Ex-CEO’s 7-day sentence tossed

A federal appeals court on Friday overturned the seven-day jail sentence of Michael Peppel, former chief executive of a failed local company, MCSi Inc., saying the sentence was too short.

The U.S. Court of Appeals for the Sixth Circuit ruled that Peppel should be resentenced for his role in a stock price manipulation scheme. While the court vacated the seven-day sentence, it affirmed the part of the sentence that calculated the amount of loss and number of victims tied to Peppel’s crimes.

“We conclude that the district court imposed a substantively unreasonable sentence of merely seven days, and we thus vacate Peppel’s sentence and remand for resentencing consistent with this opinion,” the three-judge panel wrote in the opinion.

U.S. Attorney Carter Stewart said, “We argued that the court’s sentence, which was well under the sentencing guidelines of 97 to 121 months, did not reflect the seriousness of the crime or create any measure of deterrence.

“The court accepted every one of our arguments that a seven-day sentence was unreasonably low for a crime that caused hundreds of shareholders to lose a total of $18 million,” Stewart added.

Asked if Peppel could return to prison, Fred Alverson, a spokesman for the U.S. attorney’s office in Southern Ohio, said, “That would certainly be one possible outcome.”

U.S. District Judge Sandra Beckwith, who orignially sentenced Peppel, will handle the re-sentencing in federal court in Cincinnati, Alverson said. No date had been set for resentencing as of Friday.

Thomas Hagel, a University of Dayton School of Law professor, said the case is unusual in that the prosecutors first appealed Beckwith’s original sentence, and the appeals court then agreed with the prosecutors’ arguments. No trial judge wants to be told that a sentence is wrong, he said.

MCSi was a Dayton-based computer company that filed for bankruptcy in 2003. Prosecutors said Peppel conspired with the company’s chief financial officer to falsify company accounting and financial statements in order to conceal the company’s true earnings from shareholders while at the same time laundering proceeds from the sale of his own shares of stock.

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.

Beckwith handed down the first sentence against Peppel in October 2011. The sentence included three years of supervised release and a $5 million fine. He agreed to never again work as a CEO or chief financial officer, to disclose his conviction to all prospective employers and to perform 30 hours of community service each year during his probation.

At the time, Beckwith said she was impressed with the 113 letters of support for Peppel offered by his friends and relatives. She acknowledged that the sentence was a “huge” departure from sentencing guidelines, but she said she did not believe Peppel was likely to repeat his crimes and that he did not present a threat to the public.

Said Stewart in Friday’s announcement, “We will now prepare to go before the court for a re-sentencing in this case.”

John Ellis, a 59-year-old Vandalia resident who worked for Peppel, estimated that Peppel’s actions cost him “a few thousand dollars.” But Ellis said those crimes hurt others far more, draining 401(K) accounts and upending retirement plans for too many of Peppel’s employees.

“In my wildest dreams, I didn’t think he’d get seven days,” Ellis said.

For the new sentencing, Ellis said he may try to start a letter-writing campaign by those who believe they are victims of Peppel’s crimes.

Joseph Geraghty, senior managing director with the Dayton office of crisis management and turnaround consultant Conway MacKenzie, Inc., said his firm helped liquidate MCSi in the company’s final days. His company also was retained by the U.S. Department of Justice to establish MCSi’s losses and damages.

“This is certainly good news given the massive losses that had occurred because of Mr. Peppel’s fraud,” Geraghty said.

Ralph Kohnen, a Cincinnati attorney who represented Peppel when he was sentenced, could not be reached for comment Friday.

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