United States District Court, D. Maryland
Lipton Hollander United States District Judge.
Memorandum Opinion I consider a victim's request for an
adjustment of restitution payments. In effect, the victim
challenges the decision of the Social Security Administration
(“SSA”) to recoup overpayments.
October 23, 2014, following an eleven day jury trial, John
and Joeann Wharton were convicted of several offenses
relating to their receipt of various kinds of social security
benefits. In particular, they were convicted of conspiracy,
in violation of 18 U.S.C. § 371; false statement in
regard to Title XVI benefits, in violation of 42 U.S.C.
§ 1381a(a)(2); and theft of government property, under
18 U.S.C. § 641. ECF 198; ECF 251; ECF 261; see
also ECF 19 (Superseding Indictment). Ms. Wharton was
also convicted of an additional count of Title XVI Benefit
Fraud, in violation of 42 U.S.C. § 1383a(a)(3). ECF 198;
ECF 251; see also ECF 19.
other penalties, both defendants were ordered to pay
restitution to three individual victims, all of whom are
relatives whose social security benefits were misappropriated
by the defendants, and to SSA. ECF 251 at 4-5; ECF 252 at 4;
ECF 261 at 5-6; ECF 262 at 4-5.
I directed Ms. Wharton to pay restitution in the amount of
$155, 722.00, in monthly installments of $10.00. ECF 251 at
4-5. And, I ordered Mr. Wharton to pay restitution in the
amount of $172, 731.00, in monthly installments of $200.00,
to begin 30 days after he began his term of supervised
release. ECF 261 at 5-6. In sum, the Whartons are jointly and
severally responsible for $155, 722.00 in restitution; Mr.
Wharton is solely responsible for the remaining $17, 009.00.
ECF 261 at 6.
Wharton appealed her convictions to the Fourth Circuit. ECF
266. Mr. Wharton did not note an appeal. The Fourth Circuit
affirmed Ms. Wharton's convictions. ECF 306; see also
United States v. Wharton, 840 F.3d 163 (4th Cir. 2016).
August 26, 2016, E.W., a grandchild of the defendants and a
victim in the case, filed a motion to adjust the schedule of
restitution payments, pursuant to 18 U.S.C. § 3664(k)
(ECF 299), supported by a memorandum of law (ECF 299-1)
(collectively, the “Motion”). In particular, E.W.
complains that, despite the Court's order prioritizing
restitution to the individual victims, no restitution has
been paid to the victims because SSA is withholding benefit
payments to the Whartons in order to recoup its overpayments
to them. ECF 299 at 2. The government opposes the Motion. ECF
310 (“Opposition”). E.W. has replied. ECF 314
government moved for leave to file a surreply, claiming that
E.W. raised several new arguments in her Reply. ECF 316. By
Order of the same date (ECF 317), I granted that motion. The
surreply is docketed at ECF 318 and is supported by two
exhibits. ECF 318-1; ECF 318-2.
hearing is necessary to resolve the Motion. See
Local Rule 105.6. For the reasons that follow, I must deny
and Joeann Wharton were married in 1970, when Ms. Wharton was
16 and Mr. Wharton was 29. In an eight count Superseding
Indictment filed on June 27, 2013 (ECF 19), they were charged
with multiple offenses relating to their receipt of various
types of Social Security benefits over an extended period.
One charged conspiracy to defraud the government with respect
to Social Security benefits programs, in violation of 18
U.S.C. § 371. In particular, Count One alleged that,
since about 1996, the defendants conspired to embezzle,
steal, and convert money of the government, whose value
exceeded $1, 000, in violation of 18 U.S.C. § 641, and
that they conspired to use, without lawful authority, the
identification of another, during and in relation to theft of
government property, in violation of 18 U.S.C. §
1028A(a)(1), (a)(4), and (a)(5). See ECF 19, ¶
Two charged the submission of a false statement on December
13, 2012, in violation of 42 U.S.C. § 1383a(a)(2). Count
Three, lodged against Ms. Wharton only, charged Social
Security fraud under 42 U.S.C. § 1383a(a)(3), in
connection with Social Security benefits paid to Ms. Wharton
from October 1996 until December 2012. Counts Four through
Seven charged theft of government funds, in violation of 18
U.S.C. § 641. Count Eight, against Ms. Wharton only,
alleged aggravated identity theft under 18 U.S.C. §
1028(A). All of the substantive counts incorporated
paragraphs 1 through 10 and 12 through 23 of Count One.
charges involved several factual groupings. Counts One,
Three, and Four concerned Ms. Wharton's own disability
claim, filed in 1996 in connection with the Social Security
benefits program known as Supplemental Security Income for
the Aged, Blind, and Disabled, under Title XVI of the Social
Security Act, 42 U.S.C. § 301 et seq.
(“SSI Program”). According to the government, Ms.
Wharton received SSI Program benefits from 1996 to 2012,
based on a diagnosis of “mental
retardation” and a corresponding representation of
financial need. In particular, the government alleged that
when Ms. Wharton applied for SSI Program disability benefits
in October 1996, she did so under false pretenses, in that
she falsely represented that she was living separate and
apart from her husband. See ECF 19, ¶ 12. The
government claimed that, had it been known that the two lived
together, Ms. Wharton would not have qualified for SSI
Program benefits. Id.
Three, against Ms. Wharton only, alleged that between October
1996 and December 2012, with “knowledge of the
occurrence of any event affecting her initial or continued
right to payment of SSI Program benefits, ” Ms. Wharton
“did conceal and fail to disclose said event with
intent to fraudulently secure payment....”
Specifically, she “knowingly concealed and failed to
disclose that she lived with her husband...for the purpose of
causing SSA to continue to pay SSI Program benefits”
for which Ms. Wharton was “otherwise
ineligible....” See 42 U.S.C. §
1383a(a)(3). Count Four charged both defendants with
embezzling, stealing, and converting SSI Program benefits,
whose value exceeded $1, 000, paid to Ms. Wharton between
October 1996 and December 2012. See 18 U.S.C. §
second group concerned the alleged misuse of SSI Program
disability benefits under Title II of the Social Security
Act. These benefits were paid to Ms. Wharton from 1993 to
2004, in her capacity as representative payee for the
couple's disabled son, Lasean. According to the
allegations, Ms. Wharton received these benefits during a
period when her son did not live with her, and the benefits
were converted for the use of the defendants. Because of
limitations, these allegations were not the subject of a
substantive count. But, the benefits paid with respect to
L.W. were part of the conspiracy count. See Count
One, ¶¶ 8, 13, 15, 20, 23(a).
group, Count One and Count Five, pertained to the alleged
misuse of SSA Title II Program survivor's benefits, paid
between 2002 and 2012 to Ms. Wharton in her capacity as
representative payee for the Whartons' two
granddaughters, E.W. and C.W., who were then minors. The
children's late mother, LaShema, was the Wharton's
daughter. LaShema was murdered in 2002 by the father of one
of her children. According to the allegations, Ms. Wharton
continued to receive and convert to the defendants' use
the survivor's benefits that “she was required to
spend for the care and benefit of her granddaughters, ”
and she did so “even during a period when her
granddaughters no longer lived with her.” ECF 19,
¶ 14; see 18 U.S.C. § 641.
fourth group related to Mr. Wharton's use of the alia
“James Wharton” to obtain Title II Program
retirement benefits between April 2010 and June 2013 under
the SSA record of James Wharton, while he also received
disability benefits in his own name. See ECF 19,
¶¶ 16- 19; 18 U.S.C. § 641. This conduct was
the subject of Count One and Count Six.
One and Count Seven pertained to Ms. Wharton's receipt of
Medicaid benefits between January 2000 and January 2013,
based on her receipt of SSI Program benefits. See
ECF 19, ¶ 7; 18 U.S.C. § 641.
Eight, lodged only against Ms. Wharton, alleged that on July
14, 2011, in relation to theft of government property (as set
forth in Count Five), Ms. Wharton used, without lawful
authority, a means of identification of another person,
i.e., the name and signature endorsement of her
granddaughter, C.W., on a bank check issued by the U.S.
Treasury on or about July 13, 2011. See ECF 19,
¶ 22; 18 U.S.C. § 1028A(a)(1).
status of the Whartons' marriage during the relevant time
period was hotly contested during the criminal proceedings.
The defense claimed that the couple separated in the
1990's and, “to the extent that they resided under
the same roof, ” it was for only economic reasons. ECF
37 at 4-5 (defense motion). Further, defendants insisted that
Mr. Wharton did not provide support for Ms. Wharton or the
couple's children. Id. Therefore, the defendants
claimed, among other things, that Ms. Wharton was entitled to
the SSI benefits she received. Id.
to trial, and without the benefit of a plea agreement, Mr.
Wharton entered a plea of guilty to Count Six, charging theft
of government property. ECF 146. As noted, on October 23,
2014, a jury convicted the Whartons of conspiracy, in
violation of 18 U.S.C. § 371; one count of federal
benefit government fraud, in violation of 42 U.S.C.
§§ 1383a(a)(2); and two counts of theft of
government property, in violation of 18 U.S.C. § 641 and
18 U.S.C. § 2. ECF 198; ECF 251; ECF 261. The jury also
convicted Ms. Wharton of an additional count of federal
benefit government fraud, in violation of 42 U.S.C.
§§ 1383a(a)(3). ECF 198; ECF 251.
Wharton was sentenced on February 12, 2015. ECF 250; ECF
At the sentencing, I noted that Ms. Wharton is “a woman
with a very challenging social history.” ECF 286 at
103:25. I need not recount that social history here in
detail, except to say, inter alia, that she came
from a financially disadvantaged background; her daughter,
LaShema, was brutally murdered, leaving two young daughters
who came into the Whartons' care; and Ms. Wharton
“has a host of serious medical problems”,
including cognitive impairment. Id. at
104:3-8;13-25. In my view, all of these factors
“weigh[ed] heavily on the mitigating scale.”
Id. at 105:21-22.
relevance here, I ordered both defendants to pay restitution
to Lasean Wharton,  who is the defendants' adult son; to
their granddaughters, E.W. and C.W., who are now emancipated;
and to SSA. See ECF 252 (sealed statement of reasons
for Ms. Wharton), at 4; ECF 262 (sealed statement of reasons
for Mr. Wharton), at 4-5. The social security benefits of all
three individuals were misappropriated by defendants. In
particular, I directed the Whartons to pay $30, 184.00 to
E.W.; $19, 968.00 to C.W.; $10, 328.00 to Lasean Wharton, and
$95, 242.00 to SSA. ECF 252 at 4; ECF 262 at 4-5. That
obligation is joint and several. ECF 261 at 6. And, I ordered
Mr. Wharton to pay an additional $17, 009.00 in restitution
to SSA. Id. I also stated that, “pursuant to
18 U.S.C. § 3664(i), all nonfederal victims must be paid
before the United States is paid.” ECF 251 at 4; ECF
261 at 5. Notably, I specified: “Payments to Individual
victims shall be paid before the Social Security
Administration.” ECF 251 at 5.
I recommended “to Social Security that it not withhold
more than 10% of the current, of the benefits [Joeann
Wharton] otherwise would get…” ECF 286 at
120:24-121:1. In making this recommendation, I noted that it
did not appear that Ms. Wharton has any other source of
income from which to pay restitution. Id. at
116:120; 120:11-13. I reasoned that, if SSA were to withhold
100% of her benefits, she would be unable to pay restitution
to the individual victims. However, I also said, id.
at 121:1-5: “I don't know that I can order it. If
there's a change, somebody has some authority that they
can cite to me, I'll revisit the order and make it an
order rather than a recommendation.”
Wharton was released from incarceration on or about March 3,
2016. He was subsequently informed that SSA had suspended his
benefit payments as of April 2015. See letter from
SSA, dated March 4, 2016, from SSA, ECF 299-2. Mr. Wharton
was also informed by SSA that his benefits would not resume
until 2026. See notice dated July 5, 2016, ECF
299-3.Further, SSA has indicated that, pursuant
to 20 C.F.R. § 404.502(a), it is withholding the social
security benefits of both defendants to recoup the benefits
that defendants fraudulently obtained, which are termed
“overpayments.” ECF 310 at 1. As a result,
neither defendant has any income to satisfy the monthly
restitution obligations to the individual victims.
See ECF 299 at 6; ECF 318 at 1. Indeed, no
restitution has been paid to them.
to the government, “SSA both withheld and suspended
certain benefits payable to both Defendants as early as
January 2013, based on administrative determinations that
preceded the Court's restitution orders, and in amounts
that differ from the Court's restitution orders.”
ECF 318 at 7. The restitution orders in the criminal case
were issued in February 2015, two years after SSA began to
withhold the defendants' benefits. The government
asserts, ECF 310 at 1: “SSA is withholding both
Defendants' social security benefits to recoup the
benefits that were fraudulently obtained by
to 18 U.S.C. § 3664(k), E.W. seeks “to adjust the
schedule of restitution payments.” ECF 299 at 1; ECF
299-1 at 1. She argues, inter alia, that SSA's
practice of withholding the defendants' benefits violates
18 U.S.C. § 3664(i), which requires individual victims
to receive “full restitution” before payment to
the United States, and 18 U.S.C. § 3771(a)(6), which
provides for “full and timely restitution. . . .”
ECF 299 at 2-3. However, E.W. does not challenge SSA's
determination that the Whartons were overpaid. Rather, she
maintains that SSA's recoupment practice unlawfully
results in SSA receiving its restitution before restitution
is paid to the non-federal victims. See ECF 299-1 at
6-7. E.W. also contends that SSA's practice violates this
Court's orders. Id. at 3. As noted, I had said
that, “pursuant to 18 U.S.C. § 3664(i), all
nonfederal victims must be paid before the United States is
paid.” ECF 251 at 4; ECF 261 at 5 (same); see
also ECF 251 at 5 (“Payments to Individual victims
shall be paid before the Social Security Administration [is
addition, E.W. maintains that, to the extent that SSA
regulations authorize withholding the defendants'
benefits, they either conflict with 18 U.S.C. § 3664(i)
or are inapplicable here. E.W. states, ECF 299-1 at 7:
The Social Security Administration's regulations may not
override an explicit federal statute that is unambiguously
incorporated in the valid, unchallenged sentencing orders in
this case. Until there are no other non-federal victims due
unpaid restitution, the SSA's regulations, which do not
appear to expressly address the situation presented here
where non-federal victims have not fully collected
restitution awards and the SSA seeks to withhold benefits
that would otherwise be used to pay non-federal victims'
prioritized restitution awards, are inapplicable.
E.W. asks the Court to enter an order that prohibits SSA from
withholding the defendants' Social Security benefits and
requires SSA to remit all previously withheld payments and
all future benefit payments to the Clerk of the Court for