United States District Court, D. Vermont
OPINION AND ORDER
William K. Sessions III, District Court Judge.
case centers on restitution payments ordered by this Court
during the 2006 sentencing of defendant Kathryn Keough.
Subsequent to her sentencing, Keough, whose father was a
hostage during the Iran hostage crisis, was awarded funds
under the Justice for United States Victims of State
Sponsored Terrorism Act (“Terrorism Act”). The
government contends that those funds are subject to offset
under the Treasury Offset Program (“TOP”), and
must be used to satisfy Keough's restitution obligation.
victims of Keough's crimes, Robert and Tona White, have
informed the government that they do not wish to receive
restitution payments. Accordingly, the government filed a
motion to substitute the restitution payee, and the Whites
subsequently expressed their desire for the funds to be paid
to the Crime Victims Fund and three designated charities.
Keough opposes the motion, arguing that Terrorism Act funds
should not be transferred to the TOP, and that the attorneys
who advocated for compensation on behalf of the hostage group
and their families should receive 25% of the Terrorism Act
funds. At the Court's request, the parties have briefed
the following questions: (1) whether the attorneys are
entitled to 25% of any Terrorism Act fund
(“Fund”) award prior to any offset or payment to
Keough; (2) whether the Whites have the right to designate
alternate restitution payees, and if they do not, whether the
funds go to the Crime Victims Fund by default, and (3)
whether the government has the power to negotiate the terms
of restitution with a defendant. In a related question, the
Court inquired whether the Whites' designation was based
on full knowledge of the relevant facts.
reasons set forth below, the Court finds that the Terrorism
Act funds are subject to offset, that those funds must be
used to satisfy the restitution obligation, and that the
Whites may designate the recipients of those restitution
payments. The restitution payments can be altered by the
Court only in limited circumstances, none of which apply
here, and the government cannot negotiate the amount of
restitution owed. Accordingly, Keough's payments from the
Terrorism Act shall be offset through the TOP to the extent
that restitution is owed, and restitution shall be paid
according to the instructions provided by the Whites as the
victims of Keough's crimes.
2004, Keough was charged with defrauding numerous clients of
her home interior design business. The largest losses were
sustained by Robert and Tona White. Pursuant to a plea
agreement, Keough pled guilty to one count of mail fraud and,
together with her co-defendant and husband Peter Liska, was
ordered to pay restitution to the Whites in the amount of
$292, 643.00. The payment was due in a lump sum, and interest
continues to accrue.
co-defendants initially made small payments to the U.S.
District Court Clerk to be applied to their restitution debt,
and the Clerk's Office sent corresponding checks to the
Whites. Those checks were not cashed, and the funds are
currently being held in the Court's registry as
unclaimed. The Whites indicated at first that they did not
want to receive restitution money.
2015, Keough became eligible to receive up to $600, 000 under
the Terrorism Act, as her father, William Keough, was a
hostage during the Iran hostage crisis of 1979-81. The
Terrorism Act was established by Congress in 2015 to provide
a fund to compensate certain victims of state sponsored
terrorism, as well as spouses and children who were named in
a specific class action law suit. See 34 U.S.C.
§ 20144(c)(2)(C) (“For each child of a former
hostage identified as a member of the proposed class
described in this subparagraph, a $600, 000 lump
sum.”). The authorized funds are not guaranteed, and
are instead subject to availability through the ten-year life
span of the Fund.
2016, with assistance of lawyers from the firm of Lankford
& Reed, Keough filed a claim for recovery under the
Terrorism Act. Lankford & Reed had been working to obtain
a recovery for the Iran hostages and their families since
1999. In 2000, the firm brought a class action lawsuit
against the Islamic Republic of Iran in the United States
District Court for the District of Columbia. Although Iran
defaulted, the Justice Department intervened and opposed
relief for the class, arguing that such relief would violate
the Algiers Accords. The litigation continued for over ten
years, and Keough was a member of the plaintiff class.
addition to engaging in the class action litigation, Lankford
& Reed attorneys reportedly helped draft legislation and
met with members of Congress. Ultimately, Congress passed the
Terrorism Act, which enabled a group of Americans to obtain
compensation without having to secure a court judgment. The
Terrorism Act also placed a cap on attorneys' fees at 25%
of claimant distributions. 34 U.S.C. § 20144(f)(1). The
Terrorism Act does not expressly provide for payment of fees
directly from the Fund to those attorneys.
2017, the Fund found Keough eligible for payment. Because of
the limited amount of money available for distribution, the
Fund, which is administered by the Department of Justice, has
distributed $81, 921.60 of the allowed $600, 000 to date. The
government, pursuant to its power to enforce restitution
orders through a TOP offset, see 18 U.S.C. §
3613, sent the funds to this Court's Clerk of Court. The
funds remain in the Court's deposit fund account.
government has been collecting restitution payments,
unrelated to the Fund payment, from Keough and Liska since
2007. In light of the Whites' apparent refusal to accept
the funds, the government filed a motion on July 21, 2017 to
substitute the Crime Victims Fund as the restitution payee.
Keough opposed the motion, arguing that the Court should (1)
vacate the restitution order given the Whites'
unwillingness to accept the money, (2) adjust the payment
schedule under 18 U.S.C. § 3664, which allows for
adjustment upon “notification of a material change in
the defendant's economic circumstances, ” or (3)
direct the funds to Keough's daughter, as she reportedly
suffered harm as a result of her father's time in prison
(Keough was sentenced to home confinement) and may therefore
be considered a victim. Keough also argued that 25% of the
money from the Fund should be paid to Lankford & Reed for
their legal advocacy. ECF No. 113.
government has responded to each point, arguing (1) that the
restitution order cannot be vacated, (2) that there is no
basis for modification when the defendant's financial
situation has improved, and (3) that Keough's
daughter is not a victim of her mother's offense. ECF No.
114. With respect to attorneys' fees, the government
argues that any such fees must be paid by Keough directly,
and not from money offset to pay her restitution obligation.
In a sur-reply memorandum, Keough has contested the validity
of the TOP offset, claiming that it was done without proper
notice or court approval. Keough has also offered significant
detail about the efforts by Lankford & Reed to secure
payments for the Iran hostages and their families.
October 24, 2017, the government notified the Court that the
Whites intended to donate the restitution money to several
charities. Both the government and the Whites were reportedly
unaware of Keough's entitlement to money from the Fund
until Keough filed her opposition to the government's
motion to substitute the restitution payee. With the
knowledge that full restitution was ...