Delays in Restitution Hearings May Violate the Victim’s Constitutional Right

One of the rights on the list in Marsy's Law is the right of a victim to a speedy outcome.
Article I §28(b)(9)  of the California Constitution gives victims the right to "a speedy trial and a prompt and final conclusion of the case and any related post-judgment proceedings."  To determine how these rights work it is helpful to consider due process jurisprudence as applied to defendants based on the California Constitution. Because "[t]he test of a state constitutional speedy trial violation and a state constitutional due process violation converge." People v. Contreras (2009) 177 Cal. App. 4th 1296, 1305.  Speedy trial cases are helpful, particularly since victims have a speedy trial right.

The due process right and the right to a speedy trial are the rights to avoid harm caused by inappropriate delay. The cases have identified three specific kinds of harm: (a) prolonged imprisonment; (b) the anxiety of prolonged legal proceedings;  and (c) the loss of evidence caused by the delay. People v. Lowe (2007) 40 Cal. 4th 937, 943 - 944. The second category applies to victims - the right to be free of the anxiety of prolonged legal proceedings.   

To analyze a due process claim, a court balances harm against the reason for delay. "[R]egardless of whether defendant's claim is based on a due process analysis or a right to a speedy trial not defined by statute, the test is the same, i.e., any prejudice to the defendant resulting from the delay must be weighed against justification for the delay. Contreras, 177 Cal. App. 4th at 1305. How much harm is required for a due process violation is closely linked to the reason for the delay. "Purposeful delay to gain an advantage is totally unjustified, and a relatively weak showing of prejudice would suffice to tip the scales towards finding a due process violation. If the delay was merely negligent, a greater showing of prejudice would be required to establish a due process violation.” People v. Nelson (2008) 43 Cal. 4th 1242, 1255-1256.  This same analysis should apply to delays in restitution hearings which hurt victims. Some defendants purposely delay restitution hearings, a strategy which victims and the Court should address with the victim’s constitutional right to a prompt restitution hearing.

KB Homes - All Parties Misunderstand Restitution

In early November 2010, federal Judge Otis Wright gave former KB Home chief Bruce Karatz detention in his 24 room Beverly Hills mansion after Mr. Karatz pled guilty to stock backdating. The Judge followed the Probation Department recommendation.  Along the way,  the Judge blistered the U.S. attorney for disagreeing with the lenient Probation Department position.  Judge Wright specifically mentioned that he agreed with the Probation Department analysis that there was no economic loss to KB Home or its investors associated with Mr. Karatz’s crimes.

But the Judge, the Probation Department and the U.S. Attorney overlooked significant economic losses for which there should have been restitution.

In 2007, KB was forced to restate its earnings to reflect more than $36 million in compensation expenses due to options that were backdated from 1999 to 2005, according to the indictment. That meant significant and large accounting fees for a publicly held company.

Then there were the legal fees: those incurred by Mr. Karatz for which KB paid in the criminal case.  The immense fees in the civil backdating case.  The fees to respond to the
formal investigation by the U.S. Securities and Exchange Commission.  Certainly tens of millions of dollars of attorneys’ fees.

KB was out all those accounting and legal fees as a result of Mr. Karatz backdating.  It is likely that shareholders would care.  Those who held stock in 2007 (when the backdating first came to light) have seen their stock plummet from about $48 to about $12 to share.  This is not to suggest that Mr. Karatz is in any way responsible for the stock market decline.  But it is to suggest that stockholders who have taken such a beating are probably not cool with leaving millions of dollars on the table.

Perhaps one answer is that there was insurance.  But that does not mean there was no victim, it just means a different victim. Title 18 U.S.C. §3664 (j) (1) provides: “[i]f a victim has received compensation from insurance or any other source with respect to a loss, the court shall order that restitution be paid to the person who provided or is obligated to provide the compensation . . .“ The insurers, if they paid for much of the huge legal expenses, were also eligible for restitution. 

The problem is that no one carefully thought of losses and victims.