United States v. Marino
654 F.3d 310
| 2d Cir. | 2011Background
- Marino pled guilty to misprision of felony in connection with the Bayou Hedge Fund fraud, a Ponzi scheme that caused approximately $200 million in investor losses.
- Bayou was run by Samuel Israel III, James Marquez, and Daniel Marino; Daniel Marino was Marino's brother and RFA served as a fictitious auditor.
- Appellant assisted in concealing the fraud, including managing RFA, altering financial statements, and drafting fake audits and confirmations.
- Investors received quarterly reports and statements showing inflated profits and supposed independent audits, sustaining the fraud from 2003–2005.
- By early 2005, the scheme unraveled; Israel, Daniel Marino, and Marquez pleaded guilty or were charged; restitution orders followed.
- The district court ordered Marino to pay $60 million in restitution, tied to losses from January–August 2005, and sentenced him to 21 months in prison.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether pre-2005 events can support restitution | Marino | Marino | Affirmed; 2003 faxes used to show knowledge but not improper error |
| Whether losses were directly and proximately caused by Marino | Marino | Marino | Affirmed; causation satisfied under MVRA |
| Causation standard under MVRA and legislative history | Marino | Marino | Affirmed; direct and proximate causation required, not unduly protracted |
Key Cases Cited
- United States v. Silkowski, 32 F.3d 682 (2d Cir. 1994) (restitution limited to losses directly caused by conduct)
- United States v. Germosen, 139 F.3d 120 (2d Cir. 1998) (limits on victim losses recoverable for restitution)
- United States v. Reifler, 446 F.3d 65 (2d Cir. 2006) (MVRA causation and efficiency in sentencing)
- Lentell v. Merrill Lynch & Co., 396 F.3d 161 (2d Cir. 2005) (loss causation in securities-fraud contexts)
- In re Omnicom Group, Inc. Sec. Litig., 597 F.3d 501 (2d Cir. 2010) (causation concepts in securities litigation)
- Battista v. United States, 575 F.3d 226 (2d Cir. 2009) (MVRA restitution aims to restore victims to prior position)
- U.S. v. Arthur Young & Co., 465 U.S. 805 (1984) (public watchdog function of independent auditors)