Peppel avoided a trial by pleading guilty in August 2010 to conspiracy to commit securities fraud, willful false certification of a financial report and money laundering. He may never again work as a CEO or chief financial officer, must disclose his conviction to all prospective employers and is expected to perform 30 hours of community service each year during his probation.
Beckwith, in issuing her sentence, noted that Peppel’s family, friends and allies wrote 113 letters of support for the former executive. Kethledge contrasted that with what he called a “two-page memorandum” from prosecutors.
“It’s very frustrating to have the government respond in that posture,” the judge told Christopher Barnes, an assistant U.S. attorney who argued Wedensday that the seven-day sentence didn’t adequately reflect Peppel’s crimes.
“Just because he’s a family man, just because he’s been a philanthropist — at least in regard to his alma mater — is not sufficient” to sentence Peppel to just one week behind bars, Barnes told the panel.
But later in the hearing, Kethledge seemed to return to the amount of material prosecutors gave Beckwith. “They could have made a much stronger argument, no doubt about it,” the judge said.
Responded Barnes, “I agree that the government could have done more.” But he also contended that prosecutors made their case and argued that Beckwith went too far afield of original sentencing guidelines that called for a prison sentence of eight to 10 years. That was the term for which prosecutors first argued in 2011 and which Beckwith first concluded was an appropriate range.
Most chief executives have families and philanthropic records and most don’t have felony records, Barnes added, saying there was “no exceptional basis for giving him (Peppel) credit for these things.”
“There’s no reasonable link that gets you from the (sentencing) guidelines range down to seven days,” Barnes said.
As prosecutors argued last year, Barnes on Wednesday again said that Peppel derived $6.5 million in proceeds from a stocks sale as he created a “false pretense” that MCSi, an audio-visual services company, was doing better than it was. When the company filed for bankruptcy protection in 2003, 1,300 MCSi employees and at least 281 investors were left without jobs or retirement income.
At one point, Peppel sold 300,000 of his company’s shares, Barnes said.
When it became clear that the company was not generating “substantial revenue and profits,” the company’s stock fell nearly $7 in value in one day, Barnes noted.
Ira Stanley, MCSi’s former chief financial officer, received a similar sentence. But Barnes argued that Stanley did not benefit from his “main fraud” as Peppel did.
Cincinnati attorney John Nalbandian, arguing for the validity of the sentence, said there were numerous delays in the case from the December 2006 indictment onward, but he argued that the delay was caused by the government.
It wasn’t clear when the judges would rule, but at the end of oral arguments, Kethledge praised both sides for being well prepared.
Prosecutors say the judges have a number of options, but one would be to remand the case back to Beckwith, who could order a new sentencing hearing.
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