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6th Cir. Upholds 1-Day Sentence for White Collar Criminal

By Casey C. Sullivan, Esq. | Last updated on

For his role in a tire recycling scheme gone bad, Paul Musgrave was convicted of four counts of white collar crime. His punishment? Essentially no punishment at all. Despite a sentencing guideline range of 57 to 71 months' imprisonment, the district court ordered Musgrave to serve a day in jail, with a day's credit for processing. Musgrave's total punishment was hardly even a slap on the wrist, requiring just three years of probation -- there was no jail time, no fine.

The Sixth Circuit rejected that one-day sentence two years ago. When the district court resentenced Musgrave, it again gave him just a one-day sentence, but this time, the Sixth Circuit allowed the sentence to stand. What caused the change of heart?

Another Tire Recycling Scheme Gone Bad

Before we get too deep into Musgrave's sentencing, let's first look at his crimes. Musgrave entered into a plan to build a tire recycling plant in Ohio with Raymond Goldberg, an Australian business man. Unbeknownst to Musgrave, Goldberg had failed at tire recycling before -- nine times before. (A little bit of research could have tipped him off.) The two obtained an Small Business Administration loan, falsified some papers, and soon saw their venture become Goldberg's tenth failure. In total, the SBA lost $1.7 million.

When the government came knocking, Goldberg copped a plea. He got probation and a ticket out of the country. Musgrave, however, was given no such deal. He was convicted of four counts, despite being arguably much less culpable for the failed scheme. (Indeed, it was Musgrave who originally contacted the FBI, the SBA, and Australian authorities over the business's financial misdealings.)

Second Time's a Charm

At sentencing, Musgrave faced up to 71 months' imprisonment. But the court was sympathetic. Musgrave was given a downward variance that removed any imprisonment and left him with no fines to pay.

The government appealed that sentence to the Sixth Circuit who vacated it as substantially unreasonable and failing to have any deterrence effect on other white collar criminals. But on remand, the court once again gave Musgrave only a one-day sentence. Once again the government appealed, but this time around the Sixth Circuit found that one day was enough.

What changed? Though the punishment the second time around required no imprisonment, it was significantly harsher. In addition to imposing a $250,000 fine, Musgrave was give 24 months of home confinement and five years of supervised release.

While the first sentence relied on impermissible considerations, like the damage Musgrave had already taken to his business and reputation, none of that was present the second time. The Sixth rejected government claims that the district court had impermissibly considered Musgrave's social status. While the court had determined that Musgrave should be "sentenced in such a way as to facilitate payment of restitution," allowing him to work rather than imprisoning him, that was not an impermissible consideration, the Sixth ruled.

Similarly, the district court sufficiently explained the deterrent effect of Musgrave's new sentence. "Musgrave is punished significantly in order to send the adequate general deterrence message," the district court wrote, "because he ends up with two years of home incarceration, a quarter-of-a-million-dollar fine, his liberty extraordinarily restrained." That, the Sixth concluded, was adequate general deterrence, even if the punishment included no jail time.

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