Article

Prior History: United States v. Musgrave, No. 3:11-cr-183-1, 2013 WL 2244346 (S.D. Ohio May 21, 2013) [USA], noted in 2014

Summary: Paul Musgrave (Fraudster/Applicant) entered a business venture with Raymond Goldberg (Co-conspirator/Beneficiary) to start a tire recycling plant in Dayton, Ohio. Fraudster/Applicant and Goldberg made arrangements to keep Co-conspirator/ Beneficiary's name out of most of the business because Co-conspirator/Beneficiary had previously failed in operating a tire recycling company. Co-conspirator/ Beneficiary was to provide the equipment needed for USD 2,300,000 with USD 300,000 supposedly coming from Fraudster/Applicant's personal funds and USD 350,000 from a price discount from Coconspirator/ Beneficiary. The remaining funds, USD 1,700,000 would come from a loan from Mutual Federal Savings Bank (Issuer) in the form of a commercial LC to obtain the remaining materials to start the tire recycling company.

When Fraudster/Applicant applied for the LC, he specified that "partial shipments not allowed." When the goods arrived, a tire shredder was missing, but Co-conspirator/Beneficiary had falsified the shipping documents to show that the shredder had been included. Issuer honored the presentation, but Co-conspirator/Beneficiary had over-drafted other accounts because of previous business ventures. Because of the overdraft, half the money of the LC was applied to cover the overdraft, leaving insufficient money to pay the tire recycling company's bill, as a result, Fraudster/Applicant's tire recycling company failed and the loan was unpaid. The government then began to investigate the venture and charged both Coconspirator/ Beneficiary and Fraudster/Applicant with bank fraud, wire fraud, conspiracy, and providing false statements. All charges resulted from actions when they applied for the LC.

The U.S. made a deal with Co-conspirator/ Beneficiary who testified that it was Fraudster/ Applicant's idea to leave Co-conspirator/Beneficiary's name off the loan applications and falsify the shipping paperwork. Based on this testimony, the jury convicted Fraudster/Applicant of four counts of fraud. In sentencing, the U.S. District Court for the Southern District of Ohio, Black, J., sentenced Fraudster/ Applicant to 1 day in prison with credit for the day of processing, 3 years probation, and USD 1,700,000 in restitution. The Judge stated, "[Fraudster/ Applicant] had no criminal history and that he had 'decades of service to the community and a family'". The Judge also noted that Fraudster/Applicant had admitted to going "though four years of hell" and had already "incurred substantial legal fees." The Judge also considered Fraudster/Applicant's loss of a CPA license, felony record, and restitution order as mitigating factors regarding jail sentence.

On appeal to the U.S. Court of Appeals for the Sixth Circuit, Julia Smith Gibbons, J., reversed the district court on sentencing because the district court considered impermissible factors in determining sentence and was substantively unreasonable, and ordered that Fraudster/Applicant be re-sentenced.

[JAH/jbb]

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