Court clarifies Loss Calculation and Restitution

Chicago – In United States v. Pu, 2016 U.S. App. LEXIS 3224 (7th Circuit February 24, 2016), the court addressed the district court’s loss calculation and restitution order. Pu who worked for two companies, one of which was the Citadel in Chicago, a hedge fund, was indicted for and pleaded guilty to unlawful possession of a trade secret from Company A and unlawful transmission of a trade secret that belonged to the Citadel. The district court found that Pu intended to cause a loss of approximately $12 million, and was ordered to pay restitution of $750,000. He was sentenced to 36 months in prison. The $12 million intended loss calculation increased his sentencing guidelines calculation by a whopping twenty-level increase, even though there was no actual loss. While the restitution order was based on a letter supplied to the court by the Citadel that included costs associated with an internal forensic analysis and an internal investigation.

The information that Pu was accused of stealing was used to conduct stock trades. However, Pu use of the data resulted in him losing about $40,000.

For purposes of the sentencing guidelines, the loss is the monetary harm that was intended from the offense, or if the court cannot determine the amount of loss it may use the gain that resulted from the offense. In the case of a trade secret, like in this case, the loss amount could be the cost of developing the information or the reduced value of the information as a result of the offense. However, the sentencing guidelines do not require any loss calculation greater than zero and the court called a loss amount “bonus punishment points.”

The court also addressed the restitution amount and sent the case back to the district court to require the government to submit an explanation of how the time and resources were spent on the investigation and to readdress the loss calculation amount.

For more information on the sentencing in federal courts, click here.