The Sixth Circuit US Court of Appeals has reversed the bank fraud conviction of Tim Parkes, who had been implicated in the downfall of Benton Banking Company. During the 2009 trial, the government offered the theory that Parkes and bank president Jimmy Goddard jointly created phony entities to disguise troubled loans to Parkes and his business, Remington Industries. The appeals court found no direct evidence showing Parkes had any knowledge of the fraud. The ruling chastised the judge for not permitting evidence of other bank fraud by Goddard and accused US Attorney Gary Humble of intentionally misleading the jury during closing arguments.

Parkes was convicted in September 2009 for 10 counts of bank fraud and has been in federal custody since the sentencing in December 2009.

In its reversal filing, the US Court of Appeals explained that the only piece of evidence connecting anyone at Remington to the 2002 fraudulent Benton Banking Company loans was a fax of company names Goddard received just before creating the fraudulent loans. Goddard created ten loans in order to break down two personal loans to Parkes and business partner Mark Mourier because those loans exceeded bank lending limits. Parkes argued that only Goddard intended the fraud.

“Surprisingly, the government offered no testimony from Goddard to establish that Parkes cooperated in, or even knew of, the scheme,” the opinion says, adding “While that failure does not directly impact the sufficiency of the evidence, it does leave the evidentiary cupboard nearly bare.”

The Appeals court said the government made no effort to prove Parkes had sent the fax or knew Goddard intended to defraud the bank. “What’s more,” the reversal states, “there was no evidence that Parkes even knew about the lending restrictions.” Remington Industries had been loaned money in amounts in excess of the lending limits previously and no new money left the bank when the smaller loans were created. “At the end of the day, the government has not identified how Parkes benefited from the scheme,” the reversal said.

In their filing, the Appeals Court also discusses two other errors Parkes identifies in his appeal that “may help illuminate why – in spite of fatal weaknesses in the government’s case against Parkes – the jury saw fit to return a partial guilty verdict.” The opinion says the district court improperly excluded evidence that Goddard had both an independent motive and an opportunity to perpetuate the fraud, leaving the jury questioning why Goddard would have repackaged Parkes’ loans if Parkes wasn’t involved.

During the trial Parkes unsuccessfully tried to offer the testimony of Carl Stephens, a local businessman who had borrowed money from Benton Bank. Stephens learned after Goddard left the bank that when he got behind on payments, Goddard had replaced his loan with false notes without his authorization. Parkes also sought to introduce an FDIC document that listed more than 300 other suspicious loans on the bank’s books. Each of the loans was made to a person or entity at one of 13 addresses, mostly post office boxes. Parkes’ appeal argued that Goddard had been embezzling money and falsifying loans for years. The reversal opinion agreed this gave Goddard “strong individual and independent reasons to disguise Remington’s troubled loan history and to do it in secret.”

The second error, characterized as “more troubling,” was a comment made by Humble to the jury that “an acquittal would let [Parkes and Mourier] keep the $4 million.” The opinion says Humble made the comment despite knowing that Parkes and Mourier had already paid off most of the money Remington had borrowed from Benton Bank. The appeals court notes that the prosecutor himself had moved to exclude any evidence that Parkes had agreed to repay Remington’s debt and unfailingly objected to Parkes’ efforts to offer repayment evidence. Although no evidence was permitted to show Parkes’ repayment of the loans, evidence had been entered that showed the bank was forced to write off $4 million, leaving the jury to believe the bank lost $4 million.

The opinion says Humble’s remarks, to which Parkes’ attorney could not respond, were not only misleading and highly prejudicial, they were deliberately made and should have resulted in a mistrial.

The Court of Appeals concluded that the evidence was insufficient to convict Parkes beyond reasonable doubt and reversed the convictions, ordering district court to enter a judgment of acquittal and vacate Parkes sentence.