Second Circuit – Mandatory Victims Restitution Act: United States v. Goodrich

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United States Court of Appeals for the Second Circuit

Mandatory Victims Restitution Act

Foreseeable losses – Securities fraud

United States v. Goodrich

19-208

Judges Calabresi, Pooler, and Carney

Background: The defendant pleaded guilty to conspiracy to commit securities fraud. As a broker-dealer in the over-the-counter securities market, the defendant executed fraudulent trades for a co-defendant client with the effect of artificially inflating the share price of a sham company. His co-defendants arranged the sale of the sham company shares outside the public market in a private placement. The district court held that the defendant was liable under the Mandatory Victims Restitution Act both to purchasers of the sham company shares in the public market and to purchasers in the private placement. The defendant challenges that portion of the restitution order.

Ruling: The Second Circuit reversed and remanded. The court held that the government failed to demonstrate that the private placement losses were attributable to his offense of conviction. The proximate cause element requires that the government prove that the losses for which restitution compensates were foreseeable to the defendant in the course of committing the offense of conviction.

Shannon C. Jones, acting United States attorney, for the appellee; Nathaniel Z. Marmur for the defendant-appellant.