Exec Loses Appeal of 40-Year Sentence for $17M Fraud

A St. Louis business owner has lost a U.S. Supreme Court bid to overturn his conviction and 40-year prison sentence for embezzling nearly $17 million in client funds.

James R. Gibson had argued that a lower court violated his constitutional rights by unilaterally breaking his plea agreement with the government.

Prosecutors then successfully tried him on reinstated charges, and he drew a sentence twice as long as the one called for in the plea agreement, according to court records.

Before his indictment in the U.S. District Court for the Southern District of Illinois in October 2001, Gibson owned SBU Inc., a successful structured settlement business in St. Louis.

The company had arrangements with as many as 60 Illinois and Missouri law firms to handle clients' personal-injury settlement money.

According to a May 25, 2001, article in the St. Louis Business Journal, SBU received a fee for investing the money and paying the law firms' clients their shares on a periodic basis.

However, prosecutors said in court filings that Gibson siphoned off $16.8 million for his own personal uses and that his financial misconduct eventually caused SBU to lose $156 million in client funds.

Gibson pleaded guilty to a single count of conspiracy to commit mail fraud and wire fraud under a plea agreement in January 2002.

Prosecutors dropped the remaining six counts of the indictment as part of the deal.

A dispute later arose over the fact that the agreement called for a 22-year prison term and $66 million in restitution.

The District Court sentenced Gibson to the 22 years and ordered him to pay the $66 million based on the terms of the agreement.

Gibson then appealed to the 7th U.S. Circuit Court of Appeals on grounds that the maximum prison sentence for mail and wire fraud conspiracy was only five years.

Prosecutors argued in opposition that the plea agreement contemplated a sentence based on the other counts in the indictment and that pegging the 22 years solely to the conspiracy charge was a "mutual mistake."

However, the 7th Circuit determined the "mistake" was fatal to the plea agreement. It overturned the guilty plea and plea agreement and remanded for further proceedings, effectively breaking the plea deal.

Prosecutors took the case to trial in the same Illinois federal court and reinstated the conspiracy charge along with the six other counts of the indictment.

A jury convicted Gibson on all counts, and he was sentenced to 40 years in prison. Restitution was set at $83 million.

The 7th Circuit affirmed, and Gibson took his case to the Supreme Court.

He argued in his petition for review that the appeals court's decision to break his plea agreement on its own initiative violated his constitutional double-jeopardy and due-process rights.

He said the 7th Circuit did not have the authority to vacate a guilty plea in the absence of an "express request by the defendant" and should have simply modified the plea agreement with the correct five-year sentence.

However, prosecutors apparently persuaded the Supreme Court in an opposition brief that no constitutional rights were breached.

They said Gibson had in fact made two express requests to overturn the guilty plea in his appeals briefing to the 7th Circuit.

"Petitioner not only specifically asked the Court of Appeals to 'remand this matter to the District Court with directions ... to reject the plea agreement,' [he] also specifically asked the court to vacate his guilty plea because it was not knowing and voluntary," the opposition brief said.

The high court rejected Gibson's petition for review without comment.

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