By Jonathan Stempel
Feb 15 (Reuters) - A former chief executive who pleaded
guilty to wrongdoing in a scheme that ultimately helped drive
his company into bankruptcy could have been sent to prison for
10 years. The trial judge thought seven days was fair.
Not long enough, a federal appeals court said on Friday.
The 6th U.S. Circuit Court of Appeals said Michael Peppel,
the former chief executive of the audio-visual technology
company MCSi Inc, must be resentenced for his 2010 guilty plea
to charges of conspiracy to commit fraud, false certification of
a financial report, and money laundering.
U.S. District Judge Sandra Beckwith in Cincinnati abused her
discretion in sentencing Peppel to an "unreasonably low" week
behind bars based almost solely on her belief that the defendant
was "a remarkably good man," the appeals court said.
Prosecutors had charged Peppel in December 2006 over an
alleged fraud they said had begun six years earlier, amid
financial difficulties at his publicly traded, Dayton,
Peppel was accused of working with his chief financial
officer to inflate results through sham transactions with a firm
called Mercatum Ltd, and companies such as FedEx Corp
that were not implicated in wrongdoing. Prosecutors said he also
sold $6.8 million of MCSi stock during this time.
By the end of 2003, MSCI was bankrupt, and a reported 1,300
people had lost their jobs.
Citing the need to punish Peppel and deter others, the
government asked Beckwith at his October 2011 sentencing to
impose a 97- to 121-month prison term. This was the length
recommended, but not required, under federal guidelines.
But the judge said the five years since the indictment had
been "punishing, literally and figuratively" for Peppel, who had
begun working for an online pharmacy to support his five
children. He also had a brother with multiple sclerosis.
"Michael's mistakes do not define him," Beckwith said. "I
see it to be wasteful for the government to spend taxpayers'
money to incarcerate someone that has the ability to create so
much for this country and economy."
She also imposed a $5 million fine and the maximum three
years of supervised release.
Circuit Judge Karen Nelson Moore, however, wrote for a
unanimous three-judge appeals court panel that Beckwith was
wrong to rely on "unremarkable aspects" of Peppel's life in
imposing a "99.9975% reduction" to the recommended prison term.
"There is nothing to indicate that the support provided by
Peppel to his family, friends, business associates, and
community is in any way unique or more substantial than any
other defendant who faces a custodial sentence," Moore wrote.
Beckwith was not immediately available for comment.
Ralph Kohnen, a lawyer for Peppel, on Friday said: "We
expect that the judge will exercise the same common sense and
fairness in imposing a similar sentence on remand."
U.S. Attorney Carter Stewart in a statement said he will
seek a longer sentence, and that seven days "did not reflect the
seriousness of the crime or create any measure of deterrence."
In November 2011, Beckwith sentenced MCSi's former CFO to
one day in prison, plus three years supervised release and a
$12,500 fine, court records show.
The case is U.S. v. Peppel, 6th U.S. Circuit Court of
Appeals, No. 11-4327.
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