## Facts

- Michael E. Peppel was President, CEO, and later Chairman of MCSi, Inc., a publicly traded communications-technology company.
- As MCSi’s financial condition worsened, Peppel and the CFO falsified accounting records and financial statements to conceal MCSi’s true earnings from shareholders.
- The misstatements inflated MCSi’s stock price and enabled Peppel to sell about 300,000 personal shares at an artificially high price.
- After public disclosure of an SEC investigation, MCSi’s stock price dropped, and shareholders incurred losses in the millions of dollars.
- Peppel pleaded guilty to conspiracy to commit securities, mail, and wire fraud; willful false certification of a financial report by a corporate officer; and money laundering.
- Using the 2002 Sentencing Guidelines, the district court calculated an advisory imprisonment range of 97–121 months, driven largely by loss amount and number-of-victims enhancements.
- After a lengthy sentencing hearing with extensive character testimony, the district court imposed seven days’ imprisonment, three years’ supervised release, and a $5 million fine.
- The government appealed the substantive reasonableness of the sentence; Peppel cross-appealed the loss-amount and number-of-victims findings used in the Guidelines calculation.

## Issues

1. Whether the district court abused its discretion under 18 U.S.C. § 3553(a) by imposing a seven-day custodial sentence—a dramatic downward variance from the 97–121 month advisory range—for a large-scale securities and accounting fraud.
2. Whether the district court erred in calculating the Guidelines loss amount and number of victims for enhancement purposes.

## Decision

- The Sixth Circuit vacated the sentence as substantively unreasonable and remanded for resentencing.
- The court held the district court abused its discretion by placing disproportionate weight on favorable character evidence and collateral consequences to justify an extreme downward variance.
- The court concluded the sentence failed to account adequately for the seriousness of the offense, the need for general deterrence, and the need to avoid unwarranted sentencing disparities.
- The Sixth Circuit affirmed the district court’s Guidelines calculations, rejecting Peppel’s challenges to the loss amount and number-of-victims enhancements.

## Legal Principles

- Sentencing courts must apply § 3553(a) in a balanced manner; undue reliance on a defendant’s favorable personal characteristics cannot justify an extreme variance in a serious fraud case.
- The Sentencing Guidelines remain the starting point and initial benchmark; the greater the variance from the advisory range, the stronger the justification required.
- In high-loss corporate fraud cases, sentencing must meaningfully reflect offense seriousness and general deterrence and must consider national sentencing uniformity.
- Loss and victim enhancements in securities-fraud cases may be supported by record evidence linking stock-price declines to disclosure of the fraud and by counting affected investors as victims.

## Conclusion

The Sixth Circuit set aside a seven-day custodial sentence for a CEO’s multi-million-dollar accounting and securities fraud as substantively unreasonable because the district court overemphasized character and collateral consequences and undervalued seriousness, deterrence, and disparity concerns, while leaving intact the district court’s loss and victim Guidelines findings for resentencing.


United States v. Peppel, 707 F.3d 627 (6th Cir. 2013)