Defrauded Company Can’t Compel Forfeiture

(CN) - A Utah company cannot use a forfeiture petition to recover money embezzled by the tax consultant who is unlikely to make full restitution, the 9th Circuit ruled.

Deborah DiFrancesco had pleaded guilty this past May to embezzling more than $3.3 million from small businesses that used her payroll-services firm. In addition to owing her former clients $3.8 million in restitution, DiFrancesco also must pay the Internal Revenue Service $1.1 million for failing to pay taxes on the money she embezzled.

The Las Vegas woman had reportedly used the money for gambling. U.S. District Judge James Mahan sentenced her earlier this month to 63 months in prison.

At the hearing, he doubted that Mahan would ever earn enough to repay her victims, CBS reported.

That prospect proved untenable to Stake Center Locating, a Salt Lake City-based company that pinpoints utilities for construction companies and others. DiFrancesco owes it $763,846, and the company felt that the best way to achieve restitution would be compelling the government to institute criminal forfeiture proceedings.

Mahan refused, and a three-judge panel of the 9th Circuit affirmed Thursday.

Federal law offers victims of crimes the right to restitution, but not to criminal forfeiture, the appellate judges found.

"Criminal forfeiture is not, as petitioner contends, a type of restitution," the unsigned ruling states.

"Among other differences between restitution and forfeiture, only the criminal defendant is subject to restitution, not third parties."

Stake Center further argued that foreiture was required in wire fraud cases, but the judges said that is true only when "the government exercises its discretion to seek such forfeiture."

This is actually the second attempt Stake Center made at compelling forfeiture. In June, the 9th Circuit told the company that it had to wait until Mahan had been sentenced.

Judge Michael Hawkins had bristled at the time that the petition could be dismissed on the merits.

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