14-820-cr
United States v. Stevens, Kinpit Assocs., L.P.
14‐820‐cr
United States v. Stevens, Kinpit Assocs., L.P.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE
OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A
SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE
FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A
PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED
BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in
the City of New York, on the 26th day of June, two thousand eighteen.
PRESENT: RALPH K. WINTER,
DENNY CHIN,
CHRISTOPHER F. DRONEY,
Circuit Judges.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
UNITED STATES OF AMERICA,
Appellee,
v. 14‐820‐cr
TROY D. STEVENS, JR.,
Defendant‐Appellant,
KINPIT ASSOCIATES, L.P.,
Intervenor.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
FOR APPELLEE: Martin E. Coffey, David C. James, Peter A.
Norling, Assistant United States Attorneys, for
Richard P. Donoghue, United States Attorney
for the Eastern District of New York, Brooklyn,
New York.
FOR DEFENDANT‐APPELLANT: Steven Y. Yurowitz, Newman & Greenberg,
New York, New York.
FOR INTERVENOR: Richard H. Dolan (James C. Sherwood, on the
brief), Schlam Stone & Dolan LLP, New York,
New York.
Appeal from the United States District Court for the Eastern District of
New York (Irizarry, C.J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Defendant‐appellant Troy Stevens, Jr., a former general partner of Kinpit
Associates, L.P. (ʺKinpitʺ), appeals from the district courtʹs judgment ordering him to
pay $4,486,176.05 million in restitution to Kinpit under the Mandatory Victims
Restitution Act (ʺMVRAʺ), 18 U.S.C. § 3663A. By summary order dated October 25,
2016, we remanded the case to the district court to answer seven questions about the
restitution award. United States v. Stevens, 657 F. Appʹx 69 (2d Cir. 2016). The district
court answered these questions and adhered to its initial ruling on restitution. We
conclude that the district court did not abuse its discretion in determining that Kinpit
was entitled to restitution in the amount ordered. Accordingly, we affirm. We assume
2
the partiesʹ familiarity with the underlying facts, procedural history, and issues on
appeal.
Stevens was the general partner of Kinpit, a limited partnership formed to
own and operate apartment buildings in New York City. Between July 7, 2000 and May
16, 2003, without the knowledge or approval of the limited partners, Stevens
fraudulently obtained loans and mortgages for Kinpit using a forged partnership
agreement and consent form. Stevens then consolidated the initial four loans into a
single $4.6 million loan, issued by North Fork Bank and later acquired by Capital One
Bank NA (ʺCapital Oneʺ), and pledged Kinpitʹs buildings as collateral.
In 2005, Kinpitʹs limited partners filed suit against Stevens for breach of
contract, breach of fiduciary duties, misuse of partnership assets, and fraud. See Garber
v. Stevens, No. 601917/05, 2005 WL 6460538 (N.Y. Sup. Ct. 2005). In October 2012, the
parties settled the civil suit and Stevens conveyed his 50% interest in Kinpit to the
limited partners, in exchange for a release of all claims (the ʺSettlement Agreementʺ).
On August 22, 2013, Kinpit sold its buildings for $10.35 million. Shortly thereafter,
Kinpit paid off the Capital One loan in full, using proceeds from the building sale.
Stevens was indicted on multiple counts on October 2, 2012. On May 28,
2013, he pleaded guilty to bank fraud in violation of 18 U.S.C. § 1344 (Count Two) and
filing a false tax return in violation of 26 U.S.C. § 7206 (Count Six). On February 28,
2014, the district court sentenced Stevens to 63 monthsʹ imprisonment and three yearsʹ
3
supervised release, and ordered forfeiture of $150,000, a $200 special assessment, and
$4,486,176.05 in restitution to Kinpit. The district court found Kinpit to be a third‐party
compensator of the victim, Capital One, who was entitled to restitution pursuant to 18
U.S.C. § 3664(j)(1). Judgment was entered on February 28, 2014.
Stevens appealed, arguing inter alia that the district court erred in ordering
him to pay restitution to Kinpit. The government argued that restitution was properly
paid to Kinpit as a third‐party compensator and that Stevens should not be given a
credit towards his restitution obligation for surrendering his partnership.
By summary order dated October 25, 2016, we affirmed the sentence, but
remanded as to the district courtʹs restitution order, as we were ʺunable, because of a
lack of clarity in the record, to determine whether the district court properly appliedʺ
the principles applicable to restitution. Stevens, 657 F. Appʹx at 73. Accordingly, we set
forth seven questions for supplementation of the record. The summary order provided
that, following the district courtʹs decision on remand, jurisdiction would automatically
be restored to this panel.
On remand, the government changed its position with respect to
restitution, arguing that Stevens should be given credit for surrendering his partnership
interest. Kinpitʹs proceeds from the sale of its buildings were $10,350,000, and
$4,500,592.71 of that amount was used to pay off the Capital One loan in full. The
4
government argued that this amount should offset Stevensʹs restitution obligation of
$4,486,176.05, and that, accordingly, Stevens owes no restitution to Kinpit.
The district court rejected the argument and adhered to its prior
restitution order. On August 21, 2017, the district court filed its memorandum and
order responding to the seven questions posed by this Court and concluded that
restitution remained appropriate.1 The parties returned to this Court and submitted
supplemental briefing.
We review a district courtʹs order of restitution ʺfor abuse of discretion,ʺ
reversing its ruling only if it ʺrests on an error of law, a clearly erroneous finding of fact,
or otherwise cannot be located within the range of permissible decisions.ʺ United States
1 The questions posed to the district court and the courtʹs answers are summarized
below:
1. Was the district court treating Kinpit as a victim of Stevensʹs bank fraud for the purposes of
the MVRA, or as a third‐party compensator? Third‐party compensator.
2. What were Capital Oneʹs ʺactual lossesʺ? $4,500,592.71.
3. Did the restitution award include compensation for Kinpitʹs losses (as opposed to Capital
Oneʹs losses)? The award only included compensation for Capital Oneʹs losses.
4. Did the restitution award exceed the amount of Capital Oneʹs actual losses resulting from
Stevensʹs bank fraud? No.
5. Were any of the loan proceeds diverted by Stevens, and, if so, how much went to Kinpit?
The parties agreed that at least some of the loan proceeds were diverted by Stevens, but the
parties disagreed on how much went to Kinpit. The district court found that none of the
transfers of the loan proceeds made by Stevens from the Kinpit operating account were
diverted to Kinpit.
6. Is Kinpit receiving a windfall (i.e., is Stevens being ordered to pay monies to Kinpit that he
has already paid)? No.
7. Was the settlement agreement between Stevens and Kinpit intended to compensate Kinpit
for its losses resulting from Stevensʹs bank fraud, and if so, to what extent? No.
5
v. Boccagna, 450 F.3d 107, 113 (2d Cir. 2006) (citations omitted). ʺWhen a defendantʹs
challenge to a restitution order raises an issue of law, we review that challenge de novo.ʺ
United States v. Thompson, 792 F.3d 273, 277 (2d Cir. 2015).
The MVRA makes restitution mandatory for certain categories of crimes,
including those that inflict property loss on their victims. 18 U.S.C. § 3663A(a). Only a
victim is entitled to restitution under the MVRA. See United States v. Maynard, 743 F.3d
374, 378 (2d Cir. 2014). A ʺvictimʺ for the purposes of the statute is ʺa person directly
and proximately harmed as a result of the commission of an offense for which
restitution may be ordered . . . .ʺ 18 U.S.C. § 3663A(a)(2). The MVRA thus aims to limit
restitution to those harms that ʺha[ve] a sufficiently close connection to the conduct at
issue.ʺ Robers v. United States, 134 S. Ct. 1854, 1859 (2014) (citation and internal
quotation marks omitted).
The primary goal of the MVRA is to ʺcompensate these victims for their
losses and to restore the[m] to their original state of well‐being.ʺ Thompson, 792 F.3d at
277 (quoting United States v. Qurashi, 634 F.3d 699, 703 (2d Cir. 2011)). To avoid
awarding the victim a windfall, ʺthe MVRA caps the restitution award at the actual
ʹamount of the victimʹs loss.ʹʺ Id. (quoting Boccagna, 450 F.3d at 117). In cases involving
monetary loss, the actual loss calculation must take into account ʺthe value (as of the
date the property is returned) of any part of the property that is returned.ʺ 18 U.S.C.
§ 3663A(b)(1)(B)(ii).
6
Where, as here, a victim receives reimbursement for his or her losses from
a third party prior to the entry of a restitution order, the third‐party compensation is
irrelevant in calculating the defendantʹs total restitution. See 18 U.S.C. § 3664(f)(1)(B)
(ʺIn no case shall the fact that a victim has received or is entitled to receive
compensation with respect to a loss from insurance or any other source be considered in
determining the amount of restitution.ʺ).
Additionally, where, as here, a third party has assumed the victimʹs losses
by reimbursing the victim, the court must order a defendant to pay restitution directly
to that third party. See 18 U.S.C. § 3664(j)(1) (ʺIf 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.ʺ). Any funds still owed to the victim, however, must be repaid in full
before any payments may be diverted to a third‐party compensator. Thompson, 792 F.3d
at 278. Moreover, because third‐party compensators are not themselves ʺvictimsʺ for
the purposes of the MVRA, ʺany losses suffered by those parties in the course of
compensating a victim cannot increase a district courtʹs calculation of the defendantʹs
restitution obligations under § 3663A(b).ʺ Id. at 279. ʺ[W]here a third party has already
reimbursed the victimʹs losses, § 3664(j)(1) simply shifts payment of the restitution
amount calculated under § 3663A(b) directly to that party.ʺ Id. (emphasis in original).
7
Here, Stevens and the government argue that Stevensʹs restitution
obligation should be offset by the 50% ownership interest Stevens gave up pursuant to
the Settlement Agreement. The district court determined, however, that Stevensʹs
relinquishment of his interest was not intended to compensate his limited partners for
the Capital One loan. Rather, the district court concluded that Stevensʹs relinquishment
of his ownership interest was to account for other liabilities to his limited partners, and
it awarded restitution to compensate Kinpit for its repayment of the Capital One loan.
The district courtʹs view is supported by the record: the Settlement
Agreement did not provide that Stevensʹs relinquishment of his interest was to account
for paying off the Capital One loan, the Settlement Agreement was silent as to who was
responsible for paying off the Capital One loan, and the Settlement Agreement
provided that Stevens would indemnify Kinpit against any liabilities incurred or to be
incurred by Kinpit by reason of any claim or suit. In addition, the settlement preceded
the repayment of the Capital One loan, Kinpit suffered additional losses (although not
attributable to Count 2, the count of conviction), and the restitution award did not
compensate Kinpit for its own losses. Thus, the district court did not err in finding that
Stevensʹs relinquishment of his 50% interest was not intended to compensate Kinpit for
repaying the Capital One loan.
The government rests its argument on general principle of equity,
claiming that even if it was not Stevensʹs intent that the proceeds from the sale of
8
Kinpitʹs buildings pay off the Capital One loan, ʺKinpit benefitted from Stevensʹs
actions, which facilitated and allowed for the . . . selling [of] its building, thereby
providing funds to Kinpit with which it could pay off the loans.ʺ Appellee Br. at 15.
This argument misses the mark. The district court found that ʺall transfers
of the loan proceeds made by [Stevens] from the partnership operating account were for
his personal benefit and that none of the loan proceeds were diverted to Kinpit.ʺ Dist.
Dkt. No. 63 at 7 (Memorandum and Order). As the government has acknowledged,
Stevens directed nearly $4.6 million to himself through Dawmich, his wholly‐owned
subsidiary. In addition, the record shows that Kinpit suffered more than $11 million in
losses and that, as the district court found, Kinpit is not receiving a windfall. Although
these losses are not entirely attributable to the crime of conviction, the district court did
not abuse its discretion when it determined that Stevensʹs relinquishment of his
partnership interest was not meant to compensate Kinpit for repayment of the Capital
One loan, but to account for other obligations, and that Kinpit was entitled, as a third‐
party compensator, to restitution in the amount ordered.
We have considered Stevensʹs remaining arguments and find them to be
without merit. Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine OʹHagan Wolfe, Clerk
9