Bad Apple Brokers and Bankers Should Train for the Boxing Ring

by David Cosgrove

Mark May was the sole director and president of Maranatha Financial Group, a financial advisory firm in Dayton, Ohio. In 1996, May closed Maranatha and opened USA Financial, another fee-based financial planning firm with the same employees and written materials utilized by Maranatha.

In 2002, a federal grand jury returned an indictment charging May with two counts of willfully evading his personal income tax liability and four counts of willfully failing to account for and pay over payroll taxes. A jury convicted May of all six counts in 2003. May was sentenced in the United States District Court for the Southern District of Ohio to 66 months imprisonment. He was also ordered to pay over $700,000 in restitution. Finally, as a special condition of his post-incarceration supervised release, the District Court ordered May “to refrain from having any association ‘with the financial services industry, in any capacity whatsoever, except as a consumer.’ This special condition was one of three alleged errors set forth by May in his post-hearing motion to reopen the judgment. The United States Court of Appeals for the Sixth Circuit heard oral argument on this issue on January 20, 2009.

The Court of Appeals issued its Opinion rejecting May’s challenge to the District Court’s prohibition in July of 2009, stating in part:

“We have held that ‘[e]ven individual fundamental rights safeguarded by the United States Constitution may be denied or limited by judicially exacted special conditions of supervised release, as long as those restrictions are directly related to advancing the individual’s rehabilitation’ and preventing recidivism. United States v. Kingsley, 241 F.3d 828, 839 n. 15 (6th Cir. 2001) (internal quotes and citations omitted). May used his position as head of a financial services company to embezzle money meant for his employees’ payroll taxes. Thus, the district court would be understandably concerned about May’s working in the financial services industry again when he had already demonstrated that he could not be trusted with other people’s money. Cf. United States v. Hughes, 964 F.2d 536, 542 (6th Cir. 1992) (upholding condition that prevented convicted union official from exercising “any decision-making authority” over any account that “receives any of its funds from a labor organization” for political activity). While May may be correct that he is not able to work as a janitor at Goldman Sachs under the terms of the district court’s order, he may still work as a janitor at Google, Burger King, or any other company that does not give financial advice.” U.S. v. May, 568 F.3d 597 (U.S. App 6th, 2009)

Should May not want to garner a position as a janitor at Google or Burger King, he may consider taking up boxing. Last week, in United States v. Stepp, 2012 WL 17282826 (C.A. 6 (Tenn)) the Court of Appeals for the 6th Circuit reversed a District Court judge that imposed a special condition requiring the defendant to “seek and maintain a full-time employment outside the field of boxing.” Of course, to be fair, the facts in Stepp were much different than the facts in May. One quote from Stepp will make that clear:

The Sentencing Guidelines explicitly permit the district court to prohibit the defendant from engaging in certain occupations upon release if the district court determines both (1) that “a reasonably direct relationship existed between the defendant’s occupation … and the conduct relevant to the offense of conviction,” and (2) that “imposition of such a restriction is reasonably necessary to protect the public because there is reason to believe that, absent such restriction, the defendant will continue to engage in unlawful conduct similar to that for which the defendant was convicted.” U.S.S.G. §§ 5F1.5(a)(1), (2). We have upheld occupational restrictions where the facts of the case demonstrate a connection between the crime and the occupation. See United States v. May 568 F. 3d 597, 607– 08 ( 6th Cir. 2009) (financial-services employee who embezzled could be banned from obtaining employment with financial-services industry); United States v. Berridge, 74 F.3d 113, 118–19 (6th Cir. 1996) (banker who made false statements on loan applications could be banned from seeking work in the banking industry); United States v. Peete, 919 F.2d 1168, 1181 (6th Cir. 1990) (city councilman who took bribes could be banned from seeking elected office during probationary period).

Here, the district court discussed on the record his reasons for imposing the special condition limiting employment. The district court noted the defendant’s age and the difficulties of competing in a sport as one gets older, stating “it is time to move on” and “you really need to go ahead and move past it.” Id. At no point did the district court address the relationship between boxing and the instant offense, nor did the court address the reason why banning Stepp from boxing would better protect the public.

Finally, the United States Court of Appeals for the Eighth Circuit took up the special employment conditions issue last summer. In U.S. v. Carter, 652 F.3d 894 (8th Cir. 2011), the Court held that it was not an abuse of discretion for the District Court for the Eastern District of Arkansas to bar Carter from obtaining employment with a federal credit union or any FDIC insured institution. Carter had been convicted of being a felon in possession of a firearm after he and a cohort were busted for robbing a motel patron at gunpoint. What was the nexus between that offense and FDIC insured institutions? According to the Court of Appeals:

“Pursuant to 12 USC §§ 1785 and 1829, the defendant shall not obtain employment in an institution insured by the FDIC or a Federal Credit Union.” The cited statutes provide that “any person who has been convicted of any criminal offense involving dishonesty or a breach of trust” may not serve as an employee of an “insured credit union” or an institution insured by the FDIC. See 12 U.S.C. §§ 1785(d)(1)(A), 1829(a)(1)(A); see also 12 U.S.C. §§ 1752, 1813(u). Carter’s prior convictions for theft and robbery (“his history”) are criminal offenses “involving dishonesty or a breach of trust.”

So, in Carter, unlike in May, the special condition was rooted in a statutory bar. The statutory bar for felony convictions exists in the financial services industry as well, but the May court failed to cite to it. So, if you are in the financial services industry and you are contemplating going astray, you would be well advised to start training in the ring.