United States v. H. Wayne Hayes, Jr.

Citations: 385 F.3d 1226; 2004 U.S. App. LEXIS 21009; 2004 WL 2255980Docket: 02-10203

Court: Court of Appeals for the Ninth Circuit; October 8, 2004; Federal Appellate Court

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H. Wayne Hayes, Jr. appealed to the Ninth Circuit seeking reimbursement for restitution payments made under a criminal judgment that was later vacated. He was previously convicted of multiple counts of fraud related to a Ponzi scheme that misled investors into believing their funds were being used for oil and gas investments, while most were diverted to his personal expenses, totaling $981,000 out of $1,187,000 collected. Hayes was sentenced in 1993 to twenty years in prison and ordered to pay $424,705 in restitution and $850 in assessments. After his conviction was affirmed and a petition for certiorari to the Supreme Court was denied, Hayes made restitution payments amounting to $77,507. The court concluded that Hayes is not entitled to the requested relief and affirmed the district court's judgment.

Hayes filed a petition for writ of habeas corpus under 28 U.S.C. § 2255, claiming a violation of his Sixth Amendment right to counsel due to the trial court's failure to inform him of the risks associated with self-representation, as required by Faretta v. California. The district court initially denied the petition, but upon appeal in September 2000, the denial was reversed, and a new trial was ordered, as Hayes had not been adequately informed of the dangers of self-representation. Subsequently, the United States moved to dismiss the case due to lost exhibits necessary for the trial, and the district court granted this motion.

Hayes then sought an order for the return of court costs and restitution he had paid, arguing that the criminal judgment was unconstitutional. The magistrate judge ordered the return of the special assessment for court costs but denied the request for restitution, which was affirmed by the district court. Hayes appealed this decision.

The document outlines the four types of monetary penalties a federal court can impose on a convicted defendant: fines, restitution to victims, special assessments, and reimbursement of trial costs. It details that wrongly convicted defendants may recover amounts mistakenly paid due to a wrongful conviction, as established in Telink, Inc. v. United States, where it was determined that recovery does not require a separate civil action and can be sought through a Rule 41(g) motion. 

The ruling clarifies that if the government retains funds like fines, special assessments, and costs after a conviction is vacated, it must return those amounts, regardless of whether the conviction was later upheld on appeal. Thus, the district court correctly ruled that Hayes was entitled to the return of $850 in special assessments and court costs.

If the government retains restitution funds until a conviction is finalized and then distributes the money to identifiable victims, the defendant has no recourse to recover those amounts. The government acts as an escrow agent during this period and cannot return funds it no longer possesses. The cases cited, United States v. Marshall and United States v. Huffhines, support that the government is not obligated to return property it never had. Hayes argues that wrongful government actions during prosecution warrant damages; however, the focus is on the government's proper handling of the restitution funds. Consequently, Hayes' motion for the return of his restitution payments is denied, and the district court's judgment is affirmed.

Further, the government suggests that if Hayes has any claims, they should be filed with the Court of Federal Claims under the Tucker Act, although previous rulings indicate that this is not the exclusive avenue for relief from criminal judgments. While the Court of Federal Claims is appropriate for civil claims regarding wrongful disbursement of funds exceeding $10,000, Fed. R. Crim. P. 41(g) also provides a remedy for the return of property in criminal cases. Sovereign immunity claims against Hayes' lawsuit do not hold, as established by prior rulings. The district court correctly interpreted Hayes' motion as one under Fed. R. Crim. P. 41(g), which allows individuals deprived of property to seek its return. The rule has been stylistically amended but retains its core provisions. This situation differs from United States v. Beckner, where the government had to compensate for funds disbursed to third parties before a final judgment was made.

Hayes contends that the government's distribution of funds should be halted until he has exhausted all collateral challenges to his judgment through a federal habeas motion under 28 U.S.C. § 2255. The court finds this impractical and inconsistent with the obligation to enforce final judgments. Furthermore, the government's claim that Hayes is ineligible for reimbursement due to committing fraud is deemed invalid following the vacation of the judgment. The court does not rule on Hayes's potential claims against third parties regarding restitution payments but notes that under 18 U.S.C. § 3663(c), restitution for unidentified victims can be allocated to state programs. While a Rule 41(g) motion can be used to request the return of funds, its success hinges on who holds the funds at the time of the motion. If the government still has funds, as with fines and costs, it must return them regardless of the conviction's status. The court affirms that Hayes is entitled to $850 in special assessments and court costs since the government retains these funds. Conversely, if the government has distributed funds to identifiable victims after a final conviction, the defendant cannot reclaim those amounts, as the government acted merely as an escrow agent. Hayes's assertion of wrongful government conduct is not applicable to the disbursement of funds but rather to the prosecution itself. The government appropriately held and distributed the restitution funds, leading to the denial of Hayes's motion for their return. The district court's judgment is affirmed.

The government argues that Hayes should bring his case to the Court of Federal Claims under the Tucker Act for claims related to wrongful government disbursements exceeding $10,000. However, previous cases, Telink and Martinson, indicate that the Tucker Act does not exclusively govern ancillary relief from criminal judgments. In civil contexts, the Court of Federal Claims is indeed recognized as the appropriate venue for such claims. Nonetheless, Telink and Martinson, along with Federal Rule of Criminal Procedure (Fed. R. Crim. P.) 41(g), provide additional remedies for the return of property wrongfully seized in criminal cases. The government's assertion of sovereign immunity against Hayes' lawsuit is undermined by these precedents and is inconsistent with its own Tucker Act argument. Telink also established that courts have inherent authority to issue orders related to their judgments. Fed. R. Crim. P. 41(g) allows individuals deprived of property to seek its return from the district court where the seizure occurred. In this instance, the district court properly interpreted Hayes' motion under Fed. R. Crim. P. 41(g). The amendment to Fed. R. Crim. P. 41, which was merely stylistic, does not alter this interpretation. Unlike the case of United States v. Beckner, where the government had to pay disbursed funds before a final judgment, Hayes contends that any improper disbursement of funds should be halted until he has completed his collateral appeals through federal habeas motions. This indefinite suspension of restitution payments is deemed impractical and contrary to the obligation to enforce final judgments. The government’s claim that Hayes is not entitled to reimbursement due to alleged fraud is also rejected, especially given the vacating of the judgment. Finally, the document does not address potential rights Hayes may have against third parties regarding restitution payments made to them, including victims or state programs.