In October 2009, Timothy Parkes and Mark Mourier, co-owners of Remington Industries, a manufacturer of vehicle floor mats in Benton, Tennessee, were indicted by a federal grand jury on charges of bank fraud. The charges arose from more than $4 million in loans the company obtained from the Benton Bank.
The indictment alleged that Parkes and Mourier had created numerous shell companies so that the bank president, Jim Goddard, could grant them loans that exceeded banking limits.
Goddard had been indicted a year earlier on charges of bank fraud and pled guilty. He was sentenced to 6½ years in prison and ordered to make restitution of nearly $1.2 million.
Parkes and Mourier went on trial in the fall of 2009 in U.S. District Court in Chattanooga, Tennessee. The prosecution presented evidence that Parkes and Mourier moved their company from Canada to Tennessee in 1986. There, they met Goddard, who arranged financing for the company’s operations. In 1999, the company suffered manufacturing setbacks that cost the firm $1.5 million a year in losses from 2000 through 2002.
As a result, the company outsourced its manufacturing to Chinese firms and quickly began to turn healthy profits. However, the firm was $2.5 million in debt to Benton Bank and was overdrafting checks pushing the debt at times to $4 million—which exceeded the bank’s limits on debt to an individual customer.
Through a $2.25 million refinancing through a private equity firm, Remington managed to pay down its Benton Bank debt. But in October 2002, Remington defaulted on its debt to the private equity firm. Benton Bank then paid off the private equity firm and, to disguise the fact that the bank was over its debt limit to Remington, Goddard recorded false entrees in the bank’s books indicating that loans totaling $2.25 million had been made to 10 new companies.
Ultimately, authorities discovered that Goddard was personally embezzling money from the bank and that he had orchestrated as many as 300 such loans involving other customers.
During the investigation, a fax from Remington to Goddard was found in Goddard’s office. The fax was a printed email from Parkes to a Remington attorney requesting the creation of 10 corporations and listing 10 names of businesses.
The prosecution contended that Parkes and Mourier had participated in Goddard’s repackaging of the loans and that the fax was proof because the loans that Goddard had created were made out to the same 10 companies. Parkes and Mourier contended they knew nothing of Goddard’s scheme.
The defense sought to introduce evidence that Goddard had an independent motive and opportunity to pull off the fraud without the knowledge of Parkes or Mourier. However, the judge barred the evidence.
On September 11, 2009, a jury acquitted Mourier, but convicted Parkes on 10 counts of bank fraud. He was sentenced to 6½ years in prison, fined $125,000 and ordered to pay $4.25 million in restitution to the bank.
On February 2, 2012, the Sixth Circuit U.S. Court of Appeals overturned Parkes’s conviction, ordered the case dismissed, and Parkes was released. The appeals court ruled that the prosecution had presented insufficient evidence that Parkes was involved in any fraud and that the fax was not proof that Parkes knew what Goddard was doing.
Further, the appeals court ruled that the evidence of Goddard’s internal dealings in the hundreds of other, similar loans should have been presented to the jury. The appeals court said, “Without that evidence, the jury had no answer to a nagging question that, we think, probably generated skepticism of Parkes’s innocence: Why would Goddard have repackaged Remington’s loans unless Parkes was involved?”
Moreover, the appeals court found that the prosecution, in its closing argument had improperly and deliberately told the jury that an acquittal would allow Parkes and Mourier to “keep the $4 million.” The court noted that most of the money had already been paid back and that the prosecution had convinced the judge to bar the defense from presenting evidence that the debt had been paid off.
– Maurice Possley