United States v. Skowron
839 F. Supp. 2d 740
S.D.N.Y.2012Background
- Morgan Stanley seeks MVRA restitution for (i) SEC disgorgement paid, (ii) legal fees and related costs, and (iii) a portion of Skowron’s compensation; the court grants for fees and 20% of compensation, but denies disgorgement as restitution.
- Skowron pleaded guilty Aug. 15, 2011 to conspiring to commit securities fraud and obstruct justice; sentenced Nov. 18, 2011 with restitution order for five victims.
- Morgan Stanley, FrontPoint, and HGSI submitted restitution letters; only Morgan Stanley’s claim remains in dispute after the government indicated FrontPoint’s claims were assigned and HGSI’s claim failed.
- Morgan Stanley’s December 14, 2011 submission sought $44,873,878.49 comprising disgorgement ($33,020,825), fees ($3,827,052.49), and compensation ($8,026,001).
- The court held Morgan Stanley is a MVRA victim and that its losses were directly caused by Skowron’s offense, which included insider trading and cover-up; the final awards were $3,827,052.49 (fees) and $6,420,801 (20% of 2007–2010 compensation).
- The SEC disgorgement amount was not recoverable, and the remaining restitution requests were denied beyond the approved amounts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Morgan Stanley is a MVRA victim and eligible for restitution | Morgan Stanley directly harmed by Skowron’s scheme; victim under MVRA | Note: Skowron argued causation/positioning issues, but court ultimately finds victim status | Yes; Morgan Stanley is a MVRA victim and may recover eligible losses |
| Court’s authority to order restitution after the 90-day deadline | Court can set final amount and order restitution beyond 90 days | Deadline strict; no authority after 90 days | Court retains power to order restitution beyond 90 days when final amount open at sentencing |
| Recoverability of the SEC disgorgement paid by Morgan Stanley | Disgorgement represents victim losses and should be recoverable | Disgorgement is ill-gotten gains not recoverable as victim restitution | Denied; disgorgement cannot be recovered under MVRA and would undermine disgorgement deterrence |
| Restitution for attorney’s fees/costs and a portion of Skowron’s compensation | Victim entitled to recover necessary expenses and loss in value of honest services | Limitations on what constitutes recoverable compensation and fees | Granted: $3,827,052.49 in fees; 20% of Skowron’s compensation ($6,420,801) awarded; other requests denied |
Key Cases Cited
- United States v. Bengis, 631 F.3d 33 (2d Cir. 2011) (MVRA; causation and victim analysis for restitution in fraud schemes)
- United States v. Bahel, 662 F.3d 610 (2d Cir. 2011) (victim status and recovery of “other expenses” including attorney’s fees)
- United States v. Archer, 671 F.3d 149 (2d Cir. 2011) (integral mechanism of crime; direct harm to victim through scheme)
- United States v. Sapoznik, 161 F.3d 1117 (7th Cir. 1998) (restitution for employer’s loss of honest services)
- United States v. Amato, 540 F.3d 153 (2d Cir. 2008) (restitution including attorneys’ fees under MVRA)
- United States v. Qurashi, 634 F.3d 699 (2d Cir. 2011) (Mvra victims; broad restitution principles)