Opinion ID: 2912069
Heading Depth: 3
Heading Rank: 1

Heading: Churn Proposes Two Projects.

Text: Defendant Keith Churn owned C&M Construction Management, a Tennessee construction company specializing in remodeling and rehabilitation, since the late 1990s. Around October 2006, Churn entered a business agreement with Dustin Rief, under which Rief would purchase real property at 2408 Clarksville Pike, Nashville, Tennessee, and Churn would install a modular—or prefabricated—house on the property. Churn would pay Rief rent during the six-to-eight months of construction and would purchase the property from him upon completion. For his efforts, Rief would receive $5,000 initially and an additional $5,000 after Churn’s purchase, for a total of $10,000. Rief financed the purchase and construction of the Clarksville Pike property with a $187,800 construction loan from BancorpSouth Bank (“BSB”). Under the terms of the loan agreement, a portion of the loan would be distributed upfront to purchase the property, and the remaining funds would be distributed in stages to pay for construction. BSB disbursed $66,758.19 for the purchase, leaving $121,041.81 for construction. The same year, Churn proposed a similar investment to Milton Thomas. Thomas agreed to obtain financing to purchase 956 Green Street, Franklin, Tennessee, and Churn agreed to demolish the existing house and install a modular home. The two would split any profits. To finance the project, Thomas received a $226,500 loan from BSB, $77,976.83 of which was distributed to fund the property purchase. No. 14-5720 United States v. Churn Page 3 BSB distributed the portion of the loan for construction in “draws.” For each draw, the bank would transfer money from the loan to Rief’s and Thomas’s checking accounts, which they could then use to pay contractors. Before approving a draw, the bank might send an inspector to the property, or it might review contractors’ receipts, to ensure that the claimed work was actually being performed. There were four draws made for the Clarksville Pike property: $25,000 on October 31, 2006; $15,000 on December 18, 2006; $30,000 on January 10, 2007, and $4,500 on January 12, 2007. On December 5, 2006, Churn submitted an invoice for $17,733 to BSB for permit fees, disconnecting old utilities, grading, and preparing footings and foundations. Based on the invoice, BSB approved a $15,000 draw on December 18. On December 22, 2006, Churn submitted a specification sheet and an invoice to BSB, which purportedly showed an order for a modular house from All American Homes of N.C., LLC (“AAH”). The invoice charged a down payment of $33,462, or approximately one-third of the total cost of the modular house. Two weeks later, Churn informed a BSB loan officer, Lisa Campsey, that the house would be set on February 8, 2007. Campsey later approved draws of $30,000 and $4,500. During this period, a site inspector for BSB submitted periodic reports to BSB indicating that demolition of the existing structure had occurred and the lot was cleared. There were four draws on the loan for the Green Street property: $20,000 on December 15, 2006; $8,000 on January 10, 2007; $12,000 on January 18, 2007; $22,000 on January 23, 2007; and $668.91 on February 1, 2007. On January 17, 2007, Churn submitted a specification sheet and an invoice to BSB, which purportedly showed an order for a modular house from AAH. Like the invoice for the Clarksville Pike property, the invoice charged a down payment of approximately one-third of the total cost of the modular house, or $33,638. Based on the invoice, BSB approved draws of $12,000 and $22,000.