Nation - Montana 9th Circuit upholds probationary sentence

HELENA, Mont. (AP) -- An appeals court for the third time has upheld a probationary sentence given to a man who pleaded guilty to bankruptcy fraud in 2004, despite arguments from federal prosecutors and a dissenting judge that it wasn't adequate punishment. A three member panel of the 9th U.S. Circuit Court of Appeals upheld a federal judge's sentence of five years of probation, with seven months of house arrest, and $102,700 in restitution in the case of Duncan W. Edwards. Edwards had been convicted of theft in 1991 for making false statements to Arizona banks when applying for loans. An Arizona state court put him on probation through July 2000 and ordered him to pay more than $3 million in restitution to the FDIC. Edwards moved to Montana and in early 1998 applied for a loan indicating he had significant assets, but did not disclose his debt to the FDIC. Edwards filed for bankruptcy in December 1998 without disclosing his obligation to the FDIC and other assets worth $42,000. He also did not initially list stock options that he valued at $189,000 on his loan application, but later said had no value in court filings. During the bankruptcy proceedings, Edwards exercised the bulk of his stock options, receiving net proceeds of $445,000. The bankruptcy trustee was able to recover approximately $417,000, court records said. In December 2000, a judge approved Edwards' bankruptcy and distributed his assets to his creditors, who released their claims against him. Edwards was indicted in December 2003 and five months later pleaded guilty to bankruptcy fraud and making a false statement to a bank. U.S. District Judge Donald Molloy gave Edwards concurrent sentences of five years of probation, with seven months to be served under house arrest, and a $5,000 fine on each conviction. The government appealed and while the case was pending before the 9th Circuit, the U.S. Supreme Court made a ruling that emphasized that federal sentencing guidelines were advisory. The appeals court sent the case back to Molloy, who in February 2006 issued a short order saying the Supreme Court ruling would not have changed the sentence he gave Edwards. The government again challenged the reasonableness of the sentence because federal guidelines had suggested a prison sentence between 27 and 33 months. The 9th Circuit returned the case to Molloy seeking an explanation for his decision. Molloy said he believed Edwards was a changed man and that the sentencing range had been calculated based on the loss intended by Edwards, not on the actual loss. However, Molloy added restitution. Both sides appealed. Edwards said his creditors agreed to the compensation they received in the bankruptcy decision and he should not be ordered to pay any further restitution. The 9th Circuit, in a 2-1 decision issued Tuesday, accepted Molloy's explanation for the probationary sentence and upheld the restitution requirement. The appeals court also noted a Supreme Court precedent holding that criminal restitution is ordered "as a means of achieving penal objectives such as deterrence, rehabilitation or retribution." Published: Wed, Feb 24, 2010

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