Lagos v. United States

Background

A company owner, Sergio Lagos, used his trucking company, Dry Van Logistics, to defraud a lender, General Electric Capital (GE), by creating false invoices and borrowing against them. The scheme collapsed, the company went bankrupt, and GE hired private lawyers, accountants, and consultants and spent about $5 million investigating and taking part in the bankruptcy. Lagos pleaded guilty to wire fraud, and the trial judge ordered him to reimburse GE for those fees; the appeals court upheld that order.

Reasoning

The Court asked whether the law requiring restitution for expenses covers private investigations and civil or bankruptcy proceedings, or only government criminal investigations and criminal trials. It concluded the words "investigation" and "proceedings" refer to government criminal matters. The opinion reasons that the statute links "investigation" to "prosecution," uses words like "participation" and "attendance," and lists expenses—lost income, child care, transportation—that fit government-related involvement, not costs for private investigators, attorneys, or accountants. The Court also noted practical burdens and differences from other restitution laws. Sharing private findings with prosecutors did not make GE's preparticipation costs coverable.

Real world impact

As a result, lenders, companies, and other private victims cannot rely on that criminal restitution provision to recoup private investigative or bankruptcy litigation fees. They may still pursue civil suits, but collecting money from convicted defendants often proves difficult. The Supreme Court reversed the appeals court and sent the case back for proceedings consistent with this interpretation.

Dissents or concurrances

The opinion was unanimous and written by Justice Breyer; the Court granted review because federal appeals courts were split on the question and resolved that disagreement by adopting the narrower reading.