U.S. V. DONAGHY 411 Cite As 570 F.Supp.2D 411 (E.D.N.Y

U.S. v. DONAGHY 411 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008)

IV. CONCLUSION (1) NBA was a victim for purposes of For the foregoing reasons, defendants’ MVRA and VWPA; motion to dismiss pursuant to 12(b)(1) is (2) crime of conspiracy to transmit wager- GRANTED in its entirety. The Section ing information was crime committed 1983 claims and Section 1985 conspiracy by fraud or deceit under MVRA; claim are dismissed without prejudice. The Clerk of the Court shall enter judg- (3) one defendant was responsible for res- ment accordingly and close this case. titution under VWPA; SO ORDERED. (4) referee’s prior actions of placing personal bets through an intermediary was not a part of the conspiracy with , codefendants; (5) NBA referee’s compensation which was to be awarded to NBA as part of restitution award included referee’s UNITED STATES of America, salary and expenses for flight and v. room and board for 16 NBA games; Timothy DONAGHY, Defendant. (6) amount sought for attorney fees as part of investigatory costs component United States of America, of restitution award was a reasonable v. estimate of costs the NBA incurred; James Battista and Thomas (7) NBA’s claimed attorney fees were not Martino, Defendants. excessive; and Nos. 07–CR–587(CBA), 08–CR–86(CBA). (8) district court would apportion attorney fee costs to the appropriate defendant United States District Court, E.D. New York. in the interest of justice. Ordered accordingly. July 23, 2008. Background: Defendants pled guilty to conspiracy to commit wire fraud and con- 1. Sentencing and Punishment O2121 spiracy to transmit wagering information in connection with betting conspiracy in National Basketball Association which one defendant, who was a National (NBA) was a victim of crime of conspiracy Basketball Association (NBA) referee, to transmit wagering information, as would transmitted information he obtained in his allow restitution under the Mandatory Vic- official capacity to two other defendants to tims Restitution Act (MVRA) and the Vic- be used on betting for games. The NBA tim and Witness Protection Act (VWPA) in sought restitution under the Mandatory case in which NBA referee was paid to Victims Restitution Act (MVRA) and the give co-conspirators inside information, Victim and Witness Protection Act confidential to the NBA, to make bets on (VWPA). NBA games; the NBA was directly Holdings: The District Court, Amon, J., harmed by the conspiracy. 18 U.S.C.A. held that: §§ 1084, 3663(a)(2), 3663A(a)(2). 412 570 FEDERAL SUPPLEMENT, 2d SERIES

2. Sentencing and Punishment O2100, for future earnings; thus, even an indigent 2137 defendant may be subject to the duty to Crime of conspiracy to transmit wa- pay restitution when and if funds are even- gering information was crime committed tually acquired. 18 U.S.C.A. § 3663. by fraud or deceit, and therefore co-con- 6. Sentencing and Punishment O2184 spirator could be ordered to pay restitution under the Mandatory Victims Resti- In the absence of a defendant show- tution Act (MRVA), in case in which ing a restricted future earnings potential National Basketball Association (NBA) by a preponderance of the evidence, it is referee provided picks to two co-conspir- entirely reasonable for a district judge to ators in exchange for fee, where the presume future earnings in ordering resti- success of co-conspirator’s wagering was tution under the Victim and Witness Pro- dependent on referee’s fraudulent con- tection Act (VWPA). 18 U.S.C.A. § 3663. duct. 18 U.S.C.A. §§ 1084, 7. Sentencing and Punishment O2134, 3663A(c)(1)(A)(ii). 2138 3. Sentencing and Punishment O2134, Defendant who pled guilty to conspir- 2148, 2195 acy to transmit wagering information was In determining whether to order resti- responsible for restitution under the Vic- tution under the Victim and Witness Pro- tim and Witness Protection Act (VWPA) in tection Act (VWPA), court is statutorily betting conspiracy case in which National required to consider (1) the amount of the Basketball Association (NBA) referee pro- loss sustained by each victim as a result of vided picks to two codefendants in ex- the offense, (2) the financial resources of change for fee, where defendant and his the defendant, (3) the financial needs and family had some financial resources, defen- earning ability of the defendant and the dant had future earning potential, and it defendant’s dependents and (4) such other would have been unjust to require only factors as the court deems appropriate, two out of three co-conspirators to pay but court is not to make detailed factual restitution simply because defendant pled findings as to each factor. 18 U.S.C.A. guilty to a different count of the indict- § 3663(a)(1)(B)(i)(I). ment. 18 U.S.C.A. §§ 1084, 3663(a). 4. Sentencing and Punishment O2134 8. Sentencing and Punishment O2102 Although the financial resources of Federal courts have no inherent pow- the defendant are one of the mandatory er to award restitution; they may only do considerations for an order of restitution so when authorized by statute. under the Victim and Witness Protection Act (VWPA), even a defendant with no 9. Sentencing and Punishment O2167 present ability to pay can still be ordered A restitution award need only to be a to do so. 18 U.S.C.A. § 3663(a). reasonable estimate of the victim’s actual losses. 5. Sentencing and Punishment O2135 A defendant’s limited financial re- 10. Sentencing and Punishment sources at the time restitution is imposed O2188(4) under the Victim and Witness Protection Although estimates are appropriate, a Act (VWPA) is not dispositive of whether court must base its restitution award on restitution is proper, particularly where more than mere speculation about a vic- the defendant has a reasonable potential tim’s actual losses; uncertainties with re- U.S. v. DONAGHY 413 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008)

spect to the amount in question should be must ask whether or not it is engaged in resolved in favor of the victim in accord furtherance of the scheme, conspiracy or with the statutory focus on making the pattern that was an element of the offense victim whole. 18 U.S.C.A. §§ 3663, 3663A. of conviction. 18 U.S.C.A. §§ 3663(a)(2), 3663A(a)(2). 11. Sentencing and Punishment O2138, 2146 16. Sentencing and Punishment O2146 Defendants who pled guilty to con- National Basketball Association spiring with one another in a betting con- (NBA) referee’s actions of placing personal spiracy involving professional basketball bets through an intermediary in prior were liable to pay restitution for acts of NBA seasons was not a part of the betting their co-conspirators committed in further- conspiracy in which he provided picks to ance of the conspiracy. 18 U.S.C.A. two co-conspirators in exchange for fee, §§ 1084, 1349, 3663(b)(4), 3663A(b)(4), and, thus, referee’s prior actions were not 3664(h). subject to an order of restitution, pursuant 12. Sentencing and Punishment O2178 to Mandatory Victims Restitution Act Co-conspirators can be held to be pro- (MVRA) and Victim and Witness Protec- portionately or jointly and severally liable tion Act (VWPA) following referee’s guilty for restitution payments. 18 U.S.C.A. plea to conspiracy to commit wire fraud § 3664(h). and conspiracy to transmit wagering information; prior actions did not serve to fur- 13. Sentencing and Punishment O2145 ther the interests of the conspiracy at is- Victim and Witness Protection Act sue. 18 U.S.C.A. §§ 1084, 1349, 3663(a)(2), (VWPA) and the Mandatory Victims Resti- 3663A(a)(2). tution Act (MVRA) confer authority to order a participant in a conspiracy to pay 17. Conspiracy O24(1) restitution even on uncharged or acquitted In order to prove a conspiracy, the co- counts. 18 U.S.C.A. §§ 3663, 3663A. conspirators need not have agreed on the 14. Sentencing and Punishment O676 details of the conspiracy, so long as they ‘‘Relevant conduct,’’ under Sentencing agreed on the essential nature of the plan. Guidelines section providing for consideration of relevant conduct in determining 18. Conspiracy O24(2) base offense level, extends beyond losses A single conspiracy is not transformed caused by schemes that are elements of into multiple conspiracies merely by virtue the offense of conviction to include losses of the fact that it may involve two or more attributable to the same course of conduct. phases or spheres of operation, so long as U.S.S.G. § 1B1.3, 18 U.S.C.A. there is sufficient proof of mutual depen- See publication Words and Phras- dence and assistance. es for other judicial constructions and definitions. 19. Sentencing and Punishment O2143 15. Sentencing and Punishment O2146 ‘‘Consequential damages,’’ which are In order to determine whether certain losses beyond those which naturally and conduct may be the subject of a restitution directly flow from the defendant’s conduct, order under the Victim and Witness Pro- are not recoverable as part of restitution tection Act (VWPA) and the Mandatory award under the Victim and Witness Pro- Victims Restitution Act (MRVA), a court tection Act (VWPA) and the Mandatory 414 570 FEDERAL SUPPLEMENT, 2d SERIES

Victims Restitution Act (MRVA). 18 sought was a reasonable estimate of the U.S.C.A. §§ 3663(b)(1), 3663A(b)(1). costs the NBA incurred while assisting the See publication Words and Phras- government in its investigation of the de- es for other judicial constructions fendants who pled guilty to conspiracy to and definitions. commit wire fraud and conspiracy to trans- 20. Sentencing and Punishment O2148 mit wagering information relating to wa- Amount of National Basketball Asso- gering conspiracy on NBA games. 18 ciation (NBA) referee’s compensation U.S.C.A. §§ 1084, 1349, 3663(b)(4), which was to be awarded to NBA as part 3663A(b)(4). of restitution award under Mandatory Vic- tims Restitution Act (MVRA) and Victim 24. Sentencing and Punishment O2168 and Witness Protection Act (VWPA) in- Assuming that district court had duty cluded referee’s salary and expenses for to scrutinize attorney fees to be awarded flight and room and board, for 16 NBA to victim National Basketball Association games that were subject of betting con- (NBA) as part of investigatory costs com- spiracy that resulted in convictions for con- ponent of restitution award, fees were not spiracy to commit wire fraud and conspira- excessive, in prosecution involving wager- cy to transmit wagering information. 18 ing conspiracy by NBA referee and two U.S.C.A. §§ 1084, 1349, 3663(b)(1), 3663A(b)(1). co-conspirators; NBA employed well- known and reputable corporate law firms, 21. Sentencing and Punishment O2154 firms’ attorneys did not overstaff docu- Investigation costs are recoverable as ment productions and witness interviews, part of restitution award under the Man- and firms’ rates were in line with rates datory Victims Restitution Act (MVRA) charged by most of the city’s major corpo- and the Victim and Witness Protection Act rate law firms. 18 U.S.C.A. §§ 1084, 1349, (VWPA) so long as they are a direct and 3663(b)(4), 3663A(b)(4). foreseeable result of the defendant’s wrongful conduct. 18 U.S.C.A. 25. Sentencing and Punishment O2154 §§ 3663(b)(4), 3663A(b)(4). Attorney fees relating to public re- 22. Sentencing and Punishment O2154 sponse of victim National Basketball Asso- Attorney fees are recoverable as part ciation (NBA) to NBA referee’s guilty plea of restitution award under Mandatory Vic- to conspiracy to commit wire fraud and tims Restitution Act (MVRA) and Victim conspiracy to transmit wagering informa- and Witness Protection Act (VWPA) when tion, in connection with NBA game betting they are incurred as an investigation cost. conspiracy, were not recoverable as part of 18 U.S.C.A. §§ 3663(b)(4), 3663A(b)(4). investigatory costs component of restitu- 23. Sentencing and Punishment tion award under Mandatory Victims Res- O2188(4) titution Act (MVRA) and Victim and Wit- Affidavits provided by National Bas- ness Protection Act (VWPA); although ketball Association (NBA) detailing attor- NBA’s desire to respond publicly when ney fees they sought to recover as part of conspiracy came to light was foreseeable, restitution under the Mandatory Victims only foreseeable steps taken to assist the Restitution Act (MVRA) and the Victim government in investigation or prosecution and Witness Protection Act (VWPA) were were recoverable. 18 U.S.C.A. §§ 1084, sufficient to establish that the amount 1349, 3663(b)(4), 3663A(b)(4). U.S. v. DONAGHY 415 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008)

26. Sentencing and Punishment O2178 guilty to conspiracy to transmit wagering District court would, in the interest of information. As a victim of these conspir- justice, apportion attorney fee costs to the acies, the National Basketball Association appropriate defendant or defendants in (‘‘NBA’’) and the United States on its be- wagering conspiracy case in which victim half, seek restitution pursuant to the Man- National Basketball Association (NBA) datory Victims Restitution Act of 1996 sought restitution pursuant to Mandatory (‘‘MVRA’’), 18 U.S.C. § 3663A. Alterna- Victims Restitution Act (MVRA) and Vic- tively, as to defendant Battista, restitution tim and Witness Protection Act (VWPA), is sought pursuant to the Victim and Wit- where defendants identified certain costs ness Protection Act of 1982 (‘‘VWPA’’), 18 that would be appropriately apportioned to U.S.C. § 3663, the MVRA’s discretionary one or two defendants, rather than jointly counterpart. For the reasons that follow, and severally to all three defendants. 18 the Court concludes that the NBA is enti- U.S.C.A. §§ 1084, 1349, 3663(b)(4), tled to restitution in the total amount of 3663A(b)(4). $217,266.94, to be imposed jointly and severally in part and apportioned in part as set forth herein.

II. Factual Background Alexander A. Solomon, Jeffrey A. Goldberg, United States Attorneys Office, A. The Pleas Brooklyn, NY, for Plaintiff. For thirteen years, up to and including John F. Lauro, Lauro Law Firm, Tam- the 2006–07 season, Donaghy was an NBA pa, FL, Jack McMahon, Philadelphia, PA, referee. During the 2003–04 season, Do- Vicki Herr, Media, PA, for Defendants. naghy began to provide betting recommendations, or ‘‘picks,’’ for NBA games, in- MEMORANDUM AND ORDER cluding games he officiated, to his friend, Jack Concannon. These bets were then AMON, District Judge. placed by Concannon, on behalf of him and I. Introduction Donaghy, with a bookmaking service. On August 15, 2007, in case number 07– Concannon, in an effort to conceal Dona- CR–587, defendant Timothy Donaghy pled ghy’s involvement, represented to the ser- guilty to both counts of a two-count Infor- vice that he was betting alone. The mation alleging conspiracy to commit wire scheme between Donaghy and Concannon 1 fraud in violation of 18 U.S.C. § 1349 and continued until November 2006, during conspiracy to transmit wagering informa- which time the two men placed bets on tion in violation of 18 U.S.C. § 1084. approximately 30 to 40 games annually. Thereafter, in case number 08–CR–86, on Eventually, Concannon failed in his ef- April 16 and 24, 2008 respectively, Dona- forts to prevent Donaghy’s gambling activ- ghy’s two co-conspirators, Thomas Martino ity from being discovered. In December and James Battista, entered pleas of of 2006, defendants James Battista and guilty. Martino pled guilty to conspiracy Thomas Martino approached Donaghy and to commit wire fraud, and Battista pled informed him that they were aware that he

1. Apparently, after a hiatus, the Dona- men gambled on approximately five games ghy/Concannon scheme rekindled for a brief together. period in February of 2007, when the two 416 570 FEDERAL SUPPLEMENT, 2d SERIES had been placing bets on NBA games, of the two conspiracy Counts take place on including games he had refereed. Battista December 13, 14, and 26, 2006, and March proposed an arrangement whereby Dona- 11, 2007, and are alleged to have been in ghy would provide picks on NBA games to furtherance of the Donaghy/Battista/Mar- Battista through Martino. In making tino conspiracy. (Information ¶ 15.) these picks, Donaghy was to utilize his There are no acts alleged regarding the access to certain non-public information, Donaghy/Concannon arrangement. including the identity of officiating crews At the plea hearing, the Court asked for upcoming games, the interactions be- Donaghy to describe in his own words tween certain referees and team person- what he did in connection with the charges nel, and the physical condition of certain in Counts One and Two. He stated: players. Rather than betting his own In December, 2006, I was employed as a money as he had done with Concannon, referee with the National Basketball As- Donaghy would simply be paid a fee by sociation. As an employee, I was sub- Battista through Martino for a correct ject to rules of conduct established by pick. Martino would often deliver the cash the NBA, including a prohibition on bet- payments. Concannon was not a part of ting on professional sporting events. In this arrangement. addition, as a referee, I was given access After the Donaghy/Battista/Martino con- to master referee schedules that includ- spiracy came to the government’s atten- ed the identities of officiating crews for tion, Donaghy approached the government particular games. This information was and cooperated with its investigation. confidential and not available to the gen- Thereafter, on August 15, 2007, he pled eral public. I also was aware of the guilty to a two-count Information. In the manner in which officials interacted with ‘‘Introduction’’ section, the Information players and called games as well as the states: condition of players prior to a game. By Approximately four years ago, DONA- having this non-public information, I was GHY began placing bets on NBA games, in a unique position to predict the out- including games he officiated. Begin- come of NBA games. ning in approximately December 2006, Beginning in December, 2006 until about DONAGHY began to receive cash pay- April, 2007, I agreed with other individu- ments in exchange for providing betting als to use this non-public information in recommendations or ‘‘picks’’ on NBA order to pick NBA teams that I predict- games, including games he officiated, to ed would win particular games and also individuals involved in the business of cover the point spreads set by profes- sports betting. sional bookmakers. As part of our (Information ¶ 7.) The Information then agreement, others would in turn use my proceeds to the two applicable Counts, al- picks in order to place bets with book- leging conspiracy to commit mail fraud and makers on the teams I had selected. I to transmit wagering information, therein received cash payments for successful describing in detail the 2006–07 conspiracy picks but would not lose any money if a Donaghy entered into with Battista and pick did not win and cover the point Martino. (Information ¶¶ 8–14.) Neither spread. Some of my picks included Count mentions the 2003–2006 gambling games I had been assigned to referee. arrangement between Donaghy and Con- (Donaghy Plea Tr. at 21.) Donaghy did cannon. The overt acts alleged in support not refer to the betting arrangement he U.S. v. DONAGHY 417 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008) had made with Concannon. A subsequent [DEFENSE COUNSEL]: That more discussion ensued regarding the scope of accurately describes. the conspiracies to which Donaghy had THE COURT: That’s what’s charged, just pled guilty: correct? [THE GOVERNMENT]: If I could [THE GOVERNMENT]: Right. I make one point of clarity, it is alleged in want to say because there’s an allegation the information in addition to the two in here that Mr. Donaghy doesn’t dis- crimes that the defendant has now pled pute, that he has been betting on NBA guilty to, that he did himself place bets games himself for three years. on NBA games. I didn’t want there to THE COURT: Where? be confusion. I think he would acknowl- [THE GOVERNMENT]: Paragraph 7. edge that. That was not part of the I wanted to make clear while he was charge. It was not part of the charged independently betting on games, the conduct and the conspiracy in Count conspiracy charge in which he was paid Two. It is conduct in which he engaged. for his picks is Count One and the relat- THE COURT: Is there any dispute ed conspiracy Count Two. That’s sepa- about that? rate from the other conduct which is alleged but not part of the essential ele- [DEFENSE COUNSEL]: Your Honor, ments of the two counts. I’m not sure of the relevance at this point in terms of the allocution, but (Donaghy Plea Tr. at 25–26 (emphasis add- there is not a factual dispute as to what ed).) was said. The following April, Martino and Battis- ta pled guilty. On April 16, 2008, Martino THE COURT: Let me ask, does the pled guilty to participating in the same government believe that I need to make wire fraud conspiracy that Donaghy had any further inquiry to establish a factual been involved in. He described his crime basis for the plea to either Count One or as follows: Count Two? Between mid-December 2006 and early [THE GOVERNMENT]: We do not, April 2007, I agreed with James Battista your Honor. and Tim Donaghy to pay Tim Donaghy, [DEFENSE COUNSEL]: Your Honor, an NBA referee, for non-public informa- let me clarify one thing that Mr. Seigel tion to which he had unique access by said. There is nothing in this informa- virtue of his position as an NBA referee tion that suggests Mr. Donaghy person- about games that he was scheduled to ally placed any bets. The allegations referee. Mr. Donaghy would provide relate to conspiracy charges which I me with the name of the team he be- think have been allocuted. I don’t want lieved was a good pick for gambling there to be any misunderstanding on the purposes. I knew that Mr. Donaghy record in terms of what he’s pleading to was violating the rules that governed his or the conduct he’s pleading to. NBA employment by providing this in- THE COURT: The heart of the allega- formation. That information was relied tion, as I understand it, with respect to on by Mr. Battista to place gambling Count One, is that he was providing wagers on NBA teams. If Donaghy’s recommendations and information for pick won he was paid for his informa- the purposes of others who were en- tion. He was not paid if his pick lost. gaged in sports betting. On most occasions I would receive that 418 570 FEDERAL SUPPLEMENT, 2d SERIES

information from Mr. Donaghy by tele- Battista met with the NBA referee, who phone and then relay that information to is Mr. Dona[ghy], is that correct? Mr. Battista by telephone. On Decem- THE DEFENDANT: Yes. ber 13, 2006, I spoke with Mr. Donaghy THE COURT: You met in Pennsylvania by telephone regarding his pick for an and gave him cash? NBA game. On December 14th, Mr. THE DEFENDANT: Yes, your Honor, Donaghy and I met in Pennsylvania I did. where I gave him a cash payment for his information. On December 26th, I THE COURT: You did that? spoke with Mr. Donaghy by telephone THE DEFENDANT: Yes, I did, your and again received his pick on an NBA honor. game. On March 11, 2007, I met with THE COURT: Now, you used the tele- Mr. Donaghy in Toronto, Canada and phone. Did you also use the telephone gave him a cash payment. During the for the purpose of transmitting bets and investigation of this case I testified that wagers and information involving bets I did not relay information I received and wagers? from Mr. Donaghy to Mr. Battista and THE DEFENDANT: Yes, your Honor, that was not truthful. I did. (Martino Plea Tr. at 23–24.) THE COURT: Did you use it interstate, did you call from state to state? On April 24, 2008, Battista pled guilty to conspiracy to transmit wagering informa- THE DEFENDANT: Yes, your Honor, tion, the same conspiracy to transmit wa- I did. gering information that Donaghy had pled (Battista Plea Tr. at 19–20.) guilty to. He described his crime as fol- The overt acts contained in the indict- lows: ment for the wagering conspiracy make I, James Battista, of sound mind and clear that, although criminalized by two will from December of 2006 to March separate provisions of the United States 2007, I was engaged in the business of Code, the same underlying conduct was at sports betting, and I agreed with Tom issue: Martino and Tim Dona[ghy] to use the In furtherance of this conspiracy and in telephone across state lines to obtain order to accomplish the objectives there- information to assist me in wagering on of, the defendants JAMES BATTISTA sporting events, on NBA basketball and THOMAS MARTINO, together games. I received information from with others, committed and caused to be Tom Martino, who received his informa- committed, among others, the following tion from the NBA referee Tim overt acts: Dona[ghy]. This agreement was formed a. On or about December 13, 2006, during a meeting between the three of MARTINO spoke with the NBA referee us, in a hotel in December of 2006. by telephone regarding the NBA refer- During the Course of this agreement ee’s pick for an NBA game. from time to time I directed Mr. Marti- b. On or about December 14, 2006, no to do certain things such as having BATTISTA and MARTINO met with meetings with Mr. Dona[ghy]. the NBA referee in Pennsylvania and THE COURT: Overt Act B says, that gave a cash payment to the NBA refer- on December 14, 2006, that you and ee. U.S. v. DONAGHY 419 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008)

c. On or about December 26, 2006, position that they were entitled not only to MARTINO spoke with the NBA referee a proportional share of Donaghy’s compen- by telephone regarding the NBA refer- sation for the 2006–07 season but also for ee’s pick for an NBA game. the preceding three seasons. The NBA d. On or about March 11, 2007, also itemized the amount of money it was MARTINO met with the NBA referee seeking for each category of what it be- in Toronto, Canada, and MARTINO lieved were compensable costs and ex- gave a cash payment to the NBA refer- penses and provided some documentation ee. in support of its request. (Indictment ¶ 15.) On June 25, 2008, the Court conducted a hearing on Donaghy’s application for the B. Request for Restitution and Ensu- Rule 17(c) subpoena as well as other issues ing Litigation pertaining to restitution. At the hearing, Despite an inquiry from the Probation the Court rejected as non-compensable the Office months earlier, the NBA did not NBA’s costs for an internal investigation, seek restitution until June 5, 2008 when it in particular its requests for the expenses wrote to Brandon Maxon, the probation associated with the interviews of the 57 officer assigned to these cases. It was a referees. This amount was expressly blanket undifferentiated request for one sought pursuant to subsection (b)(4) of the million dollars from the defendant Dona- MVRA, 18 U.S.C. § 3663A(b)(4). The ghy, for: (1) compensation and benefits for Court determined that the costs of the the 2006–07 season; (2) fees and expenses NBA’s internal investigation, which were paid to outside counsel to represent the not incurred in the course of assisting the NBA in responding to and participating in government with its investigation into or the prosecution of the offense and to at- prosecution of Donaghy’s offenses, were tend proceedings related to the offense; outside the scope of subsection (b)(4). (3) expenses associated with an internal In light of the subpoena, the Court also investigation; and (4) transportation and directed the NBA to submit further docu- expenses incurred for interviewing 57 mentation in support of its request. NBA referees as a part of the internal Thereafter, in a submission dated June 27, investigation. 2008, the NBA modified its request to seek On June 10, 2008, Donaghy responded three ‘‘categories’’ of restitution: (1) by applying for a subpoena pursuant to $577,312.89, representing Donaghy’s com- Federal Rule of Criminal Procedure 17(c) pensation for the portions of the 2003–04, for production of every conceivable docu- 2004–05, 2005–06, and 2006–07 seasons ment in the NBA’s possession underlying during which he officiated games in which the expenses sought. By letter dated he had a financial interest; (2) $150,793, June 17, 2008, the NBA submitted further representing the attorneys’ fees of Wach- support for its restitution request and took tell, Lipton, Rosen & Katz (‘‘Wachtell’’) the position that the paperwork submitted and Arkin Kaplan Rice LLP (‘‘Arkin’’), rendered the request for the Rule 17(c) who served as the NBA’s counsel in con- subpoena moot. The NBA now deter- nection with the NBA’s assistance to the mined for the first time that it was entitled government in its investigation and prose- to an additional $395,104.89, for a total of cution of these offenses; and (3) $9,930.02, $1,395,104.89. This increase appears to representing that portion of the salaries of have been based principally on a change in NBA employees which was attributed to 420 570 FEDERAL SUPPLEMENT, 2d SERIES reviewing, at the government’s request, conduct or because they are too vague and the tapes of games that Donaghy refereed. unsubstantiated to be recoverable. Donaghy responded to the NBA’s revised request by letter dated June 30, 2008, III. Discussion arguing that the NBA was not entitled to A. Liability of the Defendants Under restitution in the amount of Donaghy’s the Restitution Statutes compensation for the 2003–06 time period, 1. The NBA is a ‘‘Victim’’ that the NBA overpaid outside counsel in of Battista’s Crime assisting the government’s investigation and prosecution of his offense, and that the [1] Battista’s first argument is that he NBA’s requests were vague and unsub- should not be ordered to pay restitution, stantiated. On June 30, 2008, the Court under either the MVRA or the VWPA, issued an Order which directed the NBA because the NBA was not a ‘‘victim’’ of his to organize its data and coordinate the offense, conspiracy to transmit wagering affidavits with the time sheets. The NBA information. The definition of ‘‘victim’’ is responded on July 1, 2008. the same in both statutes: Thereafter, the Court called a telephone For the purposes of this section, the conference for July 2, 2008 to alert the term ‘‘victim’’ means a person directly parties to an issue that none had ad- and proximately harmed as a result of dressed; namely, the potential liability of the commission of an offense for which co-conspirators Battista and Martino for restitution may be ordered including, in the restitution sought by the NBA. This the case of an offense that involves as an oversight by the parties resulted in the element a scheme, conspiracy, or pat- adjournment of the sentences to permit tern of criminal activity, any person di- defendant Battista additional time to re- rectly harmed by the defendant’s crimi- view the submissions and address the is- nal conduct in the course of the scheme, sues as they pertained to him. Having conspiracy, or pattern. conducted that review, Battista contends 18 U.S.C. §§ 3663(a)(2); 3663A(a)(2). that he cannot be ordered to pay any Courts have noted that this definition, restitution because the NBA is not a ‘‘vic- which was amended to its present form in tim’’ of the conspiracy to which he pled 1990, is broad.2 See, e.g., United States v. guilty under either the MVRA or the Jewett, 978 F.2d 248, 253 (6th Cir.1992); VWPA. Alternatively, he argues that the United States v. Rand, 403 F.3d 489, 493– conspiracy to which he pled guilty is not 95 (7th Cir.2005). covered by the MVRA, and the Court In this case, Battista pled guilty to con- should not impose restitution pursuant to spiring with Martino and Donaghy to the VWPA. In the event that these argu- transmit wagering information. One of ments fail, he adopts all of Martino’s argu- the key features of this conspiracy was ments regarding amount and apportion- that Donaghy was able to gain a wagering ment. Martino acknowledges that he is advantage for Battista by using confiden- liable for restitution but disputes the tial information belonging to the NBA in amounts sought by the NBA either be- the course of providing him with ‘‘picks’’ cause in his view they do not pertain to his on games he refereed. On these facts, the

2. This amendment, and the caselaw which in section III.C.1.a, infra. prompted it, will be discussed in more detail U.S. v. DONAGHY 421 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008)

NBA is clearly a ‘‘victim’’ of Battista’s concludes that Battista is subject to the wagering conspiracy. See, e.g., United MVRA. States v. Brock–Davis, 504 F.3d 991, 998– 3. Battista May be Ordered to 1000 (9th Cir.2007) (hotel owner was a Pay Restitution Pursuant ‘‘victim’’ of a methamphetamine conspiracy to the VWPA because he incurred cleanup costs in a [3] Alternatively, Battista is accounta- room where the drug was being manufac- ble for restitution pursuant to the VWPA. tured). The VWPA provides that the court, when 2. Battista’s Crime is Covered sentencing ‘‘a defendant convicted of [any by the MVRA offense under Title 18 and others], may [2] The defendants Donaghy and Mar- order TTT that the defendant make restitu- tino do not dispute that the MVRA applies tion to any victim of such offense.’’ 18 to the offenses to which they entered U.S.C. § 3663(a)(1)(A). In determining guilty pleas, conspiracy to commit wire whether or not to order restitution pursu- fraud, in violation of 18 U.S.C. § 1349. ant to the VWPA, the district court must This is an ‘‘offense against property’’ with- consider (1) the amount of the loss sus- in the meaning of the MVRA, because it is tained by each victim as a result of the an offense committed by fraud or deceit. offense, (2) the financial resources of the See 18 U.S.C. § 3663A(c)(1)(A)(ii); United defendant, (3) the financial needs and States v. Sensmeier, 361 F.3d 982, 987–88 earning ability of the defendant and the (7th Cir.2004). Battista argues that he is defendant’s dependents and (4) such other not subject to this provision since the factors as the court deems appropriate. crime to which he pled, conspiracy to 18 U.S.C. § 3663(a)(1)(B)(i)(I). ‘‘Courts transmit wagering information in violation are statutorily required to consider the of 18 U.S.C. § 1084, is not an offense enumerated restitution factors, but not to committed by fraud or deceit, and there- make detailed factual findings as to each fore is not covered by the MVRA. factor.’’ United States v. Stevens, 211 The resolution of this issue turns on F.3d 1, 6 (2d Cir.2000). The Second Cir- cuit has held that, although it is not man- whether the language ‘‘committed by fraud datory, the purpose of section 3663 ‘‘is to or deceit’’ refers to the elements of an require restitution whenever possible.’’ offense or the manner in which the defen- United States v. Porter, 41 F.3d 68, 70 (2d dant commits the offense. If it is the Cir.1994) (‘‘Porter I’’ ) (citing United former, Battista prevails. If it is the lat- States v. Atkinson, 788 F.2d 900, 903 (2d ter, as the government argues, he is sub- Cir.1986)); see also United States v. ject to the MVRA and must pay restitu- Jacques, 321 F.3d 255, 261 (2d Cir.2003); tion. Neither party has provided any United States v. Porter, 90 F.3d 64, 68 (2d caselaw that addresses the issue. A plain Cir.1996) (‘‘Porter II’’ ); U.S.S.G. reading of the statute suggests that the 5E1.1(a)(1) (stating that ‘‘[t]he court shall government has the better argument since enter a restitution order if such order is the phrase ‘‘committed by fraud or deceit’’ authorized’’ under 18 U.S.C. § 3663). appears to refer to the way in which a particular offense was carried out rather [4–6] Although the financial resources than its elements. Accordingly, on the of the defendant are one of the mandatory unique facts of this case, where the success section 3663(a) considerations, even a de- of Battista’s wagering was dependent on fendant with no present ability to pay can Donaghy’s fraudulent conduct, this Court still be ordered to do so pursuant to sec- 422 570 FEDERAL SUPPLEMENT, 2d SERIES tion 3663. As the Second Circuit has ex- victim NBA. As to the defendant’s re- plained: sources, Battista’s presentence report indi- A defendant’s limited financial resources cates that he has assets totaling $676,300 at the time restitution is imposed is not in the form of a residence worth approxi- dispositive of whether restitution is mately $600,000, $68,000 in various check- proper, see [United States v.] Mortimer, ing and savings accounts, and the remain- 52 F.3d [429,] 436 [(2d Cir.1995)], partic- ing $7,500 in the value of a 1998 Dodge ularly where the defendant has a rea- Caravan and a 2000 Dodge Durango. His sonable potential for future earnings. sole liability is the $120,000 balance of his Thus, ‘‘[e]ven an indigent defendant may mortgage, which will be fully paid in 2017. be subject to the duty to pay restitution His household’s monthly income is $1,800, when and if funds are eventually ac- which is the sum of his wife’s salary and quired.’’ [Porter II ], 90 F.3d at 70; see assistance from other family. His house- United States v. Ismail, 219 F.3d 76, 78 hold’s monthly expenses total $4,830, re- (2d Cir.2000) (per curiam) (present indi- sulting in a monthly negative cash flow of gency not a barrier to restitution order $3,030. Currently, Battista stays home where future earning power exists). with his three children while his wife Furthermore, in the absence of a defen- works. His wife has indicated that Battis- dant showing a restricted future earn- ta has expressed interest in opening a ings potential by a preponderance of the catering business, and his presentence re- evidence, it is entirely reasonable for a port reflects that he has previous experi- district judge to presume future earn- ence in the restaurant business. He cer- ings in ordering restitution. See, e.g., 18 tainly has a reasonable potential for future U.S.C. § 3664(e) (‘‘The burden of dem- income. Accordingly, Battista should have onstrating the financial resources of the sufficient resources to contribute to the defendant and the financial needs of the payment of restitution to the NBA.3 defendant TTT shall be on the defen- In addition to the factors specifically dant.’’). identified in section 3663(a)(1)(B)(i)(I), the United States v. Ben Zvi, 242 F.3d 89, 100 Court is also permitted to consider ‘‘such (2d Cir.2001) (ellipses and one alteration in other factors as the court deems appropri- original); see also Jacques, 321 F.3d at ate.’’ 18 U.S.C. § 3663(a)(1)(B)(i)(II). 262; Porter I, 41 F.3d at 70 (‘‘It is well One important consideration is the need, established that the indigency of a defen- where possible, to insure equality of treat- dant does not per se preclude the ordering ment of similarly situated defendants. of restitution.’’). The conduct underlying Battista’s offense [7] In this case, an analysis of the per- is the same conspiracy factually that Dona- tinent factors dictates that Battista be re- ghy and Martino pled guilty to. The mere sponsible together with his co-conspirators fact that this conduct is criminalized by at for restitution to the NBA. The Court has least two different provisions of the United in the succeeding discussion identified with States Code—one that is clearly covered some degree of precision the loss to the by the MVRA and another where its appli-

3. Battista’s conclusory assertion that he ‘‘is cluded from ordering Battista to pay restitu- under severe financial strains at this time’’ is tion even if he were presently indigent, as insufficient to meet his burden of demon- long as he possessed the potential to earn a strating his financial limitations, and, as is living in the future. explained above, the Court would not be pre- U.S. v. DONAGHY 423 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008)

cability may be less clear—should not lead § 3664(e); United States v. Reifler, 446 to the result that two co-conspirators are F.3d 65, 122 (2d Cir.2006). A restitution required to pay restitution while a third, award need only to be a reasonable esti- the organizer of the conspiracy, is not, mate of the victim’s actual losses. See simply because he pled guilty to a different United States v. Germosen, 139 F.3d 120, count of the indictment. Accordingly, be- 129–30 (2d Cir.1998); United States v. cause Battista and his family have some Burdi, 414 F.3d 216, 221 (1st Cir.2005); financial resources and he has earning po- United States v. Futrell, 209 F.3d 1286, tential, and because it would be unjust to 1292 (11th Cir.2000); United States v. Sa- require only two out of three participants poznik, 161 F.3d 1117, 1121–22 (7th Cir. in a single conspiracy to pay restitution to 1998) (district judge’s estimate of 25% of its only identified victim, the Court con- the defendant’s salary not an abuse of cludes that defendant Battista is liable to discretion where no more precise number pay restitution pursuant to the VWPA. could be easily determined). Although estimates are appropriate, a court must base B. General Restitution Principles its restitution award on more than mere [8] The Court now turns to the NBA’s speculation about a victim’s actual losses. restitution requests. Federal courts have See United States v. Catoggio, 326 F.3d no inherent power to award restitution. 323, 329 (2d Cir.2003). Uncertainties with They may only do so when authorized by respect to the amount in question should statute. United States v. Gottesman, 122 be resolved in favor of the victim in accord F.3d 150, 151 (2d Cir.1997); United States with the statutory focus on making the v. Akande, 200 F.3d 136, 138 (3d Cir.1999); victim whole. See United States v. Boc- United States v. Dickerson, 370 F.3d 1330, cagna, 450 F.3d 107, 119 (2d Cir.2006) 1335 (11th Cir.2004). Here, restitution is (‘‘[R]estitution attempts to compensate for being awarded pursuant to 18 U.S.C. loss by restoring the victim to a position he 4 §§ 3663, 3663A, and 3664. In all respects occupied before the injurious event.’’ (in- relevant to the ensuing discussion, sections ternal quotations and alterations omitted)); 3663 and 3663A are identical, and the United States v. Coriaty, 300 F.3d 244, 253 Court relies on cases interpreting both (2d Cir.2002) (observing ‘‘the statutory fo- provisions. See United States v. Boyd, 222 cus on the victim’s losses and upon making F.3d 47, 50–51 (2d Cir.2000); United victims whole’’). States v. Mahone, 453 F.3d 68, 74 n. 3 (1st Cir.2006) (citing cases); Dickerson, 370 [11, 12] Because the three defendants F.3d at 1338; United States v. Randle, 324 pled guilty to conspiring with one another, F.3d 550, 556 n. 3 (7th Cir.2003); United they are liable to pay restitution for acts of States v. Quillen, 335 F.3d 219, 222 n. 4 their co-conspirators committed in further- (3d Cir.2003). ance of the conspiracy. See Boyd, 222 [9, 10] The basic principles of restitu- F.3d at 50–51; United States v. Nichols, tion are well-settled. The government 169 F.3d 1255, 1278 (10th Cir.1999); Unit- bears the burden of proving the amount of ed1 States v. Plumley, 993 F.2d 1140, 1142 loss sustained by the victim by a prepon- (4th Cir.1993). The co-conspirators can be derance of the evidence. See 18 U.S.C. held to be proportionately or jointly and

4. Section 3664 governs the procedure for the pursuant to both sections 3663, the VWPA, issuance and enforcement of a restitution or- and 3663A, the MVRA. der and expressly applies to orders issued 424 570 FEDERAL SUPPLEMENT, 2d SERIES

severally liable for restitution payments. the NBA can recover from Donaghy 6 his See 18 U.S.C. § 3664(h); United States v. compensation for certain games during the Klein, 476 F.3d 111, 114 (2d Cir.2007); 2003–04, 2004–05, and 2005–06 seasons, United States v. Nucci, 364 F.3d 419, 422 prior to the formation of his criminal rela- (2d Cir.2004). The choice among these tionship with Battista and Martino. On two options is a discretionary one for the this point the government agrees with the Court. See Nucci, 364 F.3d at 422 (citing defendants that the compensation paid to section 3664(h)). With these general prin- Donaghy for the earlier seasons is not ciples in mind, the Court now turns to the recoverable. It is only the NBA that con- NBA’s specific restitution requests. tinues to press this issue. In Hughey v. United States, the Su- C. The NBA’s Restitution Requests preme Court addressed the question of 1. Donaghy’s Compensation whether the provisions of the VWPA ‘‘al- Pursuant to subsection (b)(1) of both low a court to order a defendant who is restitution statutes,5 the Court may award charged with multiple offenses but who is restitution, in the cases of an offense convicted of only one offense to make res- against property, in the amount of the titution for losses related to the other of- victim’s loss. The proper measure of fenses.’’ 495 U.S. 411, 412–13, 110 S.Ct. 1979, 109 L.Ed.2d 408 (1990). At the time, ‘‘loss’’ is the value of the property wrong- the VWPA allowed district courts to order fully taken by the defendant. See 18 a defendant to ‘‘ ‘make restitution to any U.S.C. §§ 3663(b)(1)(B), 3663A(b)(1)(B); victim’ ’’ of the offense.7 Id. at 412, 110 Sapoznik, 161 F.3d at 1121. Here, the S.Ct. 1979 (quoting the VWPA as it read in NBA seeks to recover losses representing 1990). Hughey had been indicted for the portion of Donaghy’s compensation three counts of theft by a United States that was paid for the games he refereed Postal Service employee and three counts dishonestly during the 2003–04, 2004–05, of use of unauthorized credit cards, but 2005–06, and 2006–07 seasons. The Court had pled guilty to only one of the counts, must first address whether or not the for using an unauthorized credit card on a NBA can recover for losses incurred for all particular occasion. Id. at 413–14, 110 four of these seasons. S.Ct. 1979. Nevertheless, the district a. Recovery is Only Available court had ordered Hughey to pay restitu- for the 2006–07 Season tion for losses stemming from the use of at Although the precise amount is the sub- least 20 other credit cards on separate ject of some debate, it is not disputed that occasions. Id. at 414, 110 S.Ct. 1979. The the NBA is entitled to recover certain Supreme Court reversed, holding that ‘‘the compensation paid to Donaghy for games language and structure of the [VWPA] he refereed during the 2006–07 season for make plain Congress’ intent to authorize which he provided picks to Battista and an award of restitution only for the loss Martino. What is in dispute is whether caused by the specific conduct that is the

5. Hereinafter, where the Court simply refers for the losses claimed to have been suffered to ‘‘subsection ( ),’’ it is citing a provision that during the 2003–06 time period. can be found, at a corresponding location, in both section 3663 and section 3663A. 7. A t the time of the Hughey decision, the relevant provision of the VWPA resided at 18 6. The government does not seek restitution on U.S.C. § 3579, rather than at § 3663. the NBA’s behalf against Battista and Martino U.S. v. DONAGHY 425 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008)

basis of the offense of conviction.’’ Id. at MVRA in 1996, Congress included an iden- 413, 110 S.Ct. 1979. tical subsection (a)(2). See Boyd, 222 F.3d Hughey’s application in the case of a at 50–51 (noting that the MVRA definition crime involving only a single instance of of ‘‘victim’’ traced the VWPA definition conduct, like the unauthorized use of a verbatim and applying VWPA caselaw in a credit card on a given day, was, and re- MVRA case); Dickerson, 370 F.3d at 1338 mains, fairly straightforward. In Hu- (‘‘Because §§ 3663 and 3663A define ‘vic- ghey’s wake, however, a circuit split tim’ in precisely the same way, we look to emerged regarding its application in mail cases interpreting either statute.’’). Con- fraud cases that involve a scheme or pat- spiracy to commit wire fraud, the offense tern of fraudulent behavior. Several cir- to which Donaghy pled guilty, is an offense cuits, representing the majority, took the involving as an element a scheme, conspir- position that Hughey stood for the propo- acy, or pattern of criminal activity. sition that restitution was only available with respect to the particular conduct [13] As presently enacted, ‘‘the VWPA charged and proven. See United States v. [and the MVRA] confer[ ] authority to or- Cronin, 990 F.2d 663, 666 (1st Cir.1993) der a participant in a conspiracy to pay (joining the majority view and citing cases restitution even on uncharged or acquitted from the Third, Sixth, Ninth, Tenth, and counts.’’ Boyd, 222 F.3d at 51; see also Eleventh circuits). Only two circuits, the Dickerson, 370 F.3d at 1338–39 (noting Fifth and Seventh, concluded that Hu- that, with its definition of ‘‘victim,’’ Con- ghey’s ‘‘offense of conviction’’ language re- gress broadened a district court’s authori- ferred to the mail fraud scheme as a ty to grant restitution); United States v. whole, making restitution available for all Hensley, 91 F.3d 274, 277 (1st Cir.1996) acts done pursuant thereto, whether (court can order restitution where an ele- charged and proven or not. See id. (citing ment of the offense is a scheme, conspira- United States v. Stouffer, 986 F.2d 916, cy, or pattern of conduct ‘‘without regard 928 (5th Cir.1993) and several cases from to whether the particular criminal conduct the Seventh Circuit). of the defendant which directly harmed In 1990, Congress amended the VWPA’s the victim was alleged in a count to which definition of ‘‘victim’’ to include: the defendant pled guilty, or was even a person directly and proximately charged in the indictment’’); United States harmed as a result of the commission of v. Henoud, 81 F.3d 484, 488 (4th Cir.1996) an offense for which restitution may be (after the 1990 amendments, courts ‘‘allow ordered including, in the case of an of- broader restitution orders encompassing fense that involves as an element a losses that result from a criminal scheme scheme, conspiracy, or pattern of crimi- or conspiracy, regardless of whether the nal activity, any person directly defendant is convicted for each criminal harmed by the defendant’s criminal act within that scheme’’); United States v. conduct in the course of the scheme, Kones, 77 F.3d 66, 70 (3d Cir.1996) (‘‘[Sub- conspiracy, or pattern. section (a)(2)] expanded the district court’s 18 U.S.C. § 3663(a)(2) (Supp. III 1997) restitution powers TTT to the extent that a (emphasis added).8 Upon enacting the district court could order restitution for

8. Though cases like Cronin and Stouffer were whose crimes had been committed prior to decided after 1990, they applied pre-amend- the 1990 adoption of the amendment. ment law because they involved defendants 426 570 FEDERAL SUPPLEMENT, 2d SERIES any harm directly caused by the defen- was properly awarded); United States v. dant’s criminal conduct in the course of the Pepper, 51 F.3d 469, 473 (5th Cir.1995) scheme, conspiracy, or pattern, even (‘‘Because a fraudulent scheme is an ele- though such conduct is not the specific ment of [the defendant’s] offenses of mail conduct that is the basis of the offense of and wire fraud, actions pursuant to that conviction.’’) (internal quotations omitted). scheme are conduct underlying the offense [14] Although subsection (a)(2) takes of conviction.’’) (emphasis added). the broader of the two post-Hughey views, it only permits recovery for con- [15, 16] Therefore, in order to deter- duct that was part of the applicable mine whether or not certain conduct may scheme, conspiracy, or pattern of conduct be the subject of a restitution order, a that is the offense of conviction.9 See court must ask whether or not it is ‘‘en- United States v. Wright, 496 F.3d 371, 381 gaged in [in] furtherance of the scheme, (5th Cir.2007) (‘‘[W]here a fraudulent conspiracy or pattern’’ that was as element scheme is an element of the conviction, of the offense of conviction. United States the court may award restitution for ac- v. Kones, 77 F.3d 66, 70 (3d Cir.1996). In tions pursuant to that scheme.’’ ) (internal this case, Donaghy was convicted of partic- quotations omitted); Dickerson, 370 F.3d ipating in a conspiracy with Battista and at 1341 (concluding that ‘‘a criminal defen- Martino in which Donaghy provided picks dant cannot be compelled to pay restitu- in exchange for flat rate payments when tion for criminal conduct committed out- those picks were correct. Accordingly, the side of the scheme, conspiracy, or pattern Court is tasked with determining whether of criminal behavior underlying the of- or not Donaghy’s conduct during the 2003– fense of conviction’’); Akande, 200 F.3d at 04, 2004–05, and 2005–06 seasons was en- 141 (‘‘[T]he ‘offense of conviction,’ as de- gaged in furtherance of that conspiracy. fined by Hughey[ ], remains the reference point for classifying conduct that deter- [17, 18] There is little case law inter- mines liability for restitution.’’); United preting the scope of a given conspiracy for States v. Welsand, 23 F.3d 205, 207 (8th section 3663A(a)(2) purposes. It is useful, Cir.1994) (noting that while the 1990 therefore, to consult case law interpreting amendment expanded the definition of the the scope of a conspiracy outside of the term ‘‘victim,’’ it did not ‘‘extend the con- restitution context. See Hensley, 91 F.3d tours of the word ‘offense,’ ’’ and therefore at 278 (citing factors used to determine that restitution was available only for ‘‘all whether conduct is part of a unitary acts encompassed within the ‘scheme or ‘‘scheme’’ from ‘‘analogous caselaw on du- artifice to defraud’ ’’ that was the basis of plicitous indictments and variance of the offense of conviction); Hensley, 91 proof’’). The Second Circuit has held that, F.3d at 277–78 (determining whether cer- ‘‘[i]n order to prove a single conspiracy, tain conduct was part of the single, ‘‘uni- the government must show that each al- tary scheme’’ that was the basis of convic- leged member agreed to participate in tion in order to determine if restitution what he knew to be a collective venture

9. By way of comparison, the standard for yond losses caused by schemes that are ele- ‘‘relevant conduct’’ for the purposes of section ments of the offense of conviction to include 1B1.3 of the United States Sentencing Guide- losses attributable to ‘‘the same course of lines is broader. See United States v. Carboni, conduct.’’ United States v. Silkowski, 32 F.3d 204 F.3d 39, 47 (2d Cir.2000); Wright, 496 682, 687 (2d Cir.1994). F.3d at 381. ‘‘Relevant conduct’’ extends be- U.S. v. DONAGHY 427 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008) directed toward a common goal.’’ United hand, and Battista and Martino and Dona- States v. Geibel, 369 F.3d 682, 689 (2d ghy on the other. There was also no Cir.2004) (internal quotations omitted); see mutual dependence and assistance be- also United States v. Maldonado–Rivera, tween the Concannon scheme and the Bat- 922 F.2d 934, 963 (2d Cir.1990). ‘‘The co- tista/Martino conspiracy. The four men conspirators need not have agreed on the formed no ‘‘larger organization.’’ Rather, details of the conspiracy, so long as they Donaghy was merely placing personal bets agreed on the essential nature of the plan.’’ on NBA games through Concannon. This Geibel, 369 F.3d at 689 (internal quotations activity, which occurred from 2003 until omitted); see also Maldonado–Rivera, 922 2006, did not serve to further the interests F.2d at 963. In addition, ‘‘a single conspir- of the offense of conviction, a conspiracy acy is not transformed into multiple con- which did not yet exist. In fact, as is spiracies merely by virtue of the fact that recited above, the parties made a point at it may involve two or more phases or Donaghy’s plea hearing to note that the spheres of operation, so long as there is offense of conviction was the conspiracy sufficient proof of mutual dependence and entered into between Donaghy, Battista, assistance.’’ United States v. Berger, 224 and Martino, and that the scheme Dona- F.3d 107, 114–15 (2d Cir.2000) (internal ghy and Concannon engaged in before that quotations omitted). time was not at issue. The government In making this inquiry in the context of confirms this analysis in its letter to the examining whether or not the government Court of July 7, 2008, in which it states has offered sufficient proof of a conspiracy, ‘‘the offenses of conviction TTT do not ex- the Second Circuit has focused on ‘‘what tend to Donaghy’s betting with Concannon agreement, if any, the jury could reason- before the 2006–07 season.’’ (7/7/08 Letter ably have found to exist vis-a-vis each [co- at 7.) conspirator].’’ United States v. Johansen, The NBA advances the argument that 56 F.3d 347, 351 (2d Cir.1995). Thus, for Donaghy’s conduct during the three prior example, in the context of a narcotics con- seasons was part of an overall scheme spiracy, the Second Circuit has held that engaged in by Donaghy from 2003–07. where multiple groups are operating, a This argument misses the mark. Dona- single conspiracy exists so long as ‘‘the ghy’s offense of conviction was not this groups share a common goal and depend broad scheme to defraud the NBA, but upon and assist each other, and [the court] rather, a narrower conspiracy to enter into can reasonably infer that ‘each actor was a scheme with Battista and Martino, the aware of his part in a larger organization unlawful goal of which was to defraud the where others performed similar roles.’ ’’ NBA. Although section 3663A(a)(2) does Berger, 224 F.3d at 115 (summarizing and allow for recovery for uncharged or acquit- quoting United States v. Bertolotti, 529 ted conduct that is part of the scheme, F.2d 149, 154 (2d Cir.1975)). conspiracy, or pattern of criminal conduct Donaghy’s conduct during the 2003–04, that was an element of the offense of con- 2004–05, and 2005–06 seasons was not part viction, it does not allow for recovery for of the conspiracy to which he pled guilty. what are acts in furtherance of a broader There was no agreement, or common goal uncharged scheme being carried out alone or plan, between the arrangement entered by one of the co-conspirators. into between Concannon and Donaghy The cases cited by the NBA, Hensley during the previous seasons on the one among them, are cases involving a single 428 570 FEDERAL SUPPLEMENT, 2d SERIES defendant charged with engaging in a conduct that was agreed upon among co- broad scheme, rather than a conspiracy, conspirators. This distinction runs and are distinguishable on that basis. For through the other cases cited by the NBA instance, in Hensley, the defendant, acting as well 10—the offenses of conviction were alone, engaged in a scheme whereby he ‘‘schemes,’’ rather than conspiracies, and would order computer equipment on behalf were drawn broadly enough to include the of a fictitious company and then abscond additional conduct at issue. None of these with it. 91 F.3d at 275. The defendant cases stand for the proposition that, where pled guilty to, among other things, mail a conspiracy is the offense of conviction, and wire fraud. Id. at 275 & n. 1. After conduct outside the scope of that conspira- his plea, the government learned that, in cy is recoverable pursuant to 18 U.S.C. addition to the charged conduct, the defen- § 3663A(a) (2), merely because the con- dant had ordered computer equipment spiracy itself might be a portion of a from an additional computer company and broader uncharged personal scheme of one had it sent to a different mailing location of the conspirators. Accordingly, the ‘‘belonging to’’ a different fictitious compa- Court declines to include in the restitution ny. Id. at 275–76. Because a scheme was award the NBA’s request for $504,719.15 an element of the offense of conviction, the for the 2003–04, 2004–05, and 2005–06 sea- First Circuit relied on case law seeking to sons. determine whether or not given conduct is b. Amount Recoverable part of a unitary scheme: ‘‘[I]n determining whether particular criminal conduct [19, 20] The Court now turns to the comprised part of a unitary scheme to issue of the amount of Donaghy’s compen- defraud, the sentencing court should con- sation which should be awarded to the sider the totality of the circumstances, in- NBA to compensate it for the losses it cluding the nature of the scheme, the iden- sustained during the 2006–07 season. tity of its participants and victims, and any Subsection (b)(1) provides that, in the case commonality in timing, goals, and modus of a crime which results in loss or damage operandi.’’ Id. at 278. The court found to property, the victim is entitled to either that the defendant engaged in a ‘‘unitary the return of the property, or, if return of scheme’’ ‘‘by renting the two drop boxes at the property is impractical, the value of [Mail Boxes, Etc.] locations in Boston the property. See 18 U.S.C. §§ 3663(b)(1), within two days of one another, placing all 3663A(b)(1). Courts have established that the fraudulent orders for goods with com- subsection (b)(1)’s conception of ‘‘loss’’ en- puter-products suppliers (similar victims) compasses only actual losses directly re- within less than two weeks, using inter- sulting from the offense of conviction. See state wires in each instance, and ‘paying’ Germosen, 139 F.3d at 120; United States for the goods with counterfeit instru- v. Carboni, 204 F.3d 39, 47 (2d Cir.2000); ments.’’ Id. Hensley is distinguishable be- Quillen, 335 F.3d at 222. Accordingly, cause, in that case, the offense of convic- what the common law knows as ‘‘conse- tion was a broad scheme engaged in by quential damages’’ are not recoverable. only the defendant, whereas here, the of- See United States v. Phillips, 477 F.3d fense of conviction is limited to a course of 215, 224 (5th Cir.2007); United States v.

10. The NBA also cites United States v. Wright, Lexis 2339 (2d Cir. Feb. 11, 1997); United 496 F.3d 371 (5th Cir.2007); United States v. States v. Dickerson, 370 F.3d 1330 (11th Cir. Smith, 218 F.3d 777 (7th Cir.2000); United 2004). States v. Hart, 1997 WL 76800, 1997 U.S.App. U.S. v. DONAGHY 429 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008)

Barton, 366 F.3d 1160, 1167 (10th Cir. which, assuming that he did not provide 2004); United States v. George, 403 F.3d picks for any of the playoff games, renders 470, 474 (7th Cir.2005); Quillen, 335 F.3d the NBA’s and the government’s calcula- at 222. Consequential damages are losses tions incorrect. The Court ordered the ‘‘beyond those which naturally and directly government to advise it whether any of the flow’’ from the defendant’s conduct. Boc- games that Donaghy refereed dishonestly cagna, 450 F.3d at 120 (internal quotations were playoff games and to provide a omitted). Whereas here, the defendant is breakdown of the number of regular sea- an employee who was compensated under son versus playoff games that he refereed. the false pretense that he was rendering The government responded by letter dated honest services to his employer, the cor- July 17, 2008, and stated that Donaghy rect measure of loss is the amount of the refereed 68 regular season games during defendant’s compensation that was paid the 2006–07 season, and five playoff for the portion of his services that were games. The government further stated dishonest. See Sapoznik, 161 F.3d at that all 16 of the games that Donaghy 1121. In this case, it is undisputed that refereed after providing a ‘‘pick’’ to Battis- Donaghy dishonestly refereed 16 games ta and Martino took place during the regu- during the 2006–07 season, and a corre- lar season. Accordingly, the Court will sponding portion of his compensation for calculate the NBA’s 2006–07 loss exclusive- these games is the appropriate measure of ly as a percentage of his regular season the NBA’s loss. salary. The defendants argue, however, that Based on the numbers supplied by the compensation other than his salary—for government, Donaghy refereed 16 out of instance, his expenses for flights and room 68 regular seasons games, or just over and board—should not be recoverable. 23.5%, after providing a pick to Battista No legal authority is cited in support of and Martino. That percentage multiplied this proposition. To the same extent that by his total regular season compensation the NBA suffered loss in the form of sala- of $286,211.67 11 yields a loss amount, ry payments for dishonest services, so too rounded to the nearest penny, of did it suffer loss when it paid Donaghy’s $67,343.92. This amount represents the expenses for traveling to games at which NBA’s ‘‘loss’’ under subsection (b)(1). The he did not perform his services honestly. defendants are liable to pay it jointly and There is no logic to the argument that severally. these losses were less ‘‘direct’’ than the 2. Investigation Costs payment of his salary. Therefore, these [21] In addition to allowing for recov- expenses will be included in the loss calcu- ery for ‘‘property loss,’’ the MVRA and lation. VWPA both permit recovery for ‘‘lost in- The defendants have raised an issue come and necessary child care, transporta- which does merit discussion. They have tion, and other expenses incurred during pointed out that Donaghy’s playoff com- participation in the investigation or prose- pensation was greater, per game, than his cution of the offense or attendance at pro- regular season compensation, a distinction ceedings related to the offense.’’ 18

11. This number was derived from Exhibit A to sumes represent Donaghy’s total compensa- the NBA’s submission of June 27, 2008 by tion for the 2007 NBA playoffs, from the total subtracting the last five entries on the chart figure of $358,431.62. for the 2006–07 season, which the Court as- 430 570 FEDERAL SUPPLEMENT, 2d SERIES

U.S.C. §§ 3663(b)(4); 3663A(b)(4). Courts of two broad categories. First, in some have taken a broad view of subsection instances, they argue that a portion of the (b)(4)’s scope. See United States v. Gor- legal fees sought by the NBA should not don, 393 F.3d 1044, 1056–57 (9th Cir.2004). be recoverable at all, either because the These ‘‘investigation costs’’ are recoverable records are so vague that the government so long as they are a ‘‘direct and foresee- failed to establish the amount of those fees able result of the defendant’s wrongful by a preponderance of the evidence, be- conduct.’’ Id. at 1057 (internal quotations cause the fees are excessive, or because a omitted); United States v. Fogel, 494 portion of the fees were not incurred as a F.Supp.2d 136, 140–41 (D.Conn.2007). direct and foreseeable result of the investi- The NBA requests recovery for the legal gation into or prosecution of the defen- fees it incurred when it enlisted the help of dant’s wrongful conduct. Second, there is two law firms to represent it as it assisted a series of expenses that each defendant the government’s investigation and prose- argues he should not be responsible for, cution of these offenses, and for the costs pursuant to the Court’s authority to forgo of having NBA employees review video of joint and several liability and instead ap- games that Donaghy refereed during the portion costs. 2006–07 season. The NBA has stated on the record that it is seeking these costs i. Expenses Challenged solely pursuant to subsection (b)(4). The as Unrecoverable Court will address each request in turn. [23] All of the defendants argue that the government has generally failed to es- a. Attorneys’ Fees tablish the amount of the investigation [22] Attorneys’ fees are recoverable costs, because the time sheets, affidavits pursuant to subsection (b)(4) when they and charts provided by the NBA’s outside are incurred as an investigation cost.12 counsel are too vague. The government See Gordon, 393 F.3d at 1056–57; United need only establish these amounts by a States v. Hayward, 359 F.3d 631, 642 (3d preponderance of the evidence. Moreover, Cir.2004); United States v. Cummings, the Court, where a precise number cannot 281 F.3d 1046, 1052–53 (9th Cir.2002); Fo- be calculated, may award a reasonable es- gel, 494 F.Supp.2d at 139–40. Although timate to the victim in accord with the goal attorneys’ fees in this case are generally of the restitution statutes which is to make recoverable as investigation costs, the de- the crime victim whole. The defendants’ fendants contest certain portions of the claim that the records are too vague for fees sought. Those challenges fall into one any type of analysis is unpersuasive. The

12. In his July 18, 2008 letter to the Court, argument, because they are all cases analyz- defendant Battista argues that several juris- ing attorneys’ fees under the ‘‘loss’’ provision dictions have held that attorneys’ fees and of subsection (b)(1), and observing that, gen- costs are not recoverable. He cites United erally speaking, attorneys’ fees fall on the States v. Diamond, 969 F.2d 961, 968 (10th ‘‘consequential damages’’ side of the actu- Cir.1992); United States v. Patty, 992 F.2d al/consequential divide. All of these cases, 1045, 1049 (10th Cir.1993); United States v. the most recent being Patty, decided in 1993, Mullins, 971 F.2d 1138, 1147 (4th Cir.1992); were decided before Congress enacted subsec- United States v. Mitchell, 876 F.2d 1178, 1184 tion (b)(4) in 1994, which explicitly provides (5th Cir.1989); United States v. Arvanitis, 902 for the recovery of the cost of assisting the F.2d 489, 497 (7th Cir.1990); and United government’s investigation into or prosecu- States v. Barany, 884 F.2d 1255, 1261 (9th tion of the offense. Cir.1989). None of these cases support his U.S. v. DONAGHY 431 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008) billing records are accompanied by affida- sive attorneys’ fees are not. Even assum- vits which explain what each attorney and ing that the Court has a duty to scrutinize paralegal for whom restitution is sought the attorneys’ fees pursuant to subsection was doing and how it related to assisting (b)(4), performing that task in this case the government in the prosecution of these does not suggest that they were excessive. offenses. In some cases, a given attorney First, while the defendants persistently or paralegal has explained that only a por- assert that ‘‘multiple’’ lawyers participated tion of a billing entry was dedicated to in each task, a review of the affidavits and assisting the government, and has given time records reveals that the document his or her best estimate as to how many productions and witness interviews were hours are recoverable. It is only these not overstaffed. It appears that one asso- portions of those entries that the NBA ciate prepared each set of witness inter- now seeks. The defendants have not iden- view preparation materials, and accompa- tified a single billing entry that is not nied one partner to a preparation session mentioned in the affidavits. The Court with the witness and to the interview itself. has reviewed the affidavits in their entire- The records further reflect that only one ty, and finds that, while not extremely or two associates and one or two parale- detailed, they are sufficient to establish by gals worked on each of the several docu- a preponderance of the evidence that the ment productions under the supervision of amounts requested are a reasonable esti- one partner. After carefully reviewing the mate of the costs the NBA incurred while records, and bearing in mind its own first- assisting the government in the prosecu- hand knowledge of what it had asked of tion of these offenses. the NBA, the government advised the [24] In addition to arguing that outside Court that the staffing and amount of counsel’s records are insufficient to estab- hours spent by outside counsel appeared to lish the amounts recoverable, the defen- be a reasonable response to the assistance dants argue that the amounts charged it requested. (See 7/9/08 Tr. at 37–38.) were excessive. Since the goal of restitu- The Court has reviewed the records and tion is to make the victim whole, there is agrees that they do not raise any red flags an argument to be made that as long as suggesting excessive fees. Moreover, the the Court is satisfied that the attorneys’ defendants have not provided any basis for fees were incurred for the purpose of as- this Court to conclude that Wachtell and sisting the government in the investigation Arkin, both reputable law firms, engaged and prosecution of these offenses, and in over-billing. Accordingly, the Court will were in fact paid by the victim, the Court not reduce the restitution award on the need go no further. Specifically, it need basis that this matter was over-staffed or not further examine the request with the otherwise over-billed. proverbial green eyeshade as it might do Although all of the defendants argue in reviewing a fee application of a prevail- that outside counsel over-charged the ing party in a civil case to determine NBA in one way or another, they do not whether the hours were reasonably spent seem to argue, at least in their papers, or the hourly rates appropriate. On the that the hourly rates charged by outside other hand, it could also be argued that counsel were unreasonable. At most, de- although reasonable attorneys’ fees are a fendant Donaghy alluded to this argument ‘‘direct and foreseeable’’ investigation cost at the July 9, 2008 hearing, where he within the scope of subsection (b)(4), exces- suggested that Wachtell was too promi- 432 570 FEDERAL SUPPLEMENT, 2d SERIES nent a law firm to have been hired to do rates paid by the NBA in rendering assis- the work associated with the government’s tance to the government’s investigation of investigation and prosecution of these of- these offenses were not excessive. fenses, but even that comment was made in the context of an argument that Wach- [25] Finally, the defendants argue that tell had assigned too many lawyers to certain billing entries for the services of work on particular tasks. (7/9/08 Tr. at Wachtell Partner David Anders on August 31.) No defendant has cited any authority 13, 14, and 15, 2007, which reflect that they on this point or otherwise suggested what are, in part, for his time consulting with more appropriate rates should be. It is the NBA regarding its public response to only the government that discusses this Donaghy’s guilty plea, are not recoverable issue, and it apparently concludes that the as an ‘‘investigation cost’’ pursuant to sub- rates are within parameters that are suffi- section (b)(4). The government argues ciently reasonable to allow the Court in its that this cost was a ‘‘direct and foresee- discretion to accept them. able’’ result of the conspiracy at issue, and Without purporting to set any new stan- that it is therefore recoverable. On this dards for appropriate hourly rates in civil issue, the Court agrees with the defen- attorneys’ fees cases, the Court does not dants. Although the NBA’s desire to re- find that the hourly rates charged in this spond publicly when this conspiracy came case were excessive. The NBA hired two to light was foreseeable, it is only foresee- well-known corporate law firms in one of able steps taken for the purpose of assist- the world’s most expensive markets, New ing the government in the investigation or York City. Wachtell charged either $600, prosecution of the offense that are recover- $700, or $750 per hour for David Anders, a able pursuant to subsection (b)(4), the spe- partner, between $380–$580 per hour for cific provision under which these fees are the associates, and $175–$200 per hour for sought. See United States v. Goldstein, paralegals.13 These amounts are in line No. 07–00151, 2008 WL 659676, at *3 with the rates charged by most of New (D.Haw. March 11, 2008) (attorneys’ fees York City’s major corporate law firms. for dispute resolution process resulting See Miele v. New York State Teamsters from the offense not recoverable as an Conf. Pension & Retirement Fund, 831 investigation cost because it was unrelated F.2d 407, 409 (2d Cir.1987) (district court to the government’s investigation and/or may rely on its own knowledge of hourly prosecution of the offense). Accordingly, rates in the market). The NBA is the the Court holds that the attorneys’ fees type of major commercial organization that relating to the NBA’s public response are would likely hire law firms like Arkin and not recoverable pursuant to subsection Wachtell, a consequence that should have (b)(4), and the award will be reduced by been foreseeable to the defendants. Ac- the $10,800 that Mr. Anders billed for cordingly, the Court finds that the hourly August 13, 14, and 15.14

13. The billing rates for Arkin were substan- ble and unrecoverable portions, and an at- tially similar. tempt by the Court to do so would require pure speculation. Accordingly, the govern- 14. A careful review of the records submitted ment has not established by a preponderance indicates that it is possible that Mr. Anders of the evidence that any of this $10,800 is did more than just prepare the NBA’s public recoverable, and it will be excluded in its response to the guilty plea on these dates. entirety. However, the government has not even at- tempted to divide these charges into recovera- U.S. v. DONAGHY 433 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008)

In sum, the NBA is entitled to a total The first three of the costs listed above award of $139,993 for attorneys’ fees in- should be apportioned to defendant Dona- curred pursuant to its effort to assist the ghy. First, the cost of assisting the gov- government in the investigation and prose- ernment in investigating Donaghy’s 2003– cution of these offenses, and for attend- 06 conduct, which did not involve Battista ance at proceedings related to these of- and Martino, is most fairly apportioned 16 fenses. only to Donaghy. Although determining the precise amount of the total investiga- ii. Apportionment tion costs attributable to the 2003–06 time [26] The restitution statute would al- period is not possible, the Court believes low for all three defendants to be liable that attempting to come up with a reason- for the total amount of $139,993 jointly able estimate of those costs and attributing them only to Donaghy is a more just result and severally. However, in its discretion, than holding Martino and Battista jointly the Court may apportion liability in the in- and severally liable for the cost of investi- terest of fairness. The defendants have gating conduct in which they were not identified certain costs that might be ap- implicated. It was for this reason that the propriately apportioned to one or two de- Court ordered the government to provide fendants, rather than jointly and severally the most accurate estimation possible re- to all three: (1) the cost of the portion of garding the percentage of the document the investigation that was dedicated to Do- requests and witness interviews that were naghy’s 2003–06 conduct, rather than the attributable to the 2003–06 Donaghy/Con- 2006–07 conspiracy; (2) the cost associat- cannon scheme, rather than the 2006–07 ed with the October 2007 document sub- Donaghy/Battista/Martino conspiracy. In poena served on the NBA; (3) the cost of its July 17, 2008 letter to the Court, the preparing the NBA’s June 5, 2008 letter government stated that its best estimate to the Court regarding certain statements was that 25% of the witness interviews and made by Donaghy during these proceed- documents related to the 2003–06 conduct. ings; (4) the cost of the NBA sending The Court believes that this fairly trans- outside counsel to various proceedings in lates to an equivalent percentage of the these two cases; and (5) the costs associ- attorneys’ time in obtaining, reviewing, ated with preparation for the anticipated and producing these documents and pre- trial of Battista and Martino. In the in- paring the witnesses. Accordingly, after all terest of justice, the Court will allocate other apportionments have been made, the these costs to the appropriate defendant Court will take 25% of the amount remain- or defendants.15 ing designated as ‘‘joint and several’’ and

15. To the extent that the defendants argue require the victim to bear the cost. See Fogel, that they may not be ordered to pay costs that 494 F.Supp.2d at 139–40. are not clearly attributable specifically to their own prosecution, such an argument is 16. Although the court has held that the ‘‘loss- rejected. The government has established, by es’’ caused by Donaghy’s 2003–06 conduct is a preponderance of the evidence, that the not recoverable pursuant to subsection (b)(1), NBA paid $139,993 to assist the government the costs incurred by the NBA in assisting the in the prosecution of these offenses. To the government’s investigation of this time period extent that the records lack sufficient specific- were foreseeable given the nature of offense ity as to which defendant each and every of conviction and are therefore recoverable dollar is attributable to, the default is to im- pursuant to subsection (b)(4). Donaghy has pose liability jointly and severally, rather than not made an argument to the contrary. 434 570 FEDERAL SUPPLEMENT, 2d SERIES apportion it to Donaghy, while the other lish that this meeting related to the docu- 75% will be the amount that remains joint ment subpoena or otherwise related exclu- and several for all defendants. sively to Donaghy. Accordingly, only Second, the October 2007 document sub- $13,600 for the October 2007 document poena served on the NBA related only to subpoena will be apportioned to defendant Donaghy. The government agrees with Donaghy. Battista and Martino that Donaghy alone Third, the NBA, with the assistance of should bear this cost, but disagrees as to outside counsel, prepared a letter to this the amount. Battista and Martino claim Court, dated June 5, 2008, responding to that the amount attributable to the sub- several statements made by Donaghy’s poena is $22,280, while the government counsel during the course of these pro- claims that it is $13,500. Neither party ceedings that the NBA believed were inac- explains how they arrived at these figures, curate. The government agrees that these making it necessary for the Court to con- costs should be apportioned only to Dona- duct an independent review of the time ghy. The cost of this letter was $7,600, records and affidavits to determine which broken down as follows: (1) six and two- entries are clearly attributable to the sub- tenths hours for associate Won S. Shin at poena. It appears that the cost of the $500 per hour, totaling $3,100; and (2) six document production was $13,600, broken hours for partner David Anders at $750 down as follows: (1) fifteen hours for asso- per hour, totaling $4,500. ciate Won S. Shin at $500 per hour, total- Next, each defendant should alone bear ing $7,500; (2) four hours for partner the cost of the NBA sending attorneys to David Anders at $700 per hour, totaling proceedings that related exclusively to $2,800; (3) sixteen hours for paralegal them.18 First, associate Jonathan E. Gol- Elizabeth Hendee at $200 per hour, total- din spent two hours, at $380 per hour, ing $3,200; and (4) one half-hour for para- traveling to and from and attending Dona- legal Elana Rakoff at $200 per hour, total- ghy’s plea hearing. Accordingly, $760 ing $100.17 In other October 2007 entries, shall be apportioned to Donaghy.19 Sec- two Wachtell attorneys, David Anders and ond, on April 10, 2008, associate Won Shin his associate Joshua Naftalis, prepared for attended a status conference that related and attended an October 22, 2008 meeting to Battista and Martino, but not Donaghy. with the government regarding these He spent two-and-a-half hours, at $500 per cases. Presumably Battista and Martino hour, traveling to and from and attending assume that this cost is attributable to the the conference. Accordingly, $1,250 shall document subpoena. However, there is be apportioned to Battista and Martino, insufficient evidence in the record to estab- jointly and severally. Third, on April 16,

17. Because the government claims that the and severally, of outside counsel’s attendance proper amount to apportion to Donaghy for at Donaghy’s guilty plea, it then attributes the the document subpoena is $13,500, the Court cost incurred by the NBA in sending outside assumes that it overlooked the one half-hour counsel to several Battista/Martino confer- billed by Rakoff. ences only to Battista and Martino. The Court will resolve this inconsistency by appor- 18. Subsection (b)(4) explicitly allows for re- tioning the cost of counsel attending a hear- covery of the costs of ‘‘attendance at proceedings related to the offense.’’ ing to the defendant to whom the hearing related, which seems to be the most equitable 19. While the government argues that all of result. the defendants should bear the cost, jointly U.S. v. DONAGHY 435 Cite as 570 F.Supp.2d 411 (E.D.N.Y. 2008)

2008, associate Shin spent two-and-a-half jointly and severally. Third, on the same hours, at the same rate, traveling to and date, paralegal Elana Rakoff billed two- from and attending Martino’s plea hearing. and-a-half hours at $200 per hour, totaling Accordingly, $1,250 shall be apportioned to $500, that will be apportioned to Battista defendant Martino. Fourth and finally, on and Martino jointly and severally. April 21 and 24, associate Joshua Naftalis attended a status conference relating only Fourth and finally, partner David An- to Battista and Battista’s plea hearing, re- ders billed a total of 16 hours on various spectively. This time totaled five hours at dates in April of 2008, for a total of $580 per hour, totaling $2900. This cost $12,000, which he describes in his affidavit will be apportioned to defendant Battista. as ‘‘considerable time responding to re- In addition, the government agrees that quests from the government relating to the investigation costs that were incurred the expected trials of Battista and Marti- 20 between April 10, 2008 and April 28, 2008 no.’’ (Anders Aff. ¶ 8.) He further pro- related only to Battista and/or Martino, vides that this time was spent coordinating and not to Donaghy. Because Martino witness preparation sessions and oversee- pled guilty on April 16, 2008, eight days ing additional document requests. Of the before Battista, any trial preparation that 17 dates on which Anders made a billing can be attributed to those days should be entry pursuant to this work, six are for apportioned only to Battista. Costs dating after April 16, 2008, the date on which from April 10, 2008 to April 16, 2008, and Martino pled guilty. However, because other April 2008 costs that can be attrib- the NBA only seeks restitution for sixteen uted solely to the Battista/Martino proof the hours that Anders billed to the NBA ceedings, shall be apportioned to the two during April of 2008, and not his total of of them jointly and severally. twenty-six hours, and because the sixteen First, associate Joshua Naftalis billed hours are not attributed to particular bill- five hours, at $580 per hour, totaling ing entries, it is impossible to determine $2,900 for April 6, 7, and 8, 2008. Al- from the records how much of the sixteen though this is not within the April 10 hours for which restitution is sought was through April 28 time-frame discussed by billed after April 16, 2008. But a reason- the parties, Mr. Naftalis’ affidavit states able estimate can be made. Here, the six that on these dates he ‘‘prepared a witness entries for dates after April 16 represent for a meeting with the United States At- just over 33% of Mr. Anders’ twenty-six torneys’ Office in connection with his ex- total billable hours for April. Taking the pected testimony in the trial of James total, $12,000, and multiplying by that per- Battista and Thomas Martino.’’ (Naftalis centage, the Court arrives at a figure, Aff. ¶ 4(b).) Accordingly, this cost will be rounded to the nearest dollar, of $4,000. apportioned to Battista and Martino, joint- Accordingly, of the $12,000 billed by An- ly and severally. Second, on April 11, ders during April of 2008, $8,000 will be 2008, associate Won Shin billed two hours, apportioned to Battista and Martino, joint- at $500 per hour, totaling $1,000, that will ly and severally, and $4,000 will be appor- be apportioned to Battista and Martino tioned to Battista alone.

20. As was the case with Joshua Naftalis, some to the anticipated trials of Battista and Marti- of Mr. Anders’ entries date prior to April 10. no, and, therefore, it will be apportioned to However, Anders explicitly states in his affi- them. davit that all of this work related exclusively 436 570 FEDERAL SUPPLEMENT, 2d SERIES

For all of the foregoing reasons, the spect to the attorney’s fees, to be appor- NBA will be awarded $139,993 with re- tioned as follows:

A. Amounts apportioned only to Donaghy (not including the 25% for investigation into his 2003–06 conduct): 1. October 2007 document subpoena: $13,600; 2. June 5, 2008 letter regarding statements: $ 7,600 3. Attendance at Plea Hearing: $ 760 Total: $21,960 B. Amounts apportioned to Battista and Martino, jointly and severally: 1. Attendance at April 10, 2008 Status Conference: $ 1,250 2. Naftalis Trial Preparation: $ 2,900 3. Shin Trial Preparation: $ 1,000 4. Rakoff Trial Preparation: $ 500 5. Anders Trial Preparation: $ 8,000 Total: $13,650 C. Amounts apportioned to Martino only: 1. Attendance at April 16, 2008 Guilty Plea: $ 1,250 Total: $ 1,250 D. Amounts apportioned to Battista only: 1. Attendance at April 21 and 24 Status Conference and Guilty Plea: $ 2,900 2. Anders Trial Preparation: $ 4,000 Total: $ 6,900

Accordingly, the total amount appor- time NBA employees spent reviewing tioned, before the additional 25% to Dona- tapes of games that Donaghy refereed, at ghy, is $43,760, leaving $96,233 of the orig- the government’s request. Only Donaghy inal total unapportioned. Apportionment challenges this request, acknowledging to Donaghy for the investigation into the that these costs are generally recoverable 2003–06 conduct is therefore 25% of under the law, but that, in this case, these $96,233, or $24,058.25, to be subtracted efforts were redundant in light of the from $96,233 and added to the $21,960 NBA’s practice of having an observer mon- already apportioned to Donaghy. This itor the refereeing of each and every game leaves $72,174.75 of the attorney’s fees to be apportioned jointly and severally among at the time it is played. He further argues all three defendants, and increases the that rather than do this work over again, amount for which Donaghy is solely re- the NBA could have simply turned over sponsible to $46,018.25. The apportion- the documentation that must have accom- ment for the attorneys’ fees shall be: panied the original efforts, and that this 1. Jointly and severally as to all three would have satisfied the government’s re- defendants: $72,174.75; quest. The Court disagrees with Dona- 2. Jointly and severally as to Battista ghy’s position. The NBA was asked, by and Martino: $13,650; the United States government, to perform 3. Donaghy only: $46,018.25 ($21,960 a specific task to assist in its investigation. plus $24,058.25); It was for the government to determine 4. Battista only: $6,900; whether reviewing these game tapes with 5. Martino only: $1,250. the benefit of hindsight was an appropriate investigative step. The Court will not b. Cost of Reviewing Game Film deny a crime victim restitution for the Finally, the NBA seeks restitution in the costs of performing a specific task at the amount of $9,930.02, for the cost of the government’s request merely because that U.S. v. HANDY 437 Cite as 570 F.Supp.2d 437 (E.D.N.Y. 2008)

defendant wishes to second-guess the man- III. Conclusion ner in which the government choose to conduct its investigation of him. Accord- For the foregoing reasons, the NBA is ingly, with respect to the costs of review- entitled to restitution in the total amount ing game film, the NBA is awarded of $217,266.94, broken down among the $9,930.02, to be apportioned jointly and three defendants as follows: severally among all three defendants.

1. Jointly and severally as to all three defendants: a. For Donaghy’s Compensation: $ 67,343.92 b. For Attorney’s Fees: $ 72,174.75 c. For Review of Game Film: $ 9,930.02 Total: $149,448.69 2. Jointly and severally as to Battista and Martino: $ 13,650; 3. Donaghy only: $ 46,018.25; 4. Battista only: $ 6,900; 5. Martino only: $ 1,250.

At the sentencing of each defendant the imposed against defendant for possession Court will set a payment schedule accord- of stolen firearm was invalid. ing to which restitution is to be paid in Ordered accordingly. consideration of the factors set forth in 18 U.S.C. § 3664(f)(2). The parties should be prepared to address those factors. 1. Sentencing and Punishment O665 SO ORDERED. Sentencing Guidelines commentary is as binding as a Guideline.

2. Sentencing and Punishment O804 , In those circumstances in which the Sentencing Commission has adequately taken all circumstances into consideration, even though it has arbitrarily and capri- UNITED STATES of America, ciously mandated an enhancement, depar- v. ture is not permissible. Ramel HANDY, Defendant. 3. Sentencing and Punishment O665 No. 07–CR–906. Sentencing Commission is owed no deference when it interprets unambiguous United States District Court, federal statutes. E.D. New York. 4. Sentencing and Punishment O665 Aug. 4, 2008. Commentary to the Sentencing Guide- Background: Defendant plead guilty to a lines, which imposed two-level sentencing single-count indictment charging him with enhancement for possession of stolen fire- possession of a firearm after having previ- arm without any mens rea requirement, ously been convicted of a felony. was entitled to less deference than afford- Holding: At sentencing, the District ed to other agencies when interpreting an Court, Jack B. Weinstein, Senior District ambiguous statute, in light of fact that its Judge, held that sentencing enhancement promulgation and amendment was not sub-