Court Opinion

ID: 2981685
Source: CourtListenerOpinion
Date Created: 2015-09-22 19:46:22.049636+00
Date Added: 2024-06-11T11:44:25.544628
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 13a0270n.06

                                       No. 12-5810                               FILED
                                                                              Mar 15, 2013
                            UNITED STATES COURT OF APPEALS              DEBORAH S. HUNT, Clerk
                                 FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA,                    )
                                             )
       Plaintiff-Appellee,                   )
                                             )
v.                                           )   ON APPEAL FROM THE UNITED
                                             )   STATES DISTRICT COURT FOR THE
STEPHEN L. SIMS,                             )   WESTERN DISTRICT OF TENNESSEE
                                             )
       Defendant-Appellant.                  )

       Before: DAUGHTREY, ROGERS, and McKEAGUE, Circuit Judges.

       MARTHA CRAIG DAUGHTREY, Circuit Judge. Defendant Stephen Sims pleaded

guilty to three counts of bank fraud. The district court then sentenced Sims to 87 months

in prison and three years on supervised release, and ordered payment of $2,424,000 in

restitution to the Federal Deposit Insurance Corporation (FDIC). On appeal, the defendant

contests the calculation of his Guidelines offense level and challenges the district court’s

determination of the amount of restitution due. We find no reversible error and affirm the

judgment in its entirety.

       From 2004 into 2008, Sims convinced various individuals to apply for loans in their

own names through Oakland Deposit Bank in rural West Tennessee. Rather than allowing

those individuals to keep the loan proceeds, however, Sims would refund only ten percent
No. 12-5810
United States v. Sims

of the funds to the borrower and take possession of the remaining money, ostensibly to

purchase or develop real property. The defendant informed the borrowers that the money

kept by him actually was an investment that would pay off for the “investors” upon the sale

of the developed realty. In reality, the “investments” never generated a profit, and Sims

was forced to pay money back to the “investors” in order to satisfy their loan obligations.

Because Sims was not generating income from the properties he purchased, in order to

raise the revenue necessary to make the payments on the numerous loans he had

orchestrated, he was required to identify yet other individuals he could convince to obtain

loans from the Oakland bank. Sims would then use his 90-percent share of those loan

proceeds to pay the indebtedness to the earlier borrowers. Not surprisingly, the “borrow-

from-Peter-to-reimburse-Paul” scenario could not be maintained, given the dwindling

number of potential “investors” in the small Oakland community. Consequently, Sims

began taking out additional loans in the names of previous investors, all without the

knowledge or acquiescence of those individuals.

       This loan-lapping-scheme-gone-awry was explained in another way at Sims’s

sentencing hearing by Trent Watrous, a certified public accountant and fraud examiner

who investigated the improprieties at the Oakland Deposit Bank. Using a specific example,

Watrous stated:

       One transaction in particular that comes to mind is where moneys were
       drawn on three different borrowers, a Pernita Taylor, a Watson, and another
       party, and it all went to a Roy Ewing. Well, when you go back and look at the
       files, the three loans never had documentation that their loans could be

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No. 12-5810
United States v. Sims

        taken out in their name and the proceeds of those loans applied to Mr. Roy
        Ewing, nor in the Roy Ewing file was there documentation saying you can
        draw upon these other notes. So how funds were flowing from one point to
        the next when there was no connection between the parties is very
        interesting. So you had three $11,376 checks prepared, drawn on those
        loans, flowing to pay off four loans of an unrelated borrower.

        Catherine Walker, an agent with the Federal Bureau of Investigation, also testified

at the sentencing hearing and recounted that Sims admitted to forging documentation on

44 such unsecured loans in order to obtain a total of $488,250. Additionally, Agent Walker

explained that Sims also helped a number of individuals obtain construction loans from the

bank in amounts totaling $809,700. Although the proceeds of those loans were to be used

to construct or rehabilitate homes in the Memphis area, Walker saw no evidence of any

construction that took place in either 2007 or 2008, when a majority of the loans were

finalized.

        Indeed, other testimony indicated that much of the loan money obtained by Sims

was converted to the defendant’s own use. For example, Sims confessed to Watrous “that

approximately two to 300,000 had been spent on [Krystyle,] the rapper he was sponsoring1,

[and] three to 400,000 was related to his personal and business expenses,” including

$220,934 for tuition for his sons at a Montessori school.

        1
          According to the presentence report prepared by the United States Probation Office, “that m oney was
paid for studio tim e, prom otional item s, t-shirts, and other item s, as well as hosting larger concerts” for the
young rapper, but “the investm ent was lost” “due to Krystyle’s voice changing.” Other inform ation in the
presentence report suggests that Sim s drastically underestim ated to W atrous the cash outlay for Krystyle’s
prom otion. W hen speaking with the probation officer, Sim s “estim ated that he gave [the rapper’s] father
$300,000 to $400,000 over a three-year period” and “spent approxim ately $450,000 to $500,000” on three
large concerts.

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United States v. Sims

       Dana English, a field supervisor with the FDIC, testified that he examined the

records of the Oakland Deposit Bank and calculated that the bank’s “total losses related

to Mr. Sims was $2,279,000,” an amount that equaled “the bank’s last three full years of

earnings at that point in time.” Watrous estimated, however, that the bank’s losses were

$2,424,000, the slightly greater figure constituting “the amount of principal [that was]

outstanding on those loans and was written off by the bank as unrecoverable.”

       Needless to say, losses of either amount of money were devastating to the rural

bank, causing it to become insolvent. According to the FDIC field supervisor, “[t]he losses

for Mr. Sims alone would have materially affected the bank’s capital ratio,” lowering that

figure from a “satisfactory” 7.21 percent to 5.52 percent. English further testified that the

losses that precipitated that drastic drop in the capital ratio “substantially jeopardize[d] the

safety and soundness of Oakland Deposit Bank.”

       Presented with this testimony, the district judge found that the bank’s loss was

greater than $1,000,000 but less than $2,500,000. See USSG § 2B1.1(b)(1)(I) (2011).

The court further concluded that the offense involved more than ten victims, see USSG

§ 2B1.1(b)(2)(A)(i) (2011), that Sims had used the identification of other individuals without

their permission to perpetrate the crime, see USSG § 2B1.1(b)(11)(C)(i) (2011), and that

the crime “substantially jeopardized the safety and soundness of a financial institution, see

USSG § B1.1(b)(15)(B)(i) (2011).         As a result, with the concomitant offense-level

increases, and in light of a granted three-level downward adjustment for acceptance of

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No. 12-5810
United States v. Sims

responsibility, the district court sentenced Sims as a criminal-history-category I, level-28

offender to a prison term of 87 months, a sentence within the applicable Guidelines range

of 78-97 months. Based upon the testimony of Michael Tregle, an attorney with the FDIC,

the district court also ordered restitution to the FDIC in the amount of $2,424,000, the

amount that the FDIC considered due and owing to it as the receiver of Oakland Deposit

Bank’s successor-in-interest.

       On appeal, Sims first challenges the loss-amount figure calculated by the district

court to establish the appropriate offense level and applicable Guidelines sentencing

range. The district court determined the loss to the bank to be the $2,279,000 loan-

principal amount attributable to Sims’s machinations that the Oakland Deposit Bank was

forced to write off as unrecoverable, but “allowing for credits, offsets, payments,

realizations on collateral, whatever is there.” The defendant contends, however, that the

loss figure should be limited to only the $488,250 that Sims admits he obtained without the

knowledge or acquiescence of the individuals whose names and other information were

used on the loan applications.

       We review a district court’s sentencing determination for reasonableness under a

deferential abuse-of-discretion standard. United States v. Erpenbeck, 532 F.3d 423, 430

(6th Cir. 2008) (citing Gall v. United States, 552 U.S. 38, 51 (2007)). That review has both

procedural and substantive components, the procedural aspect of which requires that we

ensure that the sentencing court did not improperly calculate “the Guidelines range, treat[]

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No. 12-5810
United States v. Sims

the Guidelines as mandatory, fail[] to consider the [18 U.S.C.] § 3553(a) factors, select[]

a sentence based on clearly erroneous facts, or fail[] to adequately explain the chosen

sentence . . . .” Gall, 552 U.S. at 51.

       This first of Sims’s challenges to his sentence alleges only procedural error – the

improper calculation of a Guidelines range based upon the amount of loss suffered by the

bank. He admits being responsible for $488,250 worth of loss, but insists that he cannot

be held responsible for a loss between $1,000,000 and $2,500,000, as found by the district

court. Although the defendant’s malfeasance in forging loan applications in order to obtain

$488,250 in loan proceeds is readily apparent, the fact is uncontroverted that Sims also

procured construction loan proceeds in an amount over $800,000 and did not apply those

funds to the uses for which they were provided. Instead, he appropriated the money for

personal expenses and for business ventures totally separate from any plan to construct

homes or rehabilitate residential property. The fraudulent procurement of those funds thus

was properly considered in establishing Sims’s Guidelines sentencing range.

       The district court was justified in relying upon a loss figure of $2,279,000. Dana

English, the FDIC field supervisor, testified that the agency’s examinations of the Oakland

Deposit Bank’s records indicated that $2,279,000 of the bank’s losses were attributable to

Sims’s actions. In light of that evidence, the district court did not abuse its discretion in

adopting that figure and rejecting Sims’s argument that he caused only $488,250 worth of

damage to the financial institution.

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No. 12-5810
United States v. Sims

       Our conclusion on this first appellate issue preordains our resolution of the

defendant’s second allegation of error as well. Sims maintains before this court that the

district court should not have applied a four-level increase to his offense level for

“substantially jeopardiz[ing] the safety and soundness of a financial institution. See USSG

§ 2B1.1(b)(15)(B)(i) (2011). According to the defendant’s argument, if he was responsible

for a loss of only $488,250, that relatively small shortfall could not have caused the

insolvency of the Oakland Deposit Bank. As we have held, however, the district court did

not abuse its discretion in finding Sims responsible for a bank loss of over two million

dollars, a loss that constituted 20 percent of all money lost by the bank, and an amount

equal to the total earnings of the bank in the three years prior to the loss. This issue is

patently without merit.

       In a final issue, Sims disputes the $2,424,000 restitution amount included in the

district court’s judgment. The defendant’s challenge to that figure fails, however, for two

reasons. First, competent evidence before the district court established that “when this

scheme ended,” “the amount of principal [that was] outstanding on those loans and was

written off by the bank as unrecoverable” amounted to “$2.424 million.”

       Second, defendant’s counsel herself conceded that the government’s assessment

of the amount of restitution due and owing was correct. At the close of the testimony at the

sentencing hearing, the district judge, assistant United States attorney Lawrence Laurenzi,

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United States v. Sims

and defense attorney Doris Randle-Holt engaged in the following exchange regarding the

testimony of FDIC attorney Tregle:

       THE COURT: Anything you want to say about the testimony, Mr. Laurenzi?
       MR. LAURENZI: Your Honor, I think that the agreement of course was
       entered into as Mr. Tregle testified about clearly places any restitution to go
       to the FDIC. The FDIC has now stated what they consider that amount to
       be, and that should be the amount that is ordered by the court.
       THE COURT: All right. Ms. Holt?
       MS. HOLT: I submit it to the court, Your Honor.
       THE COURT: Do you have any reason to dispute that the FDIC is the
       appropriate recipient of the restitution?
       MS. HOLT: I have no reason to dispute it.
       THE COURT: What about the amount, do you have any issue with the
       amount of restitution?
       MS. HOLT: I believe that[ ] the amount we agreed on yesterday was 2.4
       million.

       Thus, if there was any error in the calculation of the restitution amount, it is clear that

Sims acquiesced to the figure offered by the government’s witness. “[W]hen a party has

himself provoked the court to commit an error, that party may not complain of the error on

appeal unless that error would result in manifest injustice.” United States v. Demmler, 655
F.3d 451, 458 (6th Cir.), cert. denied, 132 S. Ct. 794 (2011).

       As discussed previously, the restitution figure offered during the testimony of the

FDIC lawyer had its basis in uncontroverted fact. The district court’s reliance upon that

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United States v. Sims

information was not error and clearly did not result in a manifest injustice. This issue,

therefore, is also without merit.

       For the reasons set out above, we conclude that the appellate record in this matter

reveals no reversible error. Consequently, we AFFIRM the judgment of the district court.

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