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Glencore Acknowledges A Victim, But Disputes The Amount Of Restitution Owed


As highlighted in this prior post, in connection with the May 2022 Glencore FCPA enforcement action, the majority owners of Crusader Health (Ian and Laureth Hagen) petitioned the court in the underlying enforcement action to file a restitution claim under the Mandatory Victims Restitution Act and the Crime Victims Act on the basis that the entity was a victim of Glencore’s conduct in the Democratic Republic of Congo. The court granted the petition.

Recently, Glencore acknowledged “that Crusader—and by extension, the Hagens—was harmed by the offense to which Glencore has pled guilty, and it is prepared to pay restitution in the amount of any loss directly and proximately caused by that offense.”

However, Glencore is disputing the amount of restitution properly owed.

Glencore argues in summary fashion (internal citations omitted).

“For the reasons set forth below, however, neither the text of the MVRA nor controlling Second Circuit law supports the Hagens’ bid for restitution in the order of approximately $50 million. The losses alleged by the Hagens include speculative harms that extend far beyond the offense of conviction and a prejudgment interest rate well in excess of the rate typically applied in federal court.

As set forth in the Information, Glencore’s offense of conviction (as relevant here) involved payment of a bribe in 2010 that resulted in the dismissal in 2011 of a breach-of-contract claim that Crusader had brought in the Democratic Republic of Congo (“DRC”). The direct and proximate harm to Crusader caused by that bribe and resulting dismissal was the loss of any judgment Crusader might have been awarded by the DRC court. The potential value to Crusader of that lost judgment can be readily determined because, as the Hagens acknowledge, Crusader has since pursued the same claim in the DRC courts a second time, filing suit in 2018 based on the same alleged breach of contract. In 2019, the DRC court ruled that Crusader was entitled to approximately $10.86 million in damages on that claim. Although Crusader is arguably entitled to considerably less— or indeed nothing—in restitution, Glencore submits that the 2019 DRC judgment should provide the basis for an award of restitution, along with prejudgment interest set at a reasonable rate. Consistent with the MVRA’s text and purpose, that approach will make the Hagens whole for the harm to Crusader that directly and proximately resulted from Glencore’s offense of conviction by restoring to them the amounts they could reasonably expect to have obtained from the DRC court absent the 2010 bribe and the interest they could have earned by investing that damages award.

The alternative for which the Hagens advocate seeks an award far beyond that authorized by the MVRA. Apart from the value of the DRC lawsuit that was dismissed due to Glencore’s bribe, the Hagens seek compensation for harms they claim were caused not by Glencore’s offense of conviction, but by the underlying termination of Crusader’s contracts—including severance costs, legal fees, and the asserted destruction of Crusader’s entire business. (seeking approximately $16 million for the value of the lawsuit dismissed due to the bribe, plus more than $32 million for other categories of harms allegedly stemming from breach of Crusader’s contracts). The Hagens stake their claim to these amounts on the theory that Glencore’s relevant conduct “goes beyond” the bribery conduct underlying the offense of conviction, and that “[i]t is this broader conduct that the Court must also consider” in determining the compensable losses to Crusader. But Second Circuit authority squarely forecloses that proposition. Restitution under the MVRA “may be imposed only for losses arising from ‘the specific conduct that is the basis of the offense of conviction.’” Here, the “specific conduct” forming the basis of Glencore’s “offense of conviction” is the payment of a bribe resulting in dismissal of Crusader’s 2010 DRC lawsuit,—not the underlying termination of Crusader’s contracts that allegedly required Crusader to pay severance to employees, incur legal fees, and ultimately shut down its DRC business. To the extent the Hagens attempt to recast those harms as arising from the bribe, they cannot satisfy the MVRA’s requirement of “direct[] and proximate[]” causation. And some of the expenses they seek to recover—in particular, legal fees and severance costs—are not compensable expenses under the MVRA.

Moreover, determining the amount of the losses the Hagens seek would embroil the parties and this Court in substantial litigation over complex factual and legal determinations. The MVRA does not apply where “determining complex issues of fact related to the cause or amount of the victim’s losses would complicate or prolong the sentencing process to a degree that the need to provide restitution to any victim is outweighed by the burden on the sentencing process.” As evidenced by the Hagens’ extensive restitution filings—which rely on some 40 exhibits, declarations, and purported expert reports—evaluating the Hagens’ claim to restitution for the loss of their business, severance costs, and legal fees would require this Court to make extensive factual findings based on evidence entirely outside the current record, including expert testimony on the value of the Hagens’ former business in the DRC. Litigating those questions would inevitably burden the Court and delay imposition of Glencore’s sentence to a degree that would substantially outweigh any “need to provide restitution” for harms so attenuated from the offense of conviction.

The same considerations militate against the Hagens’ effort to disregard the DRC Court’s judgment in determining the value of the one category of harm that did directly and proximately result from the offense of conviction—i.e., the loss of the value of any judgment Crusader would have obtained in the DRC court had the breach-of-contract suit not been dismissed because of Glencore’s 2010 bribe. The DRC court’s 2019 ruling has already determined the value that claim would have had. For reasons explained below, that court arguably erred in awarding any judgment to Crusader at all—including because an arbitration clause in Crusader’s contracts should have foreclosed any DRC litigation in the first place. But given that the DRC court has already evaluated Crusader’s breach-of-contract claim and determined what damages Crusader was and was not entitled to, it would make no sense to convert Glencore’s sentencing proceeding into a full-fledged trial to undertake a new assessment of what damages Crusader would have obtained absent the 2010 bribe. Like the Hagens’ other asserted categories of harm, that approach would require this Court to delve into factual evidence concerning Crusader’s contractual rights and resolve multiple issues of Congolese law. In resisting reliance on the 2019 judgment, the Hagens contend that “the documentary record had deteriorated” by the time Crusader brought suit a second time. But even assuming that to be true—a fact the Court would have to hear evidence on and determine—the unavailability of records relevant to determining the value of Crusader’s claim afresh provides all the more reason to give effect to the DRC court’s ruling. The more sensible approach, consistent with the MVRA’s imperative to avoid prolonging the sentencing process with burdensome collateral litigation, is simply to conclude that, absent the bribe, the value of Crusader’s breach-of-contract claim in the DRC court would have been exactly what the DRC court later found it to be—approximately $10.86 million.

Finally, Glencore agrees that prejudgment interest should be awarded on the value of the DRC claim that was dismissed as a result of Glencore’s offense. But that interest must be set at a reasonable rate. The Hagens’ claim for 9 percent interest—more than twice the currently prevailing interest rate, and more than 30 times the rate at the time of the offense—would result in a windfall that is not supported by applicable case law. Prejudgment interest under the MVRA serves to compensate the victim for loss of the ability to “put its money to productive use” during the relevant period. To provide a “rough but fair approximation” of that loss, prejudgment interest should reflect the interest rates that prevailed during that relevant period. The Court should therefore apply the generally applicable interest rate used in federal proceedings—i.e., the annual interest rate for market yield on U.S. Treasury securities at one-year constant maturity. Applying that rate to the award of $10.86 million on a year-by-year basis yields prejudgment interest in the amount of $1.14 million, for a total restitution award of $12 million.

The MVRA aims to “restore a victim, to the extent money can do so, to the position he occupied before sustaining injury.” But the statute does not allow a victim “to recover more than his due,” id. (citation omitted), or to burden the sentencing process to calculate and capture damages for speculative harms that are not closely connected to the offense of conviction, Goodrich, 12 F.4th at 229. Glencore has accepted responsibility for the bribery conduct underlying its offense of conviction, and it acknowledges that Crusader (and the Hagens) are entitled to be made whole for losses directly and proximately resulting from that offense. Awarding restitution beyond those losses, however, would violate the MVRA.”

For its part, the DOJ recently stated in a filing.

“The Government does not oppose an award of restitution to Claimants for losses directly and proximately caused by Glencore’s offense of conviction. The Government notes that the Claimants and Glencore are in possession of the relevant facts and evidence underlying the claim and the two lawsuits filed in the DRC. At this time, while Claimants still have an opportunity to respond to Glencore’s recent submission, the Government takes no position on the amount of direct and proximate loss suffered by Claimants resulting from Glencore’s bribe.”

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