Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 1 of 22 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA Case No. 18-CR-20596-DPG UNITED STATES OF AMERICA vs. JUAN ANDRES BAQUERIZO ESCOBAR, Defendant. / GOVERNMENT S RESPONSE TO EP PETROECUADOR S MOTION FOR RECOGNITION OF ITS RIGHTS AS A VICTIM AND ENTITLEMENT TO RESTITUTION The United States, through undersigned counsel, hereby responds to third-party claimant Empresa Publica de Hidrocarburos del Ecuador ( PetroEcuador ) s Motion for Recognition of Its Rights as a Victim and Entitlement to Restitution. PetroEcuador s motion should be denied because: (1) PetroEcuador, a state-owned instrumentality, does not qualify as a victim under the Crime Victims Restitution Act ( CVRA ); (2) PetroEcuador s complicity in the bribery and money laundering schemes preclude it from being treated as a victim under both the Mandatory Victim Restitution Act ( MVRA ) and the CVRA; and (3) PetroEcuador is not entitled to restitution under the MVRA for any alleged harm resulting from conduct that was not charged. STANDARD OF REVIEW [W]hether petitioners [under the CVRA] are victims of the criminal conduct as described in the [charging document]... is a mixed question of law and fact. In re Stewart, 552 F.3d 1285, 1288 (11th Cir. 2008) (per curiam). Any dispute as to the proper amount or type of restitution shall be resolved by the court by the preponderance of the evidence. 18 U.S.C. 3664(e). 1
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 2 of 22 The enforcement provision of the MVRA allocates the various burdens of proof among the parties who are best able to satisfy those burdens and who have the strongest incentive to litigate the particular issues involved. See United States v. Sheinbaum, 136 F.3d 443, 449 (5th Cir. 1998). Although [i]t might appear to the casual observer that 3664(e) places the burden of proof on the government on all issues relating to loss to the victim... the burden section of the statute only requires the government to establish the amount of loss sustained by [the] victim. Id. (quoting United States v. Razo-Leora, 961 F.2d 1140, 1146 (5th Cir. 1992)). In fact, the statute explicitly provides that [t]he burden of demonstrating such other matters as the court deems appropriate shall be upon the party designated by the court as justice requires. 18 U.S.C. 3664(e). Accordingly, the government submits that, as the movant here, PetroEcuador should bear the burden of proof as to demonstrating that it is entitled to victim status under the CVRA and MVRA. FACTUAL BACKGROUND PetroEcuador PetroEcuador is Ecuador s state-owned and state-controlled oil company. According to PetroEcuador s Spanish-language website, the Ecuadorian government is PetroEcuador s sole stockholder. Marco Legal, EP PetroEcuador, https://www.eppetroecuador.ec/?p=3763 (last visited Jan. 17, 2019) (translated) ( Art. 317 determines that non-renewable natural resources belong to the inalienable and imprescriptible heritage of the State. ). PetroEcuador s mission is to [e]fficiently manage the processes of transport, refining, storage and national and international commercialization of hydrocarbons, guaranteeing the internal supply of products with quality, in a safe, timely and sustainable manner. Id. at Misión, Visión y Valores (translated). The General Manager of PetroEcuador is appointed by the PetroEcuador Board of Directors, which consists of 2
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 3 of 22 the Minister of Non-Renewable Natural Resources, the Planning Secretary, and a member delegated by the Ecuadorian President. During the relevant period, this individual was Jorge Glas, the former vice president of Ecuador. Ecuador and United States Criminal Proceedings In or about 2016, Ecuadorian authorities began an extensive investigation and prosecution of corruption at PetroEcuador and other high levels of the Ecuadorian government. As part of that investigation, the Ecuadorian government has convicted two former general managers of PetroEcuador, two advisors in the Refining Management, and several contractors who worked on projects for PetroEcuador. 1 In addition to these PetroEcuador employees and executives, the Ecuadorian government has also prosecuted and convicted several high level Ecuadorian officials involved in corruption, including the former comptroller who audited PetroEcuador projects, and the former vice president of Ecuador (who also sat on the board of PetroEcuador). United States authorities have also investigated and prosecuted several individuals for their involvement in bribery and money laundering schemes involving PetroEcuador. The United States investigation is ongoing. Two PetroEcuador officials and two contractors, including Defendant Baquerizo, who obtained and retained contracts with PetroEcuador by paying bribes to several PetroEcuador officials have already pleaded guilty, as has one money laundering intermediary. 2 The money laundering intermediary and both PetroEcuador officials have already 1 https://www.eluniverso.com/noticias/2018/05/09/nota/6751479/carlos-pareja-yannuzzelli-sera-juzgado-hoy-delitoenriquecimiento; https://lahora.com.ec/noticia/1101972364/c381lex-bravo-serc3a1-juzgado-por-enriquecimientoilc3adcito 2 United States v. Marcelo Reyes Lopez, Case No. 1:17-cr-20747-KMW (S.D. Fla.) (October 24, 2017 Indictment, April 10, 2018 Plea Agreement, July 23, 2018 sentencing); United States v. Arturo Escobar Dominguez, Case No. 1:18-cr-20108-CMA (S.D. Fla.) (February 20, 2018 Information, March 28, 2018 Plea Agreement, June 6, 2018 sentencing); United States v. Ramiro Andres Luque Flores, Case No. 1:17-cr-00537-CBA (E.D.N.Y.) (October 6, 2017 Information and Plea Agreement); United States v. Juand Andres Baquerizo Escobar, Case No. 1:17-cr-20596- DPG (S.D. Fla.) (July 11, 2018 Information, September 14, 2018 Plea Agreement); United States v. Jose Larrea, Case No. 1:18-cr-20312-MGC (S.D. Fla.) (April 19, 2018 Indictment, September 14, 2018 Plea Agreement, November 27, 2018 sentencing). 3
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 4 of 22 been sentenced. 3 Another intermediary, Frank Chatburn, is set to go to trial in February 2019. 4 The public filings in each of these cases detail the scope of the multi-year, multi-million dollar schemes in which these defendants participated. For example, former PetroEcuador official Arturo Escobar Dominguez admitted that he received approximately $1,900,000 in bribes from companies that conducted business with PetroEcuador and that this amount was his share in a larger scheme involving several PetroEcuador officials and other Ecuadorian government officials who illicitly benefited from receiving bribes from contracting companies. United States v. Arturo Escobar Dominguez, Case No. 1:18-cr-20108-CMA (S.D. Fla. Mar. 28, 2018 Factual Proffer, DE 18:3). PetroEcuador claims in the present motion that it is the victim in two of these cases, DE 37:1, and is the victim of crimes committed by all six defendants who have been charged, five of whom have been convicted and three of whom have already been sentenced. DE 37:2. Yet, PetroEcuador has only sought recognition as a victim of one other defendant and its motion for victim rights and restitution, filed on the eve of that defendant s sentencing and opposed by the government, has not yet been ruled upon. 5 3 Marcelo Reyes Lopez was sentenced to 53 months imprisonment. Arturo Escobar Dominguez was sentenced to 48 months imprisonment. Jose Larrea was sentenced to 27 months imprisonment. None of these individuals was ordered to pay restitution. The victims in these cases are the citizens of the country of Ecuador. Under the MVRA, where, as here, the complexity of determining the victims losses would complicate and prolong the sentencing process to a degree that the need to provide restitution to any victim is outweighed by the burden on the sentencing process, restitution need not be provided. 18 U.S.C. 3663A(c)(3)(b). 4 United States v. Frank Roberto Chatburn Ripalda, Case No. 1:18-cr-20312-MGC (S.D. Fla.) (April 19, 2018 Indictment). 5 United States v. Jose Larrea, Case No. 1:18-cr-20312-MGC (S.D. Fla.). 4
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 5 of 22 ARGUMENT A. PetroEcuador Is Not Entitled to the Rights of a Victim Under the CVRA Because the CVRA s Definition of Victim Does Not Include a State-Owned Instrumentality of a Foreign Government PetroEcuador incorrectly claims it is a victim of Defendant Baquerizo s crime under the CVRA. The CVRA defines a crime victim as a person directly and proximately harmed as a result of the commission of a Federal offense. 18 U.S.C. 3771(e)(2)(A). The Supreme Court has long held that when Congress uses the word person in a federal statute, absent some affirmative showing of statutory intent to the contrary there is a presumption that person does not include the sovereign. Vermont Agency of Natural Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 780-81 (2000). That interpretative presumption is grounded in part on the language of the Dictionary Act, 1 U.S.C. 1, which provides that [i]n determining the meaning of any Act of Congress, unless the context indicates otherwise... the words person and whoever include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals. Numerous courts have concluded that the absence of government entities from the Dictionary Act s list of what qualifies as a person indicates that, absent some express provision to the contrary, Congress did not mean to include government entities, such as cities, states, the United States, or foreign nations, within the definition of person. For example, in United States v. United Mine Workers of Am., 330 U.S. 258 (1947), the Supreme Court observed the following with respect to the Norris-LaGuardia Act: The Act does not define persons. In common usage that term does not include the sovereign, and statutes employing it will ordinarily not be construed to do so. Congress made express provision, 1 U.S.C. 1, for the term to extend to partnerships and corporations, and in 13 of the Act itself for it to extend to associations. The absence of any comparable provision extending the term to sovereign governments implies that Congress did not desire the term to extend to them. 5
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 6 of 22 Id. at 275; see also, e.g., United States v. Errol D., 292 F.3d 1159, 1162-64 (9th Cir. 2002) (holding that the Bureau of Indian Affairs, as a government agency, was not a person under the Indian Major Crimes Act). That interpretative presumption controls here. The text of the CVRA does not define person and contains no affirmative showing of statutory intent, Vermont Agency, 529 U.S. at 781, to include foreign governments within its reach. Moreover, the context of the CVRA further suggests that its provisions were not meant to apply to powerful agencies of foreign governments with the ability to hire sophisticated counsel. The participatory and protective rights of the CVRA (e.g., [t]he right to be treated with fairness and with respect; [t]he right to be reasonably protected from the accused; [t]he right to reasonable, accurate, and timely notice of any public court proceeding... ) are more appropriately understood as protecting individuals, not agencies of foreign governments. See 18 U.S.C. 3771(a). The understanding that the CVRA s definition of person does not include sovereign entities like foreign governments and agencies is supported by the United States Department of Justice, Attorney General Guidelines for Victim and Witness Assistance (2012) ( AG Guidelines ), which provide that [n]either the federal government nor any state, local, tribal, or foreign government or agency thereof fall under the definition of crime victim for either mandatory services or court enforceable rights. See AG Guidelines at 12. Moreover, at least one district court has addressed exactly this issue and concluded, based on the Dictionary Act and the AG Guidelines, that a sovereign entity cannot be a crime victim under the CVRA. See United States v. Kasper, 60 F. Supp. 3d 1177, 1178-79 (D.N.M. 2014) (holding that a tribal government was not a crime victim for purposes of the CVRA); see also In re Her Majesty the Queen in Right of Canada, 785 F.3d 1273, 1277 (9th Cir. 2015) (per curiam) (noting the open question of whether a 6
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 7 of 22 foreign sovereign is a person who may be a crime victim under 18 U.S.C. 3771(e), but declining to reach the issue and denying restitution on other grounds). PetroEcuador s status as an agency of a foreign government can hardly be questioned. Indeed, PetroEcuador has represented itself to be a government entity in its filings in this case. See DE 37:3 ( EP PetroEcuador is the state-owned oil company of Ecuador. ). Moreover, other courts in unrelated civil actions have recognized PetroEcuador s status as an Ecuadorian government agency and instrumentality. See Republic of Ecuador v. ChevronTexaco Corp., 499 F. Supp. 2d 452, 458 59 (S.D.N.Y. 2007), aff d, 296 F. App x 124 (2d Cir. 2008) ( [T]he laws differ when the party estopped is a government entity, as is the case with PetroEcuador. ). Further, all the charges in the cases from which PetroEcuador seeks restitution are based on PetroEcuador s status as an agency or instrumentality of a foreign government. See DE 37:2 n.2 (citing relevant cases). 6 The government recognizes that sovereign entities can be, and have been, recognized as victims entitled to restitution under the MVRA. See, e.g., United States v. Zhang, 789 F.3d 214, 216-17 (1st Cir. 2015) (holding that the IRS was an eligible victim under the MVRA and collecting cases). Although the definition of victim in the two statutes is similar, these decisions rest primarily on statutory language in a separate enforcement provision of the MVRA, 18 U.S.C. 3664, that specifically references the possibility that the United States can be designated as a victim entitled to restitution. See Zhang, 789 F.3d at 216 (citing 18 U.S.C. 3664(i)). That provision prompted those courts to determine that the ordinary Vermont Agency presumption against 6 PetroEcuador notes that in one instance, the government afforded certain rights to a foreign governmental entity, the Costa Rican Instituto Costarricense de Electricidad ( ICE ). DE 37:8 n.9 (citing United States v. Alcatel-Lucent France, S.A., et al., 10-CR-20906-COOKE). However, PetroEcuador also acknowledges that the government made clear it did not view ICE as a victim and rejected its right to restitution. DE 37:8 n.9. As discussed infra, Section II.C, the court agreed with the government, finding ICE was complicit in the criminal conduct and therefore not entitled to the rights of a victim. See In re Instituto Costarricense de Electricidad, No. 11-12707-G, at *2 (11th Cir. June 17, 2011). The fact that the government in that case chose to afford certain benefits to one entity does not create rights to which PetroEcuador is now entitled. 7
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 8 of 22 including sovereigns within the definition of person had been overcome. Indeed, the AG Guidelines recognize that although foreign governments cannot be a victim under the CVRA, they may qualify for restitution under federal restitution statutes. AG Guidelines at 12; see also Pasquantino v. United States, 544 U.S. 349, 382 (2005) (Ginsburg, J., dissenting) (citing Government s position at oral argument that a restitution award to Canada under the MVRA was appropriate). These cases, however, do not have any bearing on the separate question of whether government entities, including a foreign government or instrumentality thereof, can be a crime victim under the CVRA. 7 Since PetroEcuador does not qualify as a victim under the CVRA, the government did not fail to fulfill its obligations under the CVRA or hamper[] EP PetroEcuador s ability to timely and adequately seek restitution against all co-conspirators and its capacity to ensure that no bad actors remain with the company. See DE 37:7. B. PetroEcuador Is Not Entitled to the Rights of a Victim Under the MVRA or the CVRA Because PetroEcuador Was Complicit in the Illegal Conduct To date, PetroEcuador has not proffered evidence demonstrating that it is a victim deserving of restitution. To the contrary, PetroEcuador extensively participated in the bribery and money laundering schemes, and thus it is precluded from being recognized as a victim. The CVRA defines a crime victim as a person directly and proximately harmed as a result of the 7 The Presentence Investigation Report in this case notes that the citizens of Ecuador are the victims of Defendant Baquerizo s money laundering offense. DE 39:12. The text of the MVRA expressly provides that the statute does not apply where the number of identifiable victims is so large as to make restitution impracticable. 18 U.S.C. 3663A(c)(3)(A). As Ecuador is a nation of almost 17 million people, this surely suffices to render restitution impracticable. And while PetroEcuador correctly notes that restitution has on occasion been awarded to foreign governments in FCPA cases (as opposed to its individual citizens), see DE 9 n.12 (citing United States v. Kenny Int l Corp., Cr. No. 79-372 (D.D.C. 1979); (United States v. F.G. Mason Eng g, Inc., Cr B-90-29 (D. Conn. 1990); United States v. Diaz, No. 09-cr-20346-JEM (S.D. Fla. Aug. 5, 2010)), that fact does nothing to support PetroEcuador s request for victim status and restitution here. For one, none of these cases even mention the CVRA, let alone determine that a foreign government or instrumentality thereof, qualifies as a crime victim for purposes of the CVRA. Indeed, two of the three decisions predate the passage of both the CVRA and the MVRA and therefore had no occasion to consider the question presented here. Most importantly, however, these cases concerned convictions for violations of the FCPA, not the offense of conviction in this prosecution, and none involved a request for restitution from a stateowned entity complicit in criminal scheme, as is the case here. 8
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 9 of 22 commission of a Federal offense.... 18 U.S.C. 3771(e)(2)(A). Similarly, the MVRA defines a victim as a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered.... 18 U.S.C. 3663A(a)(2). Although these statutory provisions defining a victim as someone directly and proximately harmed do not expressly exclude any category of persons, several courts, including the Eleventh Circuit, have concluded that significant policy reasons preclude those involved in criminal activity from being considered victims under the CVRA and MVRA. See In re Wellcare Health Plans, Inc., 754 F.3d 1234, 1238-40 (11th Cir. 2014) (per curiam) (holding that a corporation could not seek restitution for the criminal acts of its top-level executives because doing so would be seeking restitution for its own conduct ); see also United States v. Reifler, 446 F.3d 65, 127 (2d Cir. 2006) ( [A]ny order entered under the MVRA that has the effect of treating coconspirators as victims, and thereby requires restitutionary payments to the perpetrators of the offense of conviction, contains an error so fundamental and so adversely reflecting on the public reputation of the judicial proceedings that we may, and do, deal with it sua sponte. )). In United States v. Lazarenko, 624 F.3d 1247, 1252 (9th Cir. 2010), the Ninth Circuit held that as a general rule, a participant in a crime cannot recover restitution. There, the individual seeking restitution was described by the court as both a victim and a participant of a money laundering scheme who had profited handsomely from the conspiracy. Id. at 1250. The Ninth Circuit concluded that, based on these facts, he could not qualify as a victim under the MVRA, because such a reading of the statute would be absurd. Id. at 1251. The court reasoned that coconspirators should be treated differently than innocent victims because [o]therwise, the federal courts would be involved in redistributing funds among wholly guilty co-conspirators, where one or more co-conspirators may have cheated their comrades. Id. at 1250-51. In reaching its 9
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 10 of 22 conclusion, the Ninth Circuit relied on the Second Circuit s earlier opinion in Reifler, in which that court vacated a restitution order sua sponte after concluding that the list of putative victims submitted to the court included some of the conspirators and nominees of the securities fraud scheme. See Reifler, 446 F.3d at 126-27. The court in Reifler concluded that such individuals were not victims within the meaning of the MVRA because they were instead coconspirators and the district court s restitution order had to be vacated because it was beyond the authority conferred by the MVRA. Id. at 132. Relying on both Reifler and Lazarenko, the Eleventh Circuit recently held that a corporation that admitted to engaging in illegal fraud cannot be a victim of the fraud for purposes of the CVRA and MVRA. In re Wellcare Health Plans, Inc., 754 F.3d at 1238-40 (holding that a corporation could not seek restitution for the criminal acts of its top-level executives because doing so would be seeking restitution for its own conduct ). A court in this district has previously rejected an attempt by a state-owned entity to claim that it was defrauded by its employees and those individuals who paid the bribes in an FCPA prosecution, and that it was therefore deserving of victim status and restitution. In 2011, French corporation Alcatel-Lucent and two of its subsidiaries resolved an FCPA investigation with the government whereby the parent company agreed to enter into a deferred prosecution agreement and the subsidiaries agreed to plead guilty to a criminal information charging them with conspiracy to violate the anti-bribery, books and records, and internal controls provisions of the FCPA in connection with bribes they had paid to employees of Instituto Costarricense de Electricidad ( ICE ), a state-owned Costa Rican telecommunications company in order to secure contracts from ICE. ICE filed a petition objecting to the proposed deferred prosecution agreement and plea agreement and seeking recognition as a victim pursuant to the CVRA on the same grounds as here; specifically, that ICE was a victim of the bribery scheme carried out by certain of its employees 10
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 11 of 22 and by Alcatel-Lucent. The court denied ICE s request for victim status, finding, as a factual matter, that ICE was complicit in the criminal conduct. The Eleventh Circuit denied ICE s mandamus petition, holding that the district court had not clearly erred when it found that ICE actually functioned as the offenders coconspirator, based upon the district court s finding of pervasive, constant, and consistent illegal conduct conducted by the principals (i.e. members of the Board of Directors and management) of ICE. See In re Instituto Costarricense de Electricidad, No. 11-12707-G, at *2 (11th Cir. June 17, 2011). 8 In considering ICE s petition, the district court and the Eleventh Circuit confronted a factual scenario on all fours with the one presented by PetroEcuador s claim here. While, as PetroEcuador notes, the PetroEcuador officials being pursued for their crimes represent but a small percentage of PetroEcuador s total workforce, DE 37:11, PetroEcuador neglects to mention that the involved individuals include numerous high-level PetroEcuador officials. Much like in In re Instituto Costarricense de Electricidad and In re Wellcare Health Plans, Inc., here, prosecutions in Ecuador and the United States demonstrate the pervasive, constant, and consistent illegal conduct conducted by the principals (i.e. members of the Board of Directors and management) of PetroEcuador during the relevant period. Although the respective investigations are very much ongoing, Ecuador has already convicted two former General Managers of PetroEcuador for their involvement in the bribery scheme. 9 The former vice-president of Ecuador, who was a board member of PetroEcuador has also been convicted for his involvement in corruption in Ecuador, 8 Neither the district court s ruling nor the Eleventh Circuit s order denying ICE s mandamus petition are published, but are attached as exhibits to this response. But see United States v. Alcatel-Lucent France, SA, 688 F.3d 1301, 1304 (11th Cir. 2012) (per curiam) (summarizing the procedural history of the petition and mandamus decision in ICE s related direct appeal of the district court s decision and noting that the mandamus panel concluded that the District Court did not clearly err in finding that [ICE] actually functioned as the offenders coconspirator. The district court identified the pervasive, constant, and consistent illegal conduct by members of ICE s board and management). 9 https://www.eluniverso.com/noticias/2018/05/09/nota/6751479/carlos-pareja-yannuzzelli-sera-juzgado-hoy-delitoenriquecimiento; https://lahora.com.ec/noticia/1101972364/c381lex-bravo-serc3a1-juzgado-por-enriquecimientoilc3adcito 11
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 12 of 22 including in connection to receiving bribes from companies that contracted with PetroEcuador. Several other PetroEcuador employees have been implicated in the bribery and money laundering schemes in Ecuador and the United States, including Marcelo Reyes Lopez, former General Coordinator of Contracts for the Refining Management of PetroEcuador, and Arturo Escobar Dominguez, General Coordinator of Business Management and Advisor to the Refining Division Management of PetroEcuador, both of whom have admitted their participation in the schemes. 10 In addition to these individuals, the government also has witnesses who will testify that the bribery scheme was not only perpetrated by senior executives at PetroEcuador but that corruption was pervasive throughout the organization from the board of directors to low level employees. Respectfully, this Court should reach the same decision here as in In re Instituto Costarricense de Electricidad and In re Wellcare Health Plans, Inc. and hold that PetroEcuador is not a victim in this case. 11 Nor can PetroEcuador argue that it cannot be held liable for the actions of its employees because it suffered an injury in the form of overpriced contracts. DE 37:6. Numerous courts, have held that there need not be proof of an actual benefit to the corporation and, in fact, it can still be held criminally liable even if the actions of its employees harmed the company. See Old Monastery Co. v. United States, 147 F.2d 905, 908 (4th Cir. 1945) ( We do not accept benefit as a touchstone of corporate criminal liability; benefit, at best, is an evidential, not an operative, fact. ). In fact, one court had observed that a company could have benefitted and, thus, could be liable even from an extortionate scheme in which it lost revenue. See Moecker v. Honeywell Int l, 10 United States v. Arturo Escobar Dominguez, Case No. 1:18-cr-20108-CMA, S.D. Fla.; United States v. Marcelo Reyes Lopez, Case No. 1:17-cr-20747-KMW, S.D. Fla.; https://www.larepublica.ec/blog/politica/2016/11/24/asambleista-presenta-demanda-por-lavado-de-activos-en-casopetroecuador/ 11 The fact that Ecuadorian courts have deemed PetroEcuador a victim in proceedings in that country says nothing about whether PetroEcuador fits the strict definition of a victim under U.S. law. 12
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 13 of 22 Inc., 144 F. Supp. 2d 1291, 1313 (M.D. Fla. 2001) (noting a factual dispute as to whether employees could have been acting to further the business interests of the company even by offering lower prices that cost the company revenue because the pricing arrangement was designed to facilitate the transfer of business away from a distributor that was going out of business ). The fact that the government has not charged PetroEcuador with a crime in connection with the scheme or expressly identified it as an unindicted coconspirator in the charging documents filed against the Defendants in these cases is of no moment. Numerous courts that have considered this issue have concluded that, although formal designation as a coconspirator may be sufficient to preclude a party from seeking victim status, it is by no means a necessary predicate. See, e.g., United States v. Emor, 850 F. Supp. 2d 176, 209 (D.D.C. 2012) ( [C]ourts have not limited the coconspirator exception to the MVRA to situations in which the victim/participant was indicted by the grand jury. ). In denying ICE s petition, the district court found that ICE actually functioned as the offenders coconspirator, yet neither the district court, nor the Eleventh Circuit in denying mandamus review, ever considered whether the pervasive, constant, and consistent illegal conduct by the management and Board of ICE was done with any intention to benefit ICE such that it could be held criminally liable under the principle of respondeat superior. See In re Instituto Costarricense de Electricidad, No. 11-12707-G, at *2. There is no reason that this Court should have to undertake such an unnecessary exercise here, particularly when it is not required by the numerous cases that have denied victim status and restitution to uncharged participants in a criminal scheme. Even if a finding of corporate criminal liability on PetroEcuador s part was necessary to preclude it from seeking victim status under either the CVRA or the MVRA, the evidence gathered to date as part of the government s ongoing investigation demonstrates that the actions of certain 13
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 14 of 22 PetroEcuador employees can be imputed to PetroEcuador under the governing law to subject PetroEcuador to criminal liability, because we have evidence that PetroEcuador executives not only received bribes but also passed bribe money to senior Ecuadorian officials who had oversight of PetroEcuador. 12 C. PetroEcuador Is Not Entitled to Restitution Under the MVRA for any Alleged Harm Resulting from Conduct that Was Not Charged PetroEcuador seeks restitution for alleged harms not caused by Defendant Baquerizo s crime. The MVRA requires the Court to order a defendant, convicted of an offense against property, including an offense committed by fraud or deceit, to pay restitution to the victim of the crime. 18 U.S.C. 3663A(a)(1), (c)(1)(a)(ii). A federal district court has no inherent authority to order restitution, and may do so only as explicitly empowered by statute. United States v. Collins, 854 F.3d 1324, 1329 (11th Cir. 2017). Restitution is only applicable with respect to the offense of conviction. A court can order a defendant to pay restitution only for the loss of property that was the direct and proximate result of [the defendant s] unlawful conduct. United States v. Fiorentino, 149 F. Supp. 3d 1352, 1357 (S.D. Fla. 2016). The MVRA requires not only that a particular loss would not have occurred but for the conduct underlying the offense of conviction, but also that the causal connection between the conduct and the loss is not too attenuated (either factually or temporally). United States v. Robertson, 493 F.3d 1322, 1334 (11th Cir. 2007). As discussed above, PetroEcuador is not entitled to any amount of restitution because PetroEcuador was complicit in and not a victim of Defendant Baquerizo s crimes. Further, much of the harm alleged by PetroEcuador is unrelated to Defendant Baquerizo s offense of conviction. For this additional reason, PetroEcuador is not entitled to the restitution it seeks. 12 If the Court seeks additional information regarding this conduct, the government asks to provide the information on an ex parte basis due to the sensitive nature of the ongoing investigation. 14
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 15 of 22 Defendant Baquerizo was convicted of one count of conspiracy to launder money to conceal the proceeds of and to promote an underlying bribery scheme. As PetroEcuador notes, Defendant Baquerizo s offense conduct included obtaining shell companies and bank accounts and causing the transfer of funds for the benefit of PetroEcuador officials. DE 37: 3-4. PetroEcuador claims it was the victim of Defendant Baquerizo s crime, suffering among other harms, Baquerizo and his co-conspirators purposely overpricing contracts, DE 37:6, and the loss of the honest services of its officials and employees. DE 37:7. These alleged harms would have been caused by PetroEcuador s own employees and are not the crime for which Defendant Baquerizo was convicted. See, e.g., United States v. Adorno, 950 F. Supp. 2d 426, 428-31 (E.D.N.Y. 2013) (refusing to grant restitution for losses caused by an unprosecuted offense (honest services fraud), rather than the offense of conviction (bribery)). Because Defendant Baquerizo s unlawful conduct did not cause these alleged harms, PetroEcuador should not be awarded restitution from Defendant Baquerizo on these bases. Finally, PetroEcuador provides no support for its assertion that it needs the requested 90 days following Baquerizo s sentencing to determine its loss. The Ecuadorian investigation into this scheme has been ongoing since 2016. In fact, in 2016, Baquerizo was convicted in Ecuador in connection with this scheme and sentenced. Moreover, Baquerizo pleaded guilty in this case in the Southern District of Florida in September 2018. Therefore, PetroEcuador has had at least four months from the U.S. plea hearing and years from the Ecuadorian proceedings to determine its loss from Baquerizo s conduct, and it provides no explanation for why its losses are not ascertainable by the date that is 10 days prior to sentencing. See 18 U.S.C. 3664(d)(5). 15
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 16 of 22 CONCLUSION This Court should deny PetroEcuador s Motion for Recognition of Its Rights as a Victim and Entitlement to Restitution because: (1) PetroEcuador, a state-owned instrumentality, does not qualify as a victim under the CVRA; (2) PetroEcuador s complicity in the bribery and money laundering schemes preclude it from being treated as a victim under both the MVRA and the CVRA; and (3) PetroEcuador is not entitled to restitution under the MVRA for any alleged harm resulting from conduct that was not charged. Respectfully submitted, ARIANA FAJARDO ORSHAN UNITED STATES ATTORNEY By: s/ Karen E. Rochlin Karen E. Rochlin Assistant U. S. Attorney Court I.D. No. A5500050 99 Northeast 4th Street Miami, Florida 33132-2111 Tel. (305) 961-9234 karen.rochlin@usdoj.gov ROBERT ZINK ACTING CHIEF, FRAUD SECTION By: s/ Katherine Raut Katherine Raut Lorinda Laryea David Fuhr Trial Attorneys Department of Justice 1400 New York Ave. N.W. Telephone: (202) 353-3439 Katherine.raut@usdoj.gov Lorinda.laryea@usdoj.gov david.fuhr@usdoj.gov 16
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 17 of 22 DEBORAH L. CONNOR CHIEF, MONEY LAUNDERING & ASSET RECOVERY SECTION By: s/ Randall Warden Randall Warden Court I.D. No. A5502386 Mary Ann McCarthy Trial Attorneys Department of Justice 1400 New York Ave. N.W. Telephone: (202) 598-2802 randall.warden@usdoj.gov mary.mccarthy@usdoj.gov 17
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 18 of 22 CERTIFICATE OF SERVICE CM/ECF. I HEREBY CERTIFY that a true and correct copy of the foregoing was served by s/ Katherine Raut KATHERINE RAUT TRIAL ATTORNEY 18
Case 1:18-cr-20596-DPG Document 42 Entered on FLSD Docket 01/17/2019 Page 19 of 22 APPENDIX OF UNREPORTED CASES Index of Cases In re Instituto Costarricense de Electricidad, No. 11-12707-G (11th Cir. June 17, 2011).2
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