United States v. Michael Peppel
2013 U.S. App. LEXIS 3214
6th Cir.2013Background
- Peppel, former President/CEO/Chairman of MCSi, conspired with CFO Stanley to falsify MCSi’s accounting records and misstate earnings.
- Peppel sold 300,000 shares during the unlawful period, generating about $6.86 million; proceeds were laundered to personal accounts.
- Falsified revenue involved a Mercatum transaction, plus sham deals with FedEx, Skytron, and ClearOne; reported as bill-and-hold revenue in 2001.
- In 2003 SEC investigation and class actions were filed; MCSi delisted and Peppel faced SEC bars; substantive charges included conspiracy, false certification, and money laundering.
- Sentencing guidelines advised 97–121 months; district court imposed a seven-day custodial sentence plus supervised release and a $5 million fine.
- The government appealed substantive reasonableness; Peppel cross-appealed on the amount-of-loss and number-of-victims calculations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the seven-day sentence substantively reasonable under §3553(a)? | Government argues the sentence is too lenient, fails to reflect seriousness, deterrence, and national disparities; Peppel argues totality supports leniency. | Peppel contends total sentence (including non-custodial components) reflects seriousness; district court did not err in factors weighting. | Seven-day sentence was substantively unreasonable; abuse of discretion; remand for resentencing. |
| Was the amount-of-loss calculation properly supported under §2B1.1(b)(1)(K)? | Loss must be causally linked to conduct; multiple loss theories were argued; district court reasonably selected loss proxy. | Loss causation and public disclosure details insufficiently connected to Peppel’s conduct; overstated. | District court’s loss determination upheld; not clearly erroneous. |
| Was the number-of-victims calculation correct under §2B1.1(b)(2)(B)? | All shareholders holding stock during the window suffered loss due to Peppel’s conduct. | Only post-issuance buyers (39 individuals) were victims. | All shareholders between January 15 and February 14, 2003 were victims; calculation affirmed. |
| Did the district court abuse discretion by placing excessive weight on Peppel’s history and characteristics? | Court properly considered supportive evidence and professional contributions; but weight was appropriate within discretion. | Past charitable acts and professional status should not justify large downward variance. | Abuse of discretion; district court erred by overemphasizing history/characteristics and improper factors. |
Key Cases Cited
- United States v. Vonner, 516 F.3d 382 ((6th Cir. 2008)) (reasonableness is appellate standard; no duty to object at sentencing)
- United States v. Freeman, 640 F.3d 180 ((6th Cir. 2011)) (substantive-reasonableness claims need not be raised to preserve on appeal)
- United States v. Massey, 663 F.3d 852 ((6th Cir. 2011)) (abuse-of-discretion standard for sentencing; preservation noted)
- United States v. Haj-Hamed, 549 F.3d 1020 ((6th Cir. 2008)) (guidelines factors; extent of variance requires stronger justification)
- United States v. Christman, 607 F.3d 1110 ((6th Cir. 2010)) (rejects use of defendant’s professional status as sole sentencing factor)
- United States v. Davis, 537 F.3d 611 ((6th Cir. 2008)) (seriousness of offense; need for explanation of how sentence reflects seriousness)