Sunday, August 24, 2014

Defendant who inherited over $400K did not violate his supervised release when he went on a spending spree instead of paying his restitution. Regardless of any bad faith on defendant’s part, district court failed to identify a specific condition that had been violated.

Bagdy was convicted of wire fraud (of course), sentenced to 36 months’ imprisonment plus three years’ supervised release, and ordered to pay over $500K in restitution.  One condition of supervised release was that Bagdy pay at least 10% of his monthly income toward restitution.  A wealthy aunt (don’t we wish we all had one) died and left him an inheritance of over $400K.  Bagdy told his probation officer about the inheritance and paid 10% of the inheritance for purposes of restitution.  The government filed a motion to modify the restitution order.  A hearing on that motion was then continued several times while Bagdy and the government tried to negotiate an amount that he would pay towards restitution.  Although Bagdy did pay an additional $60K towards restitution, he ultimately spent all but $52K of the inheritance (including $5,800 on flowers).

The government asked the district court to find Bagdy in violation of his supervised release because he had acted in bad faith by spending his inheritance rather than paying off his restitution or preserving the inheritance pending negotiations with the govt.  District court found him in violation and sentenced him to 6 months’ imprisonment.

Although the Circuit agreed that Bagdy’s conduct was “reprehensible,” the Circuit reversed because neither the govt nor district court identified a specific condition of supervised release that Bagdy violated.  He complied with the restitution condition when he paid 10% of the inheritance towards restitution.  Reversed and remanded so that the district court can find another condition of supervised release that Bagdy actually did violate … like honestly making monthly financial reports, including reports about his expenditures, to his probation officer.     

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