Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Wharton

United States District Court, D. Maryland

May 8, 2017

UNITED STATES OF AMERICA Plaintiff,
v.
JOEANN WHARTON, ET AL. Defendants

          MEMORANDUM OPINION

          Ellen Lipton Hollander United States District Judge.

         In this 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.

         On 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.

         Among 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.

         Specifically, 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.

         Ms. 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).

         On 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 (“Reply”).

         The 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.[1]

         No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, I must deny the Motion.

         I. Factual Background

         John 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.

         Count 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, ¶ 11.

         Count 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.

         The 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”[2] 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.

         Count 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. § 641.

         A 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).

         A third 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.

         The 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.

         Count 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.

         Count 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).[3]

         The 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.

         Prior 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.

         Ms. Wharton was sentenced on February 12, 2015. ECF 250; ECF 286.[4] 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.

         Of relevance here, I ordered both defendants to pay restitution to Lasean Wharton, [5] 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.

         Moreover, 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.”

         Mr. 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.[6]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.

         According 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 them[.]”[7]

         II. Discussion

         A.

         Pursuant 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 paid].”).

         In 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.

         Therefore, 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 ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.