882 F.3d 348
2d Cir.2018Background
- SAIC was lead contractor on New York City’s CityTime project; two senior SAIC employees (Denault and Bell) steered work to Technodyne in exchange for kickbacks, while CityTime costs were inflated from 2003–2011.
- SAIC negotiated a 2006 cost-plus amendment that shifted cost overruns to the City; after the amendment SAIC profited from the scheme and later entered a DPA admitting responsibility and agreeing to disgorge over $500 million (restitution + penalty).
- Bell pled guilty to multiple offenses arising from the scheme; other coconspirators were convicted and sentenced. SAIC’s Statement of Responsibility admitted its managerial failures and acceptance of responsibility for the misconduct.
- Federal Insurance Company (Federal) paid SAIC $15 million under an Employee Theft policy and was subrogated to SAIC’s recovery rights; Federal intervened in Bell’s criminal case seeking $15 million restitution and separately filed a §853(n) petition claiming priority in forfeited assets via a constructive-trust theory.
- The district court denied Federal’s restitution request (citing SAIC’s role in the scheme, the DPA, and that SAIC passed costs to the City) and summarily dismissed Federal’s §853(n) petition; Federal appealed and sought mandamus.
- The Second Circuit denied mandamus as to restitution (finding no abuse of discretion given SAIC’s admitted responsibility/unclean hands) but vacated the dismissal of the forfeiture petition and remanded for factual development on equitable issues and tracing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Federal (as SAIC’s subrogee) may obtain restitution under the CVRA/MVRA from Bell | Federal: is entitled to $15M restitution as SAIC’s subrogee; CVRA procedures permit victim (or lawful representative) to seek restitution | Govt: procedural defects and SAIC is disentitled because it participated in/benefitted from the fraud; CVRA deadlines and standing limits apply | Court: Denied mandamus; district court did not abuse discretion in denying restitution because SAIC admitted responsibility/benefitted from scheme (unclean hands/disentitlement) |
| Whether §3771(d)(5)(B) 14‑day mandamus deadline bars Federal’s CVRA petition | Federal: §3771(d)(5) does not apply to petitions seeking restitution (text exempts restitution) | Govt: deadline applies and is jurisdictional, petition untimely | Court: §3771(d)(5)(B) does not apply to restitution petitions; but timeliness governed by laches—Federal’s delay was unjustified though not prejudicial; court reached merits |
| Whether a constructive trust in SAIC’s favor can give Federal priority in Bell’s forfeited property under 21 U.S.C. §853(n) | Federal: employer obtains constructive trust over employee’s ill-gotten gains traceable to employer’s loss; thus Federal (as subrogee) has superior interest | Govt: DPA bars SAIC’s claims, SAIC’s unclean hands preclude equitable relief, and the government’s relation-back forfeiture priority applies | Court: Remanded—district court failed to make necessary factual findings on unclean hands, equitable discretion, and tracing; constructive trust may be available and requires hearing/tracing analysis |
| Whether reassignment on remand is warranted | Federal: prior judge should be replaced due to prior adverse rulings | Govt: no basis to reassign; judge can follow appellate instructions | Court: Denied reassignment; no showing judge cannot apply law impartially and reassignment would waste resources |
Key Cases Cited
- United States v. Reifler, 446 F.3d 65 (2d Cir.) (coconspirators are disentitled from restitution for harms caused in furtherance of the shared scheme)
- Willis Management (Vermont), Ltd. v. United States, 652 F.3d 236 (2d Cir.) (a constructive trust under state law can give a third party priority over government forfeiture)
- United States v. Zangari, 677 F.3d 86 (2d Cir.) (restitution is statutory and a sentencing court’s power to order it is constrained by statute)
- United States v. Watts, 786 F.3d 152 (2d Cir.) (forfeiture relation-back doctrine; government’s priority argument based on proceeds-of-crime tracing)
- United States v. Ojeikere, 545 F.3d 220 (2d Cir.) (MVRA may not be denied simply because a putative victim had dishonest motives)
- United States v. Finazzo, 850 F.3d 94 (2d Cir.) (not all kickbacks necessarily equate to inflated employer charges; affects restitution/tracing analysis)
- Dolan v. United States, 560 U.S. 605 (U.S. Supreme Court) (MVRA timing rules for entering restitution are not jurisdictional)