16-3754-cr(L)
United States v. Rutigliano
16-3754-cr (L)
United States v. Rutigliano
In the
United States Court of Appeals
for the Second Circuit
AUGUST TERM 2017
Nos. 16‐3754‐cr (L), 16‐3858‐cr (CON), 16‐3894‐cr (CON),
16‐3898‐cr (CON), 16‐3979‐cr (XAP)
UNITED STATES OF AMERICA,
Appellee‐Cross‐Appellant,
v.
JOSEPH RUTIGLIANO, PETER J. AJEMIAN,
MARIE BARAN, PETER J. LESNIEWSKI,
Defendants‐Appellants‐Cross‐Appellees,
MARIA RUSIN, GREGORY NOONE, REGINA WALSH, SHARON FALLOON,
GARY SATIN, STEVEN GAGLIANO, RICHARD EHRLINGER, BRIAN
DELGIORNO, PHILIP PULSONETTI, GREGORY BIANCHINI, FRANK PLAIA
AKA FRANKLIN PLAIA, MICHAEL DASARO, KARL BRITTEL, KEVIN
NUGENT, GARY SUPPER, THOMAS DELALLA, MICHAEL STAVOLA,
Defendants.
The Clerk of the Court is directed to amend the official caption to read as shown above.
16-3754-cr (L)
United States v. Rutigliano
On Appeal from the United States District Court
for the Southern District of New York
ARGUED: NOVEMBER 29, 2017
DECIDED: APRIL 4, 2018
Before: JACOBS, RAGGI, DRONEY, Circuit Judges.
____________
On cross appeals from a judgment of the United States District
Court for the Southern District of New York (Marrero, J.), entered
pursuant to 28 U.S.C. § 2255, the parties challenge a reduction in the
defendants’ restitution obligations as imposed in their original
judgments of conviction. Defendants argue that even the reduced
restitution amounts are not supported by the record. The government
argues that § 2255 does not authorize, nor do the facts warrant, any
reduction in restitution. We agree with the government. Consistent
with this court’s controlling precedent, we conclude that § 2255
jurisdiction does not reach the restitution part of a sentence where, as
here, the restitution cannot be deemed custodial punishment. It is not
the amount of restitution alone but, rather, the terms of payment that
identify those rare cases in which a restitution order might equate to
custodial punishment. Because the challenged judgments here
contemplate the payment of restitution on schedules yet to be set by
the district court, defendants cannot show on the present record that
their restitution obligations are custodial punishments for purposes
2
16-3754-cr (L)
United States v. Rutigliano
of § 2255 review. Accordingly, the judgment reducing restitution
must be vacated, and the case is remanded for reinstatement of the
original judgments. No different conclusion is warranted for
defendant Baran, who also invoked coram nobis to seek relief from
restitution. Although the district court did not rule on Baran’s coram
nobis petition, there is no need for it to do so on remand because Baran
identifies no fundamental error in her original restitution sentence, as
necessary for coram nobis relief.
VACATED AND REMANDED.
DANIEL B. TEHRANI, Assistant United States
Attorney (Karl Metzner, Assistant United
States Attorney, on the brief), for Geoffrey S.
Berman, United States Attorney for the
Southern District of New York, New York,
New York, for Appellee‐Cross‐Appellant.
JOSEPH W. RYAN, JR., Law Offices of Joseph
W. Ryan, Jr., Melville, New York,
for Defendant‐Appellant‐Cross‐Appellee Joseph
Rutigliano.
SEAN M. MAHER, Law Offices of Sean M.
Maher, PLLC, New York, New York,
for Defendant‐Appellant‐Cross‐Appellee Peter J.
Ajemian.
3
16-3754-cr (L)
United States v. Rutigliano
JOHN D. CLINE, Law Office of John D. Cline,
San Francisco, California (Thomas A.
Durkin, Durkin & Roberts, Chicago, Illinois,
on the brief), for Defendant‐Appellant‐Cross‐
Appellee Peter J. Lesniewski.
Marie Baran, pro se, Danbury, Connecticut.
REENA RAGGI, Circuit Judge:
Defendants Joseph Rutigliano, Peter J. Ajemian, Peter J.
Lesniewski, and Marie Baran stand convicted in the United States
District Court for the Southern District of New York (Victor Marrero,
Judge) for participating in a massive scheme to defraud the United
States Railroad Retirement Board (“RRB”) by filing fraudulent
disability pension applications on behalf of Long Island Rail Road
(“LIRR”) employees. See United States v. Ajemian, No. 11 Cr. 1091
(S.D.N.Y.), Dkt. Nos. 401, 592, 649, 704. Defendants here appeal from
a subsequent judgment of the same court, entered on November 1,
2016, which, in response to their motions for vacatur of sentence
pursuant to 28 U.S.C. § 2255, amended each defendant’s sentence in
part to reduce original restitution obligations: for Rutigliano from
$82,356,348 to $42,317,076; for Ajemian from $116,500,000 to
$53,494,797; for Lesniewski from $70,632,900 to $34,237,476; and for
Baran from $31,398,907 to $21,467,954. See United States v. Ajemian,
No. 11 Cr. 1091 (VM), 2016 WL 6820730, at *3–4 (S.D.N.Y. Nov. 1,
2016). Defendants argue that even these reduced amounts are not
4
16-3754-cr (L)
United States v. Rutigliano
supported by record evidence. The government cross‐appeals,
arguing that § 2255 does not authorize, nor do the facts warrant, any
reduction of the restitution parts of defendants’ sentences. The
government further argues that the certificate of appealability
granted defendants in this case does not reach their restitution
challenges; that Ajemian waived any challenge to restitution in his
plea agreement; and that, insofar as Baran had already filed one
unsuccessful § 2255 motion, she had not secured the necessary leave
to file a successive petition.
We need not reach the government’s last three arguments
because we are persuaded by its first. We conclude that § 2255 does
not authorize district courts to hear collateral challenges to the
restitution parts of criminal sentences where, as here, restitution
obligations do not equate to custodial punishment. Accordingly, we
vacate the § 2255 judgment reducing defendants’ restitution
obligations as imposed in their original judgments of conviction, and
we remand for reinstatement of the original judgments. To the extent
defendant Baran also invoked coram nobis to seek relief from
restitution, the district court did not address that claim, but no
remand is necessary for that purpose because Baran cannot show
fundamental error in the original order of restitution.
BACKGROUND
I. Defendants’ Convictions and Original Sentences
The fraud scheme for which defendants stand convicted sought
to take advantage of a disability pension plan made available to LIRR
5
16-3754-cr (L)
United States v. Rutigliano
employees by the RRB. The LIRR’s own pension plan allowed
employees with 20 or more years of service to retire as early as age 50
and to receive payments equal to half their pre‐retirement income.
When an employee reached age 62 or 65, he was eligible for an
additional retirement pension from the RRB. The RRB also offered
disability pensions to employees of any age who were no longer able
to work, for which payments began immediately upon approval of a
disability claim.
As part of a decades‐long scheme to defraud the RRB,
defendants Rutigliano, Ajemian, Lesniewski, and Baran, together
with 17 confederates, repeatedly submitted applications for disability
pensions based on fabricated medical documents. Orthopedic
physicians Ajemian and Lesniewski created these fabricated
documents. Rutigliano, a former LIRR conductor and union local
president, obtained a disability pension for himself by submitting
false documentation of his physical condition from Lesniewski.
Rutigliano also acted as a facilitator or consultant for numerous other
LIRR employees seeking disability pensions, charging approximately
$1,000 per person to fill out fraudulent applications. Baran, a former
RRB employee whose LIRR‐employed husband obtained an RRB
disability pension through a fraudulent application supported by
Lesniewski, also acted as a facilitator‐for‐hire, submitting disability
pension applications for LIRR employees that she knew were
supported by fraudulent documentation.
On January 18, 2013, Ajemian entered into an agreement with
the government and pleaded guilty to conspiracy to commit mail,
6
16-3754-cr (L)
United States v. Rutigliano
wire, and health care fraud, as well as substantive health care fraud.
See 18 U.S.C. §§ 1347, 1349. On May 24, 2013, the district court
sentenced Ajemian inter alia to 96 months’ imprisonment and ordered
$116,500,000 restitution, the amount identified in his plea agreement.
Further consistent with that agreement, Ajemian did not challenge his
conviction or any part of his sentence on direct appeal.
Rutigliano, Lesniewski, and Baran stood trial and, on August 6,
2013, a jury found them guilty of multiple conspiratorial and
substantive counts of mail, wire, and health care fraud. See id. §§ 371,
1341, 1343, 1347, 1349. The district court sentenced Rutigliano and
Lesniewski inter alia to 96 months’ imprisonment each and to
$82,356,348 and $70,632,900 in restitution respectively. It sentenced
Baran inter alia to 60 months’ imprisonment and $31,398,907
restitution.
The restitution amounts ordered were based on data compiled
by Natasha Marx, an Auditor in the Office of the RRB Inspector
General, and reflected disability pension payments made to identified
LIRR annuitants—for whom each defendant had submitted or
supported fraudulent claims—as of the dates the RRB terminated
their disability pensions due to the discovery of the fraud.
Rutigliano, Lesniewski, and Baran unsuccessfully challenged
their convictions, including their sentences, on direct appeal. See
United States v. Rutigliano, 790 F.3d 389 (2d Cir. 2015); United States v.
Rutigliano, 614 F. App’x 542 (2d Cir. 2015).
7
16-3754-cr (L)
United States v. Rutigliano
II. The RRB Board Orders and Post‐Termination Approvals
Defendants submit that post‐conviction actions by the RRB
constitute new evidence supporting the instant collateral challenges
to their convictions and sentences. We briefly summarize those
actions here.
On June 27, 2013, i.e., approximately one month after Ajemian’s
conviction, the RRB issued Board Order 13‐33, which terminated the
disability pension benefits of all LIRR employees whose applications
were supported by medical evidence from Ajemian. The RRB
provided notice to all annuitants affected by the order, and
termination became effective three months after the date of those
notices. On September 30, 2013, i.e., approximately two months after
the guilty verdicts against Rutigliano, Lesniewski, and Baran, the RRB
issued Board Order 13‐55, which similarly terminated the disability
pension benefits of all LIRR employees whose applications were
supported by medical evidence from Lesniewski. By their terms,
Orders 13‐33 and 13‐55 terminated benefits only prospectively; they
did not seek disgorgement of benefits paid prior to their
pronouncement. Further, the orders permitted employees whose
benefits were terminated to reapply based on “current medical
evidence” of disability from within twelve months of the new
application and not derived from Ajemian or Lesniewski. Lesniewski
App’x at 168–69, 171–72.
By May 22, 2015, the RRB had decided 531 reapplications for
disability pension benefits, granting 485 and reinstating such benefits
8
16-3754-cr (L)
United States v. Rutigliano
retroactive to the terminations effected by Board Orders 13‐33 and 13‐
55. Approximately 80% of the granted reapplications relied on at least
one new medical condition not included in the employee’s initial
fraudulent application, and approximately 70% of the granted
applications omitted at least one medical condition relied on in the
initial fraudulent applications.
III. Collateral Challenges to Convictions and Sentences
A. Baran’s First § 2255 Motion
On July 15, 2015, Baran moved pursuant to 28 U.S.C. § 2255 for
vacatur of her conviction based on ineffective assistance of counsel.
The motion made no challenge to any part of Baran’s sentence.
Specifically, it did not challenge restitution although the RRB had, by
then, taken the aforementioned action on disability pension
reapplications. The district court denied Baran’s § 2255 motion on
January 5, 2016. See Baran v. United States, 160 F. Supp. 3d 591, 594
(S.D.N.Y. 2016). Baran did not appeal.
B. Defendants’ Rule 33 and Instant § 2255 Motions
On October 2 and 13, 2015, Lesniewski and Rutigliano
respectively moved for a new trial under Fed. R. Crim. P. 33, arguing
that the RRB’s approval of the vast majority of reapplications for
disability pension benefits was newly discovered evidence showing
that there was no fraud in the original applications. Alternatively,
they moved for resentencing under 28 U.S.C. § 2255 on the ground
that the RRB’s approval of reapplications showed that the district
9
16-3754-cr (L)
United States v. Rutigliano
court had based defendants’ original sentences—both their
incarceratory and non‐incarceratory components—on erroneously
high loss calculations. On November 25, 2015, Ajemian also cited the
RRB’s approval of reapplications to move for vacatur of his conviction
and resentencing pursuant to § 2255.
On March 4, 2016, the district court denied Rutigliano’s and
Lesniewski’s Rule 33 motions, see United States v. Rutigliano, 168 F.
Supp. 3d 661, 667 (S.D.N.Y. 2016), which denials this court
subsequently affirmed, see United States v. Rutigliano, 694 F. App’x 19,
22, 24 (2d Cir. 2017). On March 18, 2016, the district court denied
Ajemian’s § 2255 motion for vacatur of conviction, see Ajemian v.
United States, 171 F. Supp. 3d 206, 209, 215 (S.D.N.Y. 2016), and on
June 21, 2016, it denied all defendants’ § 2255 challenges to the
incarceratory parts of their sentences, explaining that the alleged
reduction in actual loss to the RRB was immaterial because
defendants’ Guidelines ranges were properly calculated by reference
to intended loss, see United States v. Ajemian, 193 F. Supp. 3d 298, 302–
03 (S.D.N.Y. 2016), aff’d sub nom. United States v. Rutigliano, 694 F.
App’x 19 (2d Cir. 2017).1 Nevertheless, recognizing that restitution
may only be ordered with respect to actual loss, the district court
directed the parties to submit additional briefing on the question of
whether the RRB’s reapplication approvals in fact showed that it
1 Although portions of defendants’ § 2255 motions remained pending, the district court
granted Rutigliano, Lesniewski, and Ajemian certificates of appealability under 28 U.S.C.
§ 2253 on their prison‐term challenges. See United States v. Rutigliano, 694 F. App’x at 21
n.1.
10
16-3754-cr (L)
United States v. Rutigliano
suffered a lower actual loss amount than had been thought at the
original sentencing. See id. at 303–04.
Approximately two weeks earlier, on June 3, 2016, Baran had
advanced essentially the same arguments as Rutigliano, Ajemian, and
Lesniewski to move for resentencing pursuant to either § 2255 or a
writ of error coram nobis under 28 U.S.C. § 1651. The district court
denied the motion on June 29, 2016, to the extent Baran challenged
her incarceratory sentence, but directed that she too file supplemental
briefing on whether a reduction in restitution was warranted. See
United States v. Baran, 192 F. Supp. 3d 496, 501–03 (S.D.N.Y. 2016).
On November 1, 2016, the district court granted all four
defendants’ § 2255 motions in part, amending their original
judgments of conviction to reduce their restitution obligations by the
amounts of all pre‐termination disability pension benefits paid to
individuals whose benefits reapplications the RRB had thereafter
approved. See United States v. Ajemian, 2016 WL 6820730, at *3–4. The
district court reasoned that the reapplication approvals were based
on current and reliable medical evidence that employees qualified for
benefits without regard to earlier fraudulent submissions, and that
the RRB was not entitled to restitution for past payments it was thus
required to make in any event. See id. at *3. The district court
explained that this reasoning did not apply to disability pension
recipients who had not sought or obtained reapplication approvals
and, thus, it rejected defendants’ argument for vacatur of all
restitution obligations. See id. at *4. Accordingly, the district court
reduced defendants’ restitution obligations as indicated earlier, so
11
16-3754-cr (L)
United States v. Rutigliano
that Rutigliano was now obligated in the amount of $42,317,076;
Ajemian in the amount of $53,494,797; Lesniewski in the amount of
$34,237,476; and Baran in the amount of $21,467,954. See id.
The parties timely filed these cross appeals, challenging only
the district court’s ruling with respect to the reduction of the
restitution parts of defendants’ sentences.
DISCUSSION
I. Jurisdiction to Review Defendants’ § 2255 Challenges to
Restitution
We begin with the government’s argument that defendants
could not use § 2255 to challenge the restitution parts of their original
sentences, because the issue implicates the district court’s subject
matter jurisdiction. See Kaminski v. United States, 339 F.3d 84, 86–87,
91 (2d Cir. 2003) (affirming dismissal of § 2255 challenge to restitution
order for lack of subject matter jurisdiction). As this is a question of
law, our review is de novo. See Moser v. Pollin, 294 F.3d 335, 339 (2d
Cir. 2002).
Section 2255 states in pertinent part as follows:
A prisoner in custody under sentence of a court
established by Act of Congress claiming the right to be
released upon the ground that the sentence was imposed
in violation of the Constitution or laws of the United
States, . . . or is otherwise subject to collateral attack, may
move the court which imposed the sentence to vacate, set
aside or correct the sentence.
12
16-3754-cr (L)
United States v. Rutigliano
28 U.S.C. § 2255(a). It is well established in our precedent that to
secure § 2255 review, a petitioner “must satisfy the jurisdictional ‘in
custody’ requirement” of the statute. Scanio v. United States, 37 F.3d
858, 860 (2d Cir. 1994); see United States v. Brilliant, 274 F.2d 618, 620
(2d Cir. 1960) (holding district court “without jurisdiction to entertain
. . . § 2255 motion if the relator or movant is not in custody”); see also
Vega v. Schneiderman, 861 F.3d 72, 74 (2d Cir. 2017) (reaching same
conclusion with respect to parallel “in custody” requirement of
§ 2254).
At the time defendants filed the § 2255 motions at issue on this
appeal, all were “in custody” serving the incarceratory terms of their
respective sentences. Thus, to the extent defendants’ § 2255 motions
challenged their prison terms, the district court had jurisdiction to
consider those challenges on their merits. See Kaminski v. United
States, 339 F.3d at 86. Whether the district court was also empowered
to review defendants’ challenges to restitution presents a different
question.
In considering that issue, we are guided by this court’s decision
in Kaminski v. United States. We there concluded that the monetary
components of criminal sentences, such as fines and restitution
orders, generally do not restrict liberty so severely as to satisfy the
custody requirement of § 2255. See id. at 86–87. Kaminski explained
that § 2255, by its terms, applies to prisoners “claiming the right to be
released”; thus, the statute “may not be used to bring collateral
challenges addressed solely to noncustodial punishments” such as
fines and restitution. Id.; accord Gonzalez v. United States, 792 F.3d 232,
13
16-3754-cr (L)
United States v. Rutigliano
237 (2d Cir. 2015) (reiterating that § 2255 motion generally “may not
attack the non‐custodial aspects of a sentence”).
A party cannot avoid this conclusion by challenging both the
custodial and noncustodial parts of his sentence in the same § 2255
motion. In Kaminski, as here, the incarcerated defendant’s § 2255
motion challenged both his prison term and his restitution obligation.
This court held that the district court properly exercised jurisdiction
over the prison‐term challenge, see Kaminski v. United States, 339 F.3d
at 86, but “lacked subject matter jurisdiction” over the restitution
challenge because the defendant “was not in custody in relation to the
claims against his order of restitution,” id. at 91. In sum, a
noncustodial punishment “may not be attacked in a § 2255 [motion],
even if the [motion] also alleges error in the sentence of
imprisonment.” Id. at 88–89 (identifying “no reason why the presence
of a plausible claim against a custodial punishment should make a
noncustodial [restitution] punishment more amenable to collateral
review than it otherwise might be”). Accordingly, to the extent the
challenged restitution orders here are noncustodial punishments,
precedent dictates that the district court lacked subject matter
jurisdiction to review such challenges under § 2255 even though the
same motions challenged defendants’ prison sentences.
In nevertheless defending the district court’s exercise of § 2255
jurisdiction, defendants argue that their restitution orders should be
deemed “custodial” because the amounts are so high. The argument
cannot be dismissed out of hand because this court, by contrast to
most of our sister circuits, has not pronounced “fines and restitution
14
16-3754-cr (L)
United States v. Rutigliano
orders to be, ipso facto, noncustodial” so as categorically to preclude
their § 2255 review. Id. at 87.2 Rather, we have left open the question
whether such fines and orders “could ever be such a restraint on the
liberty of a petitioner as to amount to custody.” Id.; accord Gonzalez v.
United States, 792 F.3d at 237. The question is grounded in precedent
recognizing that even a non‐incarcerated petitioner may satisfy the
“in custody” requirement of the federal habeas statutes by showing
that he is subject to “a significant restraint upon [his] physical liberty
‘not shared by the public generally.’” Vega v. Schneiderman, 861 F.3d
at 74 (quoting Jones v. Cunningham, 371 U.S. 236, 240 (1963)). This does
not mean that every aspect of a sentence not shared by the general
public equates to custody for purposes of § 2254 or § 2255 review.
Rather, the challenged condition must “impose a severe restraint on
individual liberty or the imminent threat of such a restraint.” Id.; see
Kaminski v. United States, 339 F.3d at 86–87. Thus, the Supreme Court
has recognized parole to constitute a sufficiently severe restraint on
individual liberty to keep a defendant in the state’s “custody” as that
word is used in the federal habeas statutes. See Jones v. Cunningham,
371 U.S. at 243. But a sentence of conditional discharge may or may
2 See Smullen v. United States, 94 F.3d 20, 26 (1st Cir. 1996) (concluding restitution cannot be
challenged under § 2255); United States v. Hatten, 167 F.3d 884, 887 (5th Cir. 1999) (same);
Barnickel v. United States, 113 F.3d 704, 706 (7th Cir. 1997) (same); United States v. Bernard,
351 F.3d 360, 361 (8th Cir. 2003) (same); United States v. Kramer, 195 F.3d 1129, 1130 (9th Cir.
1999) (same); Mamone v. United States, 559 F.3d 1209, 1210–11 (11th Cir. 2009) (same); see
also United States v. Ross, 801 F.3d 374, 380 (3d Cir. 2015) (recognizing that monetary
component of sentence cannot satisfy custody requirement of federal habeas statutes);
Erlandson v. Northglenn Mun. Court, 528 F.3d 785, 788 (10th Cir. 2009) (same); but see
Weinberger v. United States, 268 F.3d 346, 351 n.1 (6th Cir. 2001) (declining categorically to
prohibit restitution challenges under § 2255).
15
16-3754-cr (L)
United States v. Rutigliano
not so severely restrain liberty as to equate to custody depending on
whether it requires a defendant’s “physical presence at particular
times and locations, both for community service and court
appearances,” Nowakowski v. New York, 835 F.3d 210, 217 (2d Cir. 2016)
(holding defendant in custody in such circumstances), or only his
refrainment from certain conduct, such as contact with a specified
person, see Vega v. Schneiderman, 861 F.3d at 75 (holding that
conditional discharge requiring defendant to abide by order of
protection did not equate to custody under § 2254).
While, in Kaminski, we left open the possibility of a restitution
order imposing such a severe restraint on individual liberty as to
equate to custody, this court also observed that such situations will
likely be “rare” and, in any event, “cannot be known” until the
“terms” of restitution, as well as the “amount,” are set. Gonzalez v.
United States, 792 F.3d at 237. Thus, when in Kaminski we held a
$21,180 restitution order not to equate to custodial punishment
reviewable under § 2255, we focused on the terms of payment, which
were there limited “on a monthly basis [to] the greater of ten percent
of Kaminski’s monthly income, or $100,” and concluded that those
terms did “not come close to” creating a sufficiently severe restraint
on liberty to equate to custody. Kaminski v. United States, 339 F.3d at
87. Following Kaminski, district courts in this circuit have dismissed
§ 2255 challenges to even multi‐million‐dollar restitution orders
based on similar payment terms. See, e.g., Mansour v. United States,
No. 11 Cr. 612 (NRB), 2015 WL 1573327, at *4 (S.D.N.Y. Apr. 9, 2015)
(holding challenge to $9,301,538 restitution order not cognizable
16
16-3754-cr (L)
United States v. Rutigliano
under § 2255 because, as in Kaminski, payment obligation was limited
to ten percent of defendant’s monthly income, so as not to constitute
custody); McEwan v. United States, 279 F. Supp. 2d 462, 464 & n.1
(S.D.N.Y. 2003) (holding challenge to $6,984,000 restitution order not
cognizable under § 2255 where defendant required to make payments
in installments of fifteen percent of gross monthly income).
Here, the challenged judgments do not set terms for
defendants’ payment of restitution. Nevertheless, the record
indicates that the district court plainly contemplated such terms,
deferring its fixing of payment schedules until receipt of Probation
Department recommendations, presumably upon defendants’ release
from prison when realistic assessments of their means can be made.
This is evident from Lesniewski’s and Baran’s original judgments of
conviction, which expressly state that the monetary parts of their
sentences are to be paid “[a]s determined by probation.” United States
v. Ajemian, No. 11 Cr. 1091 (S.D.N.Y.), Dkt. Nos. 649, 704.3 While no
similar statement is included in Rutigliano’s or Ajemian’s judgment
of conviction, the omission appears to be scrivener’s error because all
four defendants’ judgments of conviction state that the only monetary
3 Because a district court cannot delegate its authority to fix either the amount of restitution
or the schedule for payment to the Probation Department, see United States v. Kinlock, 174
F.3d 297, 300 (2d Cir. 1999); United States v. Porter, 41 F.3d 68, 71 (2d Cir. 1994), we do not
construe this language—which no defendant challenges—to indicate such impermissible
delegation. Rather, we expect that the able and experienced district judge intended only
for Probation to recommend schedules of payments to the court, which recommendations
would then inform the judge’s own scheduling decisions. To eliminate any ambiguity in
this regard, when the district court on remand reenters defendants’ original judgments, it
should clarify the language to make plain that it will itself order the schedules on which
defendants are to make restitution.
17
16-3754-cr (L)
United States v. Rutigliano
component of their sentences that is “due immediately” is each
defendant’s special assessment. Id., Dkt. Nos. 401, 592, 649, 704.
Moreover, all four judgments impose additional supervised release
terms based on each defendant’s “compliance with the installment
payment schedule.” Id. In sum, because defendants’ original
judgments of conviction plainly contemplate that restitution will be
paid not immediately, but pursuant to terms yet to be set by the
district court, and because there is no reason to think those terms will
present the “rare situation” where restitution obligations so constrain
liberty as to equate to custody, Gonzalez v. United States, 792 F.3d at
237, defendants’ collateral challenges to the restitution parts of their
sentences were not cognizable under § 2255.4
In seeking to avoid this conclusion, defendants argue that their
restitution orders must be deemed custodial because they will never
be able to make full restitution on any terms and, thus, necessarily face
imprisonment. The argument fails because only a willful failure to
pay restitution can result in incarceration, see 18 U.S.C. § 3614(b), and
4 Indeed, Lesniewski’s Presentence Investigation Report (“PSR”) recommended that
restitution be “paid in monthly installments of 10% of gross monthly income” following
release from incarceration, Lesniewski PSR at 149, a schedule that would not equate to
custodial punishment. See Kaminski v. United States, 339 F.3d at 87. It is not clear whether
the district court, in originally ordering restitution for Lesniewski and Baran “[a]s
determined by probation,” United States v. Ajemian, No. 11 Cr. 1091 (S.D.N.Y.), Dkt. Nos.
649, 704, was itself setting this recommended payment schedule for Lesniewski. Neither
Baran’s nor any other defendant’s PSR contained a recommended restitution payment
schedule. The district court may clarify this point on remand. We here conclude only that
there is no basis in the present record for assuming that any defendant’s payment schedule
will be so onerous as to equate to custodial punishment.
18
16-3754-cr (L)
United States v. Rutigliano
the law specifically prohibits incarceration solely on the basis of a
defendant’s financial inability to pay, see id. § 3614(c).
In sum, because defendants fail to show that the restitution
ordered in their judgments of conviction equates to custodial
punishment, the district court was without authority to review and
reduce restitution pursuant to § 2255. See Kaminski v. United States,
339 F.3d at 87, 91.5
II. Baran’s Alternative Pursuit of Coram Nobis Relief
Alone among the defendants, Baran pursued relief from
restitution not only under § 2255, but also through a writ of error
coram nobis pursuant to the All Writs Act. See 28 U.S.C. § 1651. The
district court did not address this alternative ground for relief, and
we do not direct it to do so on remand because we conclude that Baran
cannot show fundamental error in her original restitution order, as
required for coram nobis relief.
The writ of error coram nobis is an “extraordinary remedy” that
“issues only in extreme cases,” United States v. Denedo, 556 U.S. 904,
916 (2009), and “typically [is] available only when habeas relief is
unwarranted because the petitioner is no longer in custody,” Kovacs
v. United States, 744 F.3d 44, 49 (2d Cir. 2014). The writ thus serves as
5 For the first time at oral argument, Rutigliano submitted that the district court reduced
restitution pursuant to Fed. R. Crim. P. 33 and not § 2255. The procedural history belies
this assertion and shows that the district court granted defendants relief only under § 2255.
Compare United States v. Rutigliano, 168 F. Supp. 3d at 666–67 (denying relief under Rule
33); United States v. Baran, 192 F. Supp. 3d at 499–500 (same), with United States v. Ajemian,
2016 WL 6820730, at *4 (partially granting § 2255 motions to reduce restitution).
19
16-3754-cr (L)
United States v. Rutigliano
“a remedy of last resort,” Fleming v. United States, 146 F.3d 88, 89–90
(2d Cir. 1998), “strictly limited to those cases in which errors . . . of the
most fundamental character have rendered the proceeding itself
irregular and invalid,” Foont v. United States, 93 F.3d 76, 78 (2d Cir.
1996) (internal quotation marks omitted) (alteration in original).
To secure coram nobis relief, a petitioner must show that
(1) “there are circumstances compelling such action to achieve
justice,” (2) “sound reasons exist for failure to seek appropriate earlier
relief,” and (3) “the petitioner continues to suffer legal consequences
from his conviction that may be remedied by granting of the writ.”
Id. at 79 (internal quotation marks and alteration omitted); accord
Kovacs v. United States, 744 F.3d at 49. The burden is a heavy one
because a court reviewing a petition for coram nobis relief “must
presume that the proceedings were correct, and the burden of
showing otherwise rests on the petitioner.” United States v. Mandanici,
205 F.3d 519, 524 (2d Cir. 2000).
The possibility that coram nobis could afford collateral relief
from restitution was raised in our precedent by that part of the
Kaminski opinion wherein Judge Calabresi wrote only for himself. See
Kaminski v. United States, 339 F.3d at 89–91; see also Gonzalez v. United
States, 792 F.3d at 238 n.31 (characterizing Kaminski’s discussion of
coram nobis as dicta); but see Barnickel v. United States, 113 F.3d 704, 706
(7th Cir. 1997) (recognizing availability of coram nobis for restitution
challenges not cognizable under § 2255). In suggesting that
restitution challenges not cognizable under § 2255 might be reviewed
through coram nobis, Judge Calabresi was nevertheless careful to note
20
16-3754-cr (L)
United States v. Rutigliano
that relief could be afforded “only if the challenged error is
fundamental.” Kaminski v. United States, 339 F.3d at 91. The
challenged restitution orders here manifest no fundamental error.
Thus, we need not decide if, or when, coram nobis might be invoked
collaterally to challenge the restitution component of a criminal
sentence because, even assuming Baran could do so here, her claim
would necessarily fail on the merits.
Baran based her coram nobis claim—as she and her co‐
defendants based their § 2255 claims—on the fact that, after the RRB
terminated disability pension benefits to annuitants whose claims had
been supported by Ajemian or Lesniewski, the RRB approved
benefits for a majority of those annuitants who reapplied. The district
court was persuaded in part, concluding that the pre‐termination
benefits paid to reapproved applicants represented no loss to the RRB
because it had made its own independent determination as to those
applicants’ disability statuses based on reliable information. See
United States v. Ajemian, 2016 WL 6820730, at *3. Therefore, the district
court reduced the challenged restitution orders to eliminate pre‐
termination benefits paid to reapproved applicants, explaining that
“[t]he RRB may not seek reimbursement from the Defendants for
disability payments it is required to make based on its own
independent determinations.” Id.
While the government challenges this conclusion, Baran (and
her co‐defendants) submit that it does not go far enough. They
maintain that the district court should have vacated their restitution
obligations entirely because the high rate of reapplication approvals
21
16-3754-cr (L)
United States v. Rutigliano
leaves insufficient reliable evidence to conclude that any persons,
including those who did not reapply for benefits, received disability
pension benefits to which they were not entitled so as to cause a loss
to the RRB.
We reject Baran’s argument. Not only do the facts she relies on
not show fundamental error in the original restitution order
warranting wholesale vacatur; they fail to show fundamental error
supporting any reduction of restitution.
In reaching that conclusion, we are guided by two general
principles. First, the essence of fraud is misrepresentation, made with
the intent to induce another person to take action “without the
relevant facts necessary to make an informed . . . decision.” United
States v. Binday, 804 F.3d 558, 579 (2d Cir. 2015). It is not necessary
that the fraudster intend to inflict a financial loss. See id. Second, and
by contrast, a court’s power to order restitution is “limited to actual
loss” and “may be awarded only in the amount of losses directly and
proximately caused by [a] defendant’s conduct.” United States v.
Gushlak, 728 F.3d 184, 194–95 (2d Cir. 2013) (emphasis omitted).
The record here, including the trial record supporting Baran’s
conviction, convincingly demonstrates that she and her co‐
defendants supplied the RRB with false medical documentation to
induce its payment of many millions of dollars in disability pension
benefits. There is no question that if the RRB had known the
supporting medical documents were fraudulent, it would not have
made these payments; thus, by making payments, the RRB sustained
22
16-3754-cr (L)
United States v. Rutigliano
an actual loss. Cf. United States v. Marino, 654 F.3d 310, 322 (2d Cir.
2011) (observing, in rejecting causation challenge to restitution on
direct appeal, that “but for” defendant’s affirmative concealment of
falsity of certain representations, victims would not have invested in
venture “as no reasonable investor would invest in a known Ponzi
scheme”).
Baran and her co‐defendants urge otherwise, arguing that the
RRB sustained no loss in paying benefits to annuitants who could have
demonstrated their entitlement to disability pensions without fraud.
The argument fails. Nothing in the record shows that the RRB, once
having been induced to pay disability benefits on the basis of
fraudulent applications, remained obliged to pay those benefits to
persons who purportedly could have demonstrated disability
without fraud. Cf. United States v. Klein, 543 F.3d 206, 215 (5th Cir.
2008) (remanding for reduction of restitution where defendant
showed insurance companies would have had to pay for medications
actually provided to patients, “regardless” of defendant’s fraudulent
billing practices relating to how medications were administered). In
any event, neither Baran nor her co‐defendants offered evidence that
any annuitants could have made a non‐fraudulent showing of
disability at the time of their original applications.
To be sure, at sentencing, the government bears the
preponderance burden of proving actual loss supporting a restitution
order. See United States v. Finazzo, 850 F.3d 94, 117 (2d Cir. 2017). But
where, as here, the government carried that burden at the original
sentencing by showing that the RRB’s pre‐termination payments
23
16-3754-cr (L)
United States v. Rutigliano
were induced by fraud, a defendant seeking coram nobis relief cannot
show fundamental error in the restitution order simply by
speculating that some annuitants might have been able to
demonstrate eligibility without fraud. See United States v. Mandanici,
205 F.3d at 524 (referencing coram nobis petitioner’s burden to rebut
presumption that underlying proceedings were correct); Foont v.
United States, 93 F.3d at 78 (“strictly limit[ing]” coram nobis relief to
fundamental errors rendering original proceeding itself “irregular
and invalid” (internal quotation marks omitted)).
Defendants argue that more than speculation supports their
challenges to the original restitution orders. Specifically, they assert
that the RRB, in approving such a large number of disability pension
reapplications based on reliable information, itself determined that it
was required to pay pre‐termination benefits to the approved re‐
applicants. The record does not support this conclusion.
After issuing Board Orders 13‐33 and 13‐55 terminating future
disability pension payments to persons found disabled based on
defendants’ fraudulent submissions, the RRB allowed terminated
annuitants to reapply for benefits. The review process for such
reapplications, however, expressly stated that the RRB would not
reopen or reevaluate an annuitant’s original disability determination.
Rather, reapplications would be assessed on the basis only of current
medical evidence, specifically, evidence from within twelve months
of the reapplication and not connected to Ajemian or Lesniewski. In
short, reapplication approvals determined only an annuitant’s present
eligibility for disability pension benefits. In no way can these
24
16-3754-cr (L)
United States v. Rutigliano
approvals be understood as “independent determinations” that
reapplicants were disabled at the time of their initial—fraudulent—
applications, much less that the RRB was “required” to pay these
applicants the pre‐termination benefits they received. United States v.
Ajemian, 2016 WL 6820730, at *3.
Our conclusion is only reinforced by the temporal and factual
gulf between the fraudulent applications that induced the RRB’s
payment of pre‐termination benefits and the approved
reapplications. An average 8.3‐year interval separated the two.
Moreover, some 80% of reapplications relied on at least one medical
condition not included in the initial application to demonstrate
present disability, while some 70% of reapplications omitted a
medical condition asserted in the initial fraudulent applications. In
these circumstances, an RRB finding on reapplication that a person
was then eligible for a disability pension cannot be said to have found
that he was also eligible years earlier or that the RRB considered itself
“required to make” pre‐termination benefits payments despite
defendants’ fraud.
In sum, the record convincingly supports the district court’s
initial determination of the actual loss caused to the RRB through its
termination of benefits by defendants’ fraud and, therefore, the
restitution amounts ordered in defendants’ original judgments. The
RRB’s subsequent approval of most reapplications for benefits shows
no fundamental error in restitution because the RRB determined only
a reapplicant’s present eligibility for benefits; it made no
25
16-3754-cr (L)
United States v. Rutigliano
determination as to eligibility in the pre‐termination period.6 Thus,
because Baran cannot show fundamental error in the $31,398,907
restitution ordered in her original judgment of conviction, she was
not entitled to have that order vacated or even reduced through a writ
of error coram nobis.
CONCLUSION
For the reasons stated, we conclude,
1. Collateral review jurisdiction under 28 U.S.C. § 2255 does
not reach the restitution parts of criminal sentences where, as here,
the restitution cannot be deemed custodial punishment. It is not the
amount of restitution alone but, rather, the terms of payment that
identify those rare cases in which a restitution order might so severely
deprive a defendant of liberty as to equate to custodial punishment.
Defendants’ judgments of conviction reference payment schedules,
but no such schedules have yet been set by the district court. Thus,
there is no basis in the present record for equating defendants’
restitution obligations to custodial punishments, without which the
district court could not review collateral challenges to restitution
pursuant to § 2255.
6 To the extent Baran or defendants suggest that the RRB’s failure to seek disgorgement of
pre‐termination benefits payments shows that it considered itself required to make those
payments, this argument fails to persuade. The RRB did not seek disgorgement from any
annuitants, not simply the ones whose reapplications it approved. Any number of reasons
could explain the RRB’s decision not to seek disgorgement, not least the low likelihood of
recovery as against the high cost of pursuit.
26
16-3754-cr (L)
United States v. Rutigliano
2. To the extent Baran also collaterally challenges restitution
through a writ of error coram nobis, we need not decide whether coram
nobis is available for that purpose because, even if it is, Baran cannot
show fundamental error in the $31,398,907 restitution ordered in her
original judgment of conviction. As a result, she is entitled neither to
the vacatur of all restitution that she seeks nor to the reduction in
restitution that the district court granted pursuant to § 2255.
Accordingly, we VACATE the district court’s November 1,
2016 order reducing the restitution amounts ordered in defendants’
original judgments of conviction, and we REMAND with directions
to reinstate the original judgments and to dismiss all defendants’
§ 2255 petitions as well as Baran’s coram nobis petition.
27