DONALD C. RANDOLPH, ESQ., California State Bar Number: 62468
RANDOLPH & LEVANAS
A Professional Corporation
1717 Fourth Street, Third Floor
Santa Monica, California 90401-3319
Telephone: 310/395-7900
Attorneys for Defendant
KEVIN DAVID MITNICK
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
UNITED STATES OF AMERICA,
CASE NO. CR 96-881-MRP
Plaintiff, MOTION TO BIFURCATE THE HEARING ON RESTITUTION
v. DATE: May 10, 1999
TIME: 1:30 p.m.
KEVIN DAVID MITNICK, et. al, COURT: 12
Defendants.
TO ALEJANDRO MAYORKAS, UNITED STATES ATTORNEY, AND TO HIS
ASSISTANTS, DAVID
SCHINDLER AND CHRISTOPHER PAINTER: PLEASE TAKE NOTICE that on
May 10, 1999, at 1:30
p.m., or at a date and time convenient to the Court and counsel,
defendant, KEVIN
DAVID MITNICK, by and through his attorney of record, Donald
C. Randolph, will move
this Court to bifurcate the hearing on Restitution into, first,
a hearing on the
Defendant's Ability to Pay, and second, if necessary, a hearing
on the Amount of
Restitution.
This motion is based upon the following Memoranda of Points
and Authorities, the
attached Exhibits, and any oral and documentary evidence which
may be presented at
hearing on this matter.
DATED: April 26, 1999 Respectfully submitted,
RANDOLPH & LEVANAS
By: ______________________________
Donald C. Randolph
Attorneys for Defendant
KEVIN DAVID MITNICK
MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
By this motion, the defendant requests that the Court bifurcate
the hearing on Restitution into, first, a hearing on the Defendant's
Ability to Pay, and second, if necessary, a hearing on the Amount
of Restitution. This motion is based on the previous findings
of this Court, 18 U.S.C. §3664, and the 1995 U.S. Sentencing
Guidelines §5E1.1(b).
The defense presents this issue before the Court at this time
because of the potential expenditure of time and expense in litigating
the issue of loss, as discussed below. As set forth in the pending
defense Motion for Discovery relating to restitution, the government
has provided the defense with discovery asserting losses suffered
by the victim companies totaling hundreds of millions of dollars.
(See Exhibit A) While the government has the burden of proving
loss, and thus, the amount of restitution, the defense must rebut
this evidence. To do so, the defense will be required to retain
an expert in the fields of economics and intellectual property.
This expert would be expected to analyze the government's evidence,
including what steps were taken to put the company back to its
position
before the breach in security, what losses were "sunk costs"
(costs the company had already spent),consequential costs, and
'out-of-pocket" costs. In addition, expert assistance is
needed in evaluating purported losses associated with merely
copying
source code without disclosure, an issue of first impression
for this Court. A motion requesting the appointment of an expert
economist is being filed contemporaneously with this Motion.
The defense believes in good faith that for an economist to
review documentation and discovery relating to loss as will be
necessary for the litigation of this issue, the costs would far
exceed any amount that Mr. Mitnick may be able to pay in restitution,
if indeed, he had the ability
to pay. Given the costs associated with litigating the issue
of restitution, the defense proposes that, first, this Court
consider the economic circumstances of Mr. Mitnick. If the Court
finds Mr. Mitnick has no ability to pay restitution, presently,
or in the future, then the issue of loss need not be litigated,
and substantial time and expense may be avoided.
II. STATEMENT OF FACTS
In the Presentence Report dictated on April 14, 1989, in Docket
Number 88-01031(B), the Probation Officer, Frank Gulla, stated
that "At the present time, it does not appear that the defendant
could pay a fine." (See 1989 Presentence Report, Exhibit
B, at page 18). On June 27, 1997, in Docket Number CR-95-603-MRP,
this Court found that the defendant had no ability to pay, stating
"Restitution has not been ordered
in view of the defendant's lack of resources and limited future
earning ability." (See Judgment and Probation/Commitment
Order at Exhibit C, page 21).
The defense does not believe that the issues relating to Mr.
Mitnick's present and future ability to pay have materially changed
since the Court's finding two years ago. As the Court is aware,
Mr. Mitnick has continued to remain in custody since that time.
III. ARGUMENT
A. The Controlling Statute, the 1995 Version of 18 U.S.C.
§3664 Requires Consideration of the Defendant's Ability
to Pay When Ordering Restitution.
18 U.S.C. §3664 requires that the Court, when determining
whether to order restitution, "shall consider the . . .
financial resources of the defendant, the financial needs and
earning ability of the defendant and the defendant's dependents,
and such other factors as the court deems appropriate."
18 U.S.C. §3664(a) In addition, in numerous cases, Courts
have found that "Under the Victim and Witness Protection
Act, the court must consider the financial resources of the defendant
and his earning ability when ordering restitution." U.S.
v. Jackson, 983 F.3d 1279, 1284 (9th Cir. 1992) See also U.S.
v. Newman, 6 F.3d 623, 631 (9th Cir.
1993); and U.S. v. Ramilo, 986 F.2d 333,336 (9th Cir. 1993).
To the extent that the government suggests Mr. Mitnick may be
susceptible to a windfall in the near future, this is not relevant
to the determination of restitution. According to the Court
in U.S. v. Baggett (125 F.3d 1319, 9th Cir. 1997), "restitution
orders 'must
be based on some evidence that [the defendant] may be able to
pay the amount fixed when required to do so - the possibility
of an unforeseeable windfall is not enough.'" Baggett at
1323, quoting U.S. v. Ramilo, 986 F.2d 333, 335 (9th Cir. 1993).
Additionally, to the extent that funds are earned by Mr. Mitnick
because of the notoriety of the case, this scenario is specifically
covered by the Assignment Agreement presented to the Court at
the change of plea hearing on March 26, 1999. The apportionment
of any funds that the government receives through this Agreement
can easily be accomplished by the preparation of a list of victim
companies, listed in the order of priority to receive compensation.
The determination of how funds obtained through the Assignment
Agreement are distributed has nothing to do with the Court's
determination of the defendant's ability to pay.
B. The Complication and Prolongation of the Sentencing Process
Resulting from the Fashioning of a Restitution Requirement Outweighs
the Need to Provide Restitution.
Per the applicable Sentencing Guidelines, at §5E1.1(b)(2)(b),
if the Court finds that the process of ordering restitution becomes
too cumbersome and costly, the Court may decline to order restitution.
This guideline is codified in 18 U.S.C. 3663(d), stating that,
The court shall impose an order of restitution to the extent
that such order is as fair as possible to the victim and the
imposition of such
order will not unduly complicate or prolong the sentencing process.
Here, as outlined above, the issue of restitution is complicated
by the number of victim companies and the issue of first impression
regarding loss associated with merely copying source code. This
case is one in which the costs of litigating the issue of restitution
may be higher than the amount set, if any, by the Court as restitution.
As such, this case is certainly a case in which the complication
of the issues, as well as the expense may preclude the Court
from ordering
restitution.
IV. CONCLUSION
For all the foregoing reasons, the defendant respectfully
requests that this Court bifurcate the Restitution hearing, holding
an initial hearing to determine the Defendant's Ability to Pay,
as the Court's decision on this issue will be pivotal to the
remaining proceedings.
DATED: April 26, 1999 Respectfully submitted,
RANDOLPH & LEVANAS
By: __________________________
Donald C. Randolph
Attorneys for Defendant
KEVIN DAVID MITNICK
1 This Motion has been scheduled for hearing on May 10, 1999
at 1:30 p.m.
2 Neither the Court, nor the defense are required to participate
in this process.
