represent corporate victims of crime. These engagements involve internal investigations of possible criminal conduct by employees or third-parties, referrals to law enforcement and, in cases where criminal prosecutions are brought, requests for restitution for our client’s loss and costs incurred in conducting the internal investigation, including attorney’s and expert’s fees and costs. In the past, we sought expenses for attorneys and experts under the Mandatory Victims Restitution Act on the theory that they were incurred “during participation in the investigation or prosecution of the offense.” 18 U.S.C. § 3663A(b)(4).
Last May, in Lagos v. United States, the Supreme Court changed the seemingly automatic nature of these restitution requests. The Lagos Court held that a private law firm’s legal fees incurred in an internal private investigation were not properly recoverable as restitution. Rather, to be recoverable, the expenses had to be incurred during government investigations in criminal proceedings, not during private investigations or civil or bankruptcy proceedings. The Court easily rejected the argument that expenses incurred before the victim participated in the government’s investigation were brought within the ambit of the Mandatory Victims Restitution Act because the victim shared with the government the results of its own investigation. To the Court, “during participation in the investigation” “does not refer to expenses incurred before the victim’s participation in a government’s investigation began.”
So, where does that leave us? As Justice Ginsburg noted during oral argument in Lagos, holding that fees incurred during a private investigation conducted before the government is involved — e.g., before a referral to law enforcement – are not recoverable creates a “perverse incentive” for victims to decide not to immediately investigate. Of course, our clients can bring civil actions seeking to recover these costs, and (at least in Connecticut) seek to attach the wrongdoer’s assets. And we can also argue that the expenses we are seeking to recover are those incurred in the sharing of the results of our investigation, but that likely will not involve much in the way of recovery. Or, it may be that we position the case so that our investigations are conducted at the “government’s invitation or request,” a position left open by the Lagos Court. And, of course, as pre-Lagos decisions made clear, carefully documenting in billing records and elsewhere the purpose of the investigation, and the reasonableness and necessity of all expenses will go a long way towards ensuring recovery.