Hybrid Restitution Under the MVRA: Third Circuit Endorses Flexible Crediting and Rejects Blanket “Sheets” Rule in United States v. Shvets

Introduction

In United States v. Natalya Shvets, the Third Circuit confronted a familiar but vexing problem in restitution administration: how to credit payments across multiple defendants when their restitution obligations partially overlap but are not identical. The case arose out of a large-scale Medicare fraud involving Home Care Hospice, Inc. (HCH), where 17 individuals, sentenced in different cases and at different times, were ordered to pay restitution amounts ranging from $42,211 to $16.2 million.

Shvets, a nurse convicted for her role in falsifying “continuous care” billing, was ordered to pay $253,196 in restitution, “jointly and severally” with eight named co-defendants. Years later, she moved for an accounting and for a declaration that her obligation had been satisfied based on payments made by herself and by co-defendants. The district court denied relief, reasoning that her obligation would end only if she personally paid the full $253,196 or if the entire $16.2 million associated with the HCH scheme was paid by all related defendants—a rule drawn from the Fifth Circuit’s decision in United States v. Sheets.

On appeal, the Third Circuit affirmed in part, vacated in part, and remanded. Most notably, it:

Explicitly held that sentencing judges may impose “hybrid” restitution orders under the Mandatory Victim Restitution Act (MVRA), 18 U.S.C. § 3664(h)—combining joint-and-several liability with apportionment—because “or” in § 3664(h) is inclusive.
Rejected the district court’s blanket adoption of the Fifth Circuit’s “Sheets rule” as incompatible with Shvets’s judgment and with the MVRA’s structure.
Directed district courts to select and explain a reasonable, fair method for crediting payments across hybrid obligations, and to scrutinize the Clerk’s “bucket” methodology for transparency and fairness.
Clarified that defendants receive credit only for funds actually collected and transmitted to the victim; there is no credit for assets the government did not recover, nor for forfeiture proceeds paid to qui tam relators.

Summary of the Opinion

The Third Circuit’s decision has four core components:

Hybrid Restitution Authorized. The court joined several sister circuits in holding that § 3664(h) permits hybrid restitution—mixing joint-and-several liability with apportionment—to better serve the MVRA’s purpose of making victims whole without unfairly overburdening defendants.
Sheets Rule Rejected for This Judgment. The panel concluded the district court erred by applying Sheets to Shvets’s judgment. Because Shvets’s restitution was tied to a discrete $253,196 loss arising from 52 false bills (and was joint-and-several with those who contributed to that loss), her obligation could not be pegged to satisfaction of the entire $16.2 million scheme.
Methodology Must Be Chosen and Explained. The court remanded for the district court to determine how payments are to be credited under a hybrid scheme—whether using the Clerk’s “bucket” system (with appropriate transparency and evaluation for fairness) or another reasonable method—and then to decide whether Shvets’s judgment is satisfied.
Collection Issues Affirmed Against Shvets. The panel affirmed rulings rejecting: (a) credits for assets the government did not collect, (b) enforcement of a subpoena not properly served, and (c) credits for forfeiture proceeds paid to qui tam relators.

Disposition: Affirmed in part, vacated in part, and remanded to determine the accounting methodology and whether Shvets’s restitution judgment has been satisfied under that method.

Factual and Procedural Background

Shvets was convicted in 2014 of healthcare fraud and conspiracy (18 U.S.C. §§ 1347, 1349, and 2) for falsifying “continuous care” records, leading to Medicare payments for services not rendered. The government linked her to 52 false bills yielding loss of $253,196. Her judgment set that amount as both “Restitution Ordered” and “Total Loss,” and listed eight co-defendants as jointly and severally liable for that same sum.

Separately, other HCH defendants were prosecuted for broader hospice-eligibility fraud. In total, 17 individuals were ordered to pay restitution in amounts reflecting a patchwork of overlapping responsibilities; two principals (Pugman and Kolodesh) received $16.2 million orders and later contributed the bulk of recoveries. Payments were tracked by the Clerk of Court using a non-public “bucket” methodology that partitioned the $16.2 million into 15 labeled pots (A–O).

Years later, Shvets sought an accounting and discharge, arguing that payments made by her and the eight co-defendants named in her judgment already exceeded $253,196. The district court denied relief, holding that Shvets’s obligation would end only if she personally paid $253,196 or if the entire $16.2 million was collected. It acknowledged the Clerk’s different approach but did not evaluate it, reasoning that Shvets’s balance remained outstanding either way.

Analysis

Precedents Cited and How They Shaped the Decision

United States v. Diaz, 245 F.3d 294 (3d Cir. 2001). Reaffirmed that restitution cannot exceed the victim’s loss and approved joint-and-several features across defendants with different restitution amounts. The court reads Diaz as harmonious with hybrid restitution and emphasizes the “no overcompensation” principle.
United States v. Hunter, 52 F.3d 489 (3d Cir. 1995). Recognized the arithmetic problem of “pure” joint-and-several liability when judgments list different amounts—supporting the notion that mixed obligations often require a hybrid structure.
United States v. Sheets, 814 F.3d 256 (5th Cir. 2016). Held a defendant’s joint obligation remained until he personally paid his apportioned share or the entire scheme loss was paid. The Third Circuit declines to adopt Sheets as a default rule and finds it incompatible with the text and structure of Shvets’s judgment.
United States v. Yalincak, 30 F.4th 115 (2d Cir. 2022). Approved a hybrid approach and suggested, in two-defendant scenarios, crediting a defendant’s payments first to his separate share before applying them to joint amounts to maximize recovery for victims, but emphasized district court discretion.
United States v. Salti, 59 F.4th 1050 (10th Cir. 2023). Affirmed hybrid restitution even for an indivisible loss and allowed district courts to override Clerk calculations where unfair; underscored district court discretion.
United States v. Trigg, 119 F.3d 493 (7th Cir. 1997), and United States v. Scott, 270 F.3d 30 (1st Cir. 2001). Early recognition that § 3664(h) allows combining apportionment with joint-and-several liability.
Textual Cases on “or” (Rush v. Kijakazi, Encino Motorcars, De Sylva). Support interpreting “or” in § 3664(h) inclusively—permitting a hybrid blend rather than forcing an either/or choice.
Paroline v. United States, 572 U.S. 434 (2014). Endorsed borrowing tort principles when interpreting restitution statutes; the Third Circuit cites tort analogs for mixed joint/several and separate liability.
Ruggiano v. Reish, 307 F.3d 121 (3d Cir. 2002); In re Fine Paper Antitrust Litig., 695 F.2d 494 (3d Cir. 1982). Guide how to interpret judgments and emphasize deference to a district court’s interpretation of its own orders when consistent with the record.
MVRA crediting cases (18 U.S.C. § 3664(j)(2); United States v. Bright, 353 F.3d 1114 (9th Cir. 2004); United States v. Martinez, 610 F.3d 1216 (10th Cir. 2010)). Make clear that only amounts actually recovered by the victim reduce restitution balances.
Forfeiture and restitution together (18 U.S.C. § 3663A(a)(1); 18 U.S.C. § 982; 21 U.S.C. § 853(i)(3); United States v. Sandini, 816 F.2d 869 (3d Cir. 1987); United States v. Joseph, 743 F.3d 1350 (11th Cir. 2014); United States v. Mei Juan Zhang, 789 F.3d 214 (1st Cir. 2015)). Confirm that forfeiture is punishment distinct from restitution and can run alongside it; forfeiture proceeds paid to relators do not count as restitution to the victim.
Burdens and discovery (18 U.S.C. § 3664(e); United States v. Bryant, 655 F.3d 232 (3d Cir. 2011); United States v. Parker, 927 F.3d 374 (5th Cir. 2019); United States v. Sizemore, 850 F.3d 821 (6th Cir. 2017); United States v. Smathers, 879 F.3d 453 (2d Cir. 2018); United States v. Washington, 869 F.3d 193 (3d Cir. 2017)). After the government produced an accounting, the burden shifted to Shvets to identify additional collected funds; discovery rulings reviewed for abuse of discretion were affirmed.

Legal Reasoning

1) The MVRA permits hybrid restitution orders

Section 3664(h) allows a court to “make each defendant liable for payment of the full amount of restitution or may apportion liability among the defendants to reflect the level of contribution to the victim's loss and economic circumstances of each defendant.” The Third Circuit reads “or” inclusively in context and purpose: sentencing courts may employ both approaches in tandem. That flexibility advances the MVRA’s central goal—victim compensation—while accommodating relative culpability and financial realities. Hybrid orders also recognize the practical reality that participation in a single overall scheme often varies across actors and episodes.

Examples clarify the concept. If A and B jointly commit a $1,000 robbery and B separately commits a $500 robbery, a hybrid order can make A and B jointly and severally liable for $1,000, and B separately liable for $500. The victim can recover up to $1,500 total, and A’s liability is capped at $1,000; B’s at $1,500. Hybrid orders also extend to indivisible losses where courts nonetheless apportion responsibility (as in Salti) to reflect contribution and circumstances.

2) Hybrid orders do not dictate a single arithmetic method for crediting payments

Hybrid obligations necessarily create choice points when crediting payments. Suppose A and B share joint liability of $10,000, and B also owes $7,000 separately. If both pay $5,000, the result depends on how B’s $5,000 is credited: to the joint amount, to the separate amount, or split. The MVRA and common law do not prescribe a universal algorithm. Depending on the number of defendants and victims, prioritizing separate debts may or may not maximize victim recovery.

Because there is no one-size-fits-all rule, the district court must choose a reasonable, fair method that comports with the language of the judgments and the MVRA’s no-overcompensation principle. Courts may adopt or override the Clerk’s software-driven approach where fairness warrants. The goal is clarity and predictability so defendants and victims “know, as they lead their lives and make economic decisions over the long duration of restitution orders, the extent of their remaining restitution obligations.”

3) The district court erred by applying the Fifth Circuit’s Sheets rule to this judgment

The district court held that Shvets’s obligation persisted until she personally paid $253,196 or the entire $16.2 million was collected. The Third Circuit rejected that approach as incompatible with the text and structure of Shvets’s judgment and the sentencing record, which pegged her restitution to a discrete $253,196 loss from 52 false bills and made it joint-and-several with those who contributed to that loss—not with every participant in the broader scheme.

Where a judgment is tied to a defined subset of loss, “victim’s loss” for no-overcompensation purposes means that subset. Payments by co-defendants who share that specific liability must be considered in determining satisfaction. Sheets’s scheme-wide trigger may be appropriate only if the judgment explicitly uses that scheme-wide loss as the operative basis and caps a defendant’s liability for reasons unrelated to loss attribution. That is not this case.

4) On remand: evaluate and explain the crediting method

The record contained sparse detail about the Clerk’s “bucket” system—15 pots (A–O) summing to the $16.2 million, with each defendant assigned to a subset of buckets matching their judgment amount, and incoming payments allocated across buckets according to fluctuating outstanding balances. Without a clear description of how buckets were created, how defendants were assigned, and how allocations were computed, appellate review was impossible.

The Third Circuit directed the district court to:

Ascertain the Clerk’s methodology with enough specificity to evaluate whether it is appropriate and fair.
Decide whether to adopt that method or a different, reasonable approach that aligns with the judgments’ language and MVRA principles.
Determine, under the selected method, whether Shvets’s obligation has been satisfied.

The court emphasized that judges are not cabined to the face of inconsistent judgments when determining who shares which liability; they may look to the record (as civil courts do in allocating joint credits) to implement joint-and-several features fairly.

5) Collection issues and limits on restitution credits

No credit for amounts not actually collected. Under § 3664(j)(2), credit is given only for amounts “recovered” by the victim. The government’s failure to collect from certain bank accounts or properties is not a constructive “settlement” that entitles co-defendants to credit, nor does it break the causal chain between offense conduct and victim loss. Defendants remain liable until actual recoveries reduce the balance.
Burden and discovery. After the district court ordered a report and the government produced an accounting, the burden shifted to Shvets to identify additional collected funds. She did not produce evidence of uncredited collections; the district court did not abuse its discretion in discovery management.
Cahaba subpoena. The subpoena was not properly served; the motion to enforce was not served on the recipient. The district court correctly declined to enforce it.
No credit for forfeiture proceeds paid to qui tam relators. Restitution is “in addition to” other penalties, including criminal forfeiture. Forfeiture proceeds paid to relators are not “recovered by the victim” and therefore do not reduce restitution. The government has statutory authority to share forfeited assets with persons providing information resulting in forfeiture (21 U.S.C. § 853(i)(3), incorporated by 18 U.S.C. § 982(b)(1)).

Impact and Practical Implications

For sentencing judges

Hybrid is now expressly authorized in the Third Circuit. Courts may blend joint-and-several liability with apportionment under § 3664(h). Consider stating on the record which loss segments are joint versus separate and, where feasible, indicate how payments should be credited across those segments.
Choose and explain a crediting method. When multiple defendants’ obligations overlap in complex ways (especially across cases and staggered sentencing), select a reasonable crediting methodology at or soon after sentencing, and ensure the Clerk has the necessary parameters to implement it. The chosen method need not be perfect—only fair and consistent with the judgments and the MVRA’s no-overcompensation rule.
Do not default to Sheets absent compatible judgment language. If a defendant’s judgment is tied to a discrete subset of loss, you may not condition satisfaction on personal payment or on payment of the entire scheme-wide loss unless the judgment itself is framed in those scheme-wide terms.

For clerks and court administrators

Transparency matters. If using software or a “bucket” model, maintain documentation that explains how buckets are created, how defendants are assigned, and how payments are allocated, including examples that trace specific payments through the system.
Be prepared for judicial override. The court may approve, modify, or reject Clerk allocation formulas if they produce unfair or inconsistent outcomes.

For prosecutors

Build a clear restitution record. When recommending hybrid structures, explain the overlap among defendants and identify the joint and individual components. Where civil settlements, forfeiture, or equitable remedies are likely, anticipate how those recoveries will be credited (or not) under § 3664(j)(2).
Accounting obligations. When ordered, produce comprehensive, comprehensible accountings that identify sources, amounts collected, allocation decisions, and remaining balances. This reduces litigation over methodology and supports appellate review.

For defense counsel

At sentencing, seek clarity on hybrid contours. Request identification of shared loss segments, separate loss segments, and the intended crediting approach. Propose a fair method that prevents overpayment and recognizes your client’s relative culpability and financial circumstances.
On post-judgment credits, focus on amounts actually recovered by the victim. Challenges premised on the government’s failure to collect are unlikely to succeed; concentrate on tracing actual receipts and allocation fairness.
Observe service rules for discovery and enforcement. Subpoenas and motions to enforce must be properly served, or they will fail procedurally regardless of merits.

Complex Concepts Simplified

Joint-and-several liability. Each defendant is liable for the entire shared loss, but the victim cannot recover more than that loss in total. Payment by any one defendant reduces the joint balance for all.
Apportionment. The court fixes individualized amounts based on contribution to loss and economic circumstances; each defendant’s obligation is separate from co-defendants’ payments.
Hybrid restitution. A mix: some loss segments are joint and several among a subset of defendants; other segments are allocated to specific defendants alone.
Crediting method. The way incoming payments are applied across joint and separate segments—e.g., prioritize separate shares first, or joint shares first, or allocate proportionally. There is no universal formula; judges choose a fair method.
“Loss” for no-overcompensation. The operative “loss” is the loss the judgment makes a given defendant responsible for. If the judgment targets a subset (e.g., 52 bills totaling $253,196), satisfaction is measured against that subset, not necessarily the whole scheme, unless the judgment adopts a scheme-wide measure.
Forfeiture vs. restitution. Forfeiture is punitive; restitution is compensatory. Forfeiture proceeds reduce restitution only when actually paid to the victim. Payments to qui tam relators from forfeiture do not reduce the victim’s restitution balance.
Burden of proof on credits. The government must prove loss; after producing an accounting of collected amounts, the defendant challenging credits bears the burden to show additional collected funds not accounted for.

Conclusion

United States v. Shvets is a precedential recalibration of restitution administration in the Third Circuit. It confirms that the MVRA authorizes hybrid restitution orders and assigns district courts a central role in selecting fair crediting methods consistent with judgment language and the MVRA’s core principles. The decision rejects a reflexive, scheme-wide “Sheets rule” where a defendant’s judgment is tied to a defined, narrower loss and underscores that credits follow actual recoveries, not hypotheticals or non-victim disbursements like relator payments from forfeiture.

On remand, the district court must take a hard look at the Clerk’s “bucket” system, ensure transparency, and either ratify it as fair and appropriate or choose an alternative method. Going forward, sentencing courts, clerks, and litigants should expect greater emphasis on clarity at sentencing and on documented, reviewable allocation practices in multi-defendant cases. The result will be fairer, more predictable restitution outcomes that better serve victims, courts, and defendants alike.