LITTLE ROCK — Little Rock lawyer Alvin Clay and two other men were sentenced Friday in a fraud case that left the presiding judge with questions about the fairness of the proceedings.
The convictions of Clay, 41; Raymond Nealy, 32, now of Houston; and Donny McCuien, 29, of Little Rock stemmed from a real-estate scam in 2002 and 2003 that prosecutors said resulted in four Central Arkansas home buyers being defrauded of $133,142.
Although Clay faced 24 to 30 months in prison under federal sentencing guidelines, Chief U.S. District Judge Leon Holmes cited concerns about a "sentencing disparity" between Clay and his co-defendants in sentencing him to a reduced term of five months in prison with no fine.
Federal judges are required to consider the guidelines and are not supposed to "depart downward" except in unusual circumstances.
Holmes said he wanted to reduce the disparity that occurred after Clay's former business partners, Nealy and McCuien, struck deals with prosecutors that reduced their sentencing liability.
Holmes said he was particularly "bothered" that Nealy,whom prosecutors had once described as a major player in the conspiracy, had negotiated a plea to a substantially lesser offense after Clay's trial.
The charge of misprision of a felony - knowing about a crime and failing to report it - subjected Nealy to strictly a probationary sentence, and resulted in him receiving three years' probation and no jail time.
Nealy and Clay were originally scheduled to be tried together after McCuien pleaded guilty early on to wire-fraud conspiracy - the major charge - and agreed to cooperate with the government against his codefendants. Then a conflict of interest with a defense attorney arose, prompting Holmes to order Nealy and Clay to be tried separately.
Clay went to trial first and was convicted in June 2008 of wire-fraud conspiracy and four counts of money laundering.
Nine months later, Nealy negotiated his guilty plea just before his trial was to begin in March.
"This puts us in a position where Mr. Clay has convictions on five counts based on evidence that was more compelling against Mr. Nealy than Mr. Clay," Holmes said Friday, referring to trial testimony aimed at both men, acting together, when Nealy was still facing trial.
Holmes said that was the reason for departing downward from the sentencing gridin Clay's case. Nealy's attorney, Shelly Koehler of Little Rock, argued that Nealy shouldn't be sentenced based on testimony against him that he never got a chance to defend himself against.
Because he was the first to cooperate by pleading guilty to a wire-fraud conspiracy charge, prosecutors sought a reduced sentence for McCuien, and he received five months in prison.
All the men are required to make restitution of $16,265 to Linda Jones, one of the victims who is still owed money.
Little Rock attorney Blake Hendrix, who represented Clay at sentencing, argued that Nealy "is up to his elbows in this thing," while Clay's involvement is "minimal." But because of the plea negotiations, Hendrix complained, Clay faced four to six times as much prison time under federal sentencing guidelines.
"Mr. Nealy, frankly, has impressed me as a self-serving, manipulative liar, getting himself out of being the leader of this group," Hendrix said, noting that Clay has lost his ability to practice law.
Clay told Holmes that the situation was "ridiculous" and vehemently denied that he ever intended to commit a crime, suggesting the other two men manipulated him.
Assistant U.S. Attorney Steven Snyder, who was assigned to the case from his usual position in the state's Western District, didn't recommend a particular sentence for Clay but acknowledged the awkward situation,saying, "I don't think Mr. Clay should be penalized just because he went to trial. I would ask the court to do what you think is fair under the circumstances."
Holmes called Snyder's comment "very refreshing," and said he worried that "this may have gotten sideways" because he agreed to let the men be tried separately.
Clay said afterward that he is "going to fight tooth and nail" to get his conviction overturned and retain his law license.
The case was originally pursued by prosecutors in the Eastern District of Arkansas, which has its headquarters in Little Rock but was reassigned after Clay said a "vindictive" prosecutor in the Eastern District manufactured the case to punish him for zealously defending clients against the prosecutor.
In the real estate scam, Clay, Nealy and McCuien rounded up buyers for run-down houses, promising to fix up the houses before the buyers took possession, allowing the buyers to sell them for a profit, according to prosecutors.
They said the three men fooled buyers into obtaining loans that were higher than the actual prices of the houses. Then, without the buyers' knowledge, they said the men arranged for part of the loan money to be wired to a construction company set up in Clay's name, purportedly for the cost of refurbishing the houses.
The houses were never refurbished, and the three men divided and pocketed the proceeds, prosecutors said.
Arkansas, Pages 11, 20 on 08/29/2009