Restitution is not Punishment

No Economic Loss No Right to Restitution
Victims of Crime May not Profit From a Restitution Order
Post 5097

In California criminal cases, restitution is mandatory in every case in which a victim has suffered economic loss as a result of the defendant's conduct.

In The People v. Alex Dadourian, B329218, California Court of Appeals, Second District, Fourth Division (June 6, 2025) there was a crime but not evidence of economic loss.

THE FRAUD

Alex Dadourian, the defendant and appellant, was a real estate broker. He was convicted on multiple fraud-related counts, all stemming from sending false information to obtain residential mortgage loans. The trial court ordered Dadourian to pay, as restitution, the full amount the lenders originally lent, i.e., the original face value of the loans.

Some of the fraudulently obtained loans had already been repaid in full to the lenders with interest and without loss. Payments were being made on all of the loans with interest. None of the loans were in default or were delinquent. No evidence at all was offered to show that any lender suffered any economic harm at all from making the loans.

A trial court has wide discretion in calculating a criminal restitution award to ensure that a victim of a crime is made whole. But when there is no showing of economic loss at all, a restitution award is an abuse of discretion.

BACKGROUND

In March 2022, the California Attorney General's Office (People) filed a 91-count information charging defendant and appellant Alex Dadourian multiple counts of fraud on lenders.

Dadourian pled no contest to all counts against him and admitted the special allegations. The trial court sentenced Dadourian to five years and four months in state prison. The People filed a memorandum requesting that the trial court order Dadourian to pay restitution in the full original amount of the loans, or $8,128,823.

At the restitution hearing in February 2023, the trial court ordered Dadourian to pay $8,128,823 in victim restitution. Dadourian's $100,000 cash bail was applied to the restitution amount.

DISCUSSION
Legal Principles

Restitution is normally mandatory when a criminal victim suffers an economic loss. But when there is no economic loss there is no entitlement to restitution. Victims are only entitled to an amount of restitution so as to make them whole, but nothing more.

While the trial court's discretion in calculating restitution is broad, it is not limitless.

ANALYSIS

The restitution award at issue here was based on the amount of the loans and trial court ordered restitution in the amount of $8,128,823, the full original face amount of the loans. The Court of Appeals found this was error.

That a loan was made is not enough to show, without more, that a lender suffered an economic loss on that loan.

The trial court explained that but for the fraudulent activities of Dadourian, those loans wouldn't have been made. No evidence was offered demonstrating that any lender lost anything at all from making the loans.

According to the information contained in the People's memorandum, six of the loans had been paid off in full (either by sale or refinance) with no realized losses. Six other loans were being paid as originally agreed and were in good standing. Four of the loans were being paid as agreed, although the lenders had been forced to repurchase the loans. And one of the loans had a history of default, which was cured at the time of the hearing.

At the restitution hearing, the People admitted that "there is no indication of default or delinquency" as to any of the loans. Nor did the People offer evidence tending to show that the lenders had lost anything at all on the loans due to default, refinancing, repurchases, or for any other reason. In sum, there was no evidence of loss was before the trial court.

Without any showing of economic loss to the lenders, the People did not meet their burden of showing entitlement to victim restitution.

The trial court's order did not "restore" an economic "status quo." Providing the lenders with additional funds via restitution in the amount of the original loan amounts was a windfall, not restoring the status quo that existed before the loans were made in the first place. Therefore, the victim restitution order was reversed.

ZALMA OPINION

Restitution is available only to make the victim of a crime whole, not to allow he victim to profit from being a victim nor is it proper as additional punishment to the criminal. Dadourian was a bad man who was properly sentenced to state prison. Making him pay the full amount of loans that were obtained fraudulently but which caused no loss to the lenders was wrongfully adding a more than $8 million punishment in addition to prison. Even a fraud perpetrator is entitled to a fair and reasonable sentence.

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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