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United States v. Saunders

November 18, 1997




Appeal from the United States District Court

for the Central District of Illinois. No. 96 CR 20026 Harold A. Baker, Judge.

Before FLAUM, RIPPLE and ROVNER, Circuit Judges.

RIPPLE, Circuit Judge.



On May 9, 1996, Robert A. Saunders was indicted on three counts of mail fraud. He eventually pleaded guilty to two counts; the third was dismissed by agreement of the parties. Mr. Saunders now appeals the district court's determination of his sentence. He claims that the district court erred in adding an enhancement of five levels based on the amount of the loss. For the reasons set forth in this opinion, we affirm the judgment of the district court.



Mr. Saunders began his career in the investment and insurance businesses as an insurance agent for Metropolitan Life ("MetLife") in Decatur, Illinois. While he was with MetLife, Mr. Saunders specialized in selling 401K rollover plans. In the summer of 1995, he left MetLife and started his own business, a sole proprietorship called RAS Financial Companies ("RAS"). After establishing RAS, Mr. Saunders sent a letter to all his clients announcing the new business and offering its services to them. RAS had a brokerage agreement with Guardian Life ("Guardian") and also sold annuities and life and health insurance through other companies. As part of this business, Mr. Saunders planned to specialize, as he had at MetLife, in the rollover of existing 401K plans. Mr. Saunders claimed that, during the time of the offenses, he expected to receive commissions from rollover business he had written for Guardian in the amount of 4% of the gross amount of the 401K transfers.

According to Mr. Saunders, RAS started out doing quite well. During this period of prosperity, Mr. Saunders says that he sold primarily life insurance and investments on behalf of Guardian. However, by the end of July 1995, the life insurance sales slowed, prompting him to focus on 401K rollovers. Mr. Saunders claims that he sold several rollover plans but soon learned that there was a considerable delay in receiving his commissions for those sales. This delay caused RAS to run low on working capital and forced Mr. Saunders to exhaust his personal savings and credit in order to keep his struggling business afloat.

In the hope of saving his business, Mr. Saunders began to look for other sources of income and, after doing some research, discovered that he could sell debenture bonds that did not require full financial disclosure. Mr. Saunders says that he understood debenture bonds to be personal loans to him from investors, guaranteed by both his business and personal assets. Convinced that this was the way to save RAS, Mr. Saunders decided to sell $50,000 worth of bonds. Mr. Saunders claims that he limited the sale to $50,000 because he believed that the commissions he was owed from 401K rollovers would be sufficient to repay the bonds upon maturity. He decided that the bonds would be repayable at 9.5% interest and due to be repaid on December 31, 1996. However, he included a statement in the bond offering allowing him to call the bonds early and to repay them before the maturation date in order to cancel the debt.

In the later months of 1995, Mr. Saunders succeeded in finding several individuals willing to "invest" in RAS by purchasing the bonds. The first individual to purchase these bonds from Mr. Saunders was 79 year-old Rhoda Best. Best purchased bonds totaling $5,000 from Mr. Saunders in September and November of 1995. Next, in December of 1995, Mr. Saunders sold bonds to Carol Iler totaling $25,000, to Helen and Aubrey Kingston totaling $10,000, and to Arthur Douglas totaling $5,000. In inducing these individuals to buy the bonds, Mr. Saunders made false statements concerning how the money would be used. He told the investors that the money would be used to finance the construction of a new facility to house RAS, but instead used the money to pay personal and household expenses. Although he admitted making these misrepresentations, Mr. Saunders maintains that he always intended to repay the bonds with interest on or before December 31, 1996. The government, however, contended that Mr. Saunders never intended to repay the bonds.

Although the government alleges that the "bondholders" were the principal victims of Mr. Saunders' scheme, it was a different investor who first alerted authorities to Mr. Saunders' questionable conduct. This investor was 65 year-old Charles Neathery who had originally invested money with Mr. Saunders when he was a representative of MetLife. On August 14, 1995, Mr. Saunders contacted Neathery to inform him that he had started his own business, RAS, and to encourage him to invest in the Guardian Park Avenue Fund. Neathery trusted Mr. Saunders and on August 16, 1995, transferred $10,571.74 from his MetLife account to RAS in the form of a check. These funds were to be invested in the Guardian Park Avenue Fund. *fn1

In September 1995, Neathery contacted Mr. Saunders to check on the status of his account. Mr. Saunders told Neathery that this kind of investment took time and that Neathery would hear something soon. Neathery contacted Mr. Saunders several more times and got the same response. He then became suspicious and contacted Guardian. He learned that it had no account in his name. On December 4, 1995, Neathery contacted the Piatt County State's Attorney concerning this investment. Later that same day, Neathery was interviewed by Deputy ...

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