United States District Court, M.D. Tennessee, Nashville Division
A. Trauger United States District Judge.
movant, Keith Churn, filed this pro se action under
28 U.S.C. § 2255, seeking to vacate, set aside, or
correct his conviction and sentence for bank fraud in
violation of 18 U.S.C. § 1344. (Docket Entry Nos. 1, 6.)
PROCEDURAL AND FACTUAL BACKGROUND
5, 2010, a federal grand jury indicted the movant in a
thirteen-count indictment for bank fraud under 18 U.S.C.
§ 1344. (Criminal Case No. 3:10-cr-00116, Docket Entry
No. 1.) Each count corresponded to a particular bank draw.
Id. The government voluntarily dismissed Counts One
and Four at trial. Id., Docket Entry No. 81, at 234.
On December 6, 2013, the jury convicted the movant on Counts
Three, Seven, Eight, Nine, Ten, Eleven, and Twelve and
acquitted him on Counts Two, Five, Six, and Thirteen.
Id., Docket Entry Nos. 63, 65-68. The court
sentenced the movant to 33 months of imprisonment and five
years of supervised release. Id., Docket Entry No.
112, at 12.
movant timely appealed his convictions. Id., Docket
Entry No. 94. The facts underlying the movant's
convictions were stated by the Sixth Circuit as follows:
In December 2013, defendant Keith Churn was found guilty of
seven counts of bank fraud stemming from two schemes in which
he received bank loans ostensibly to construct houses, but
performed little to no work.
. . . .
A. Churn Proposes Two Projects.
Defendant Keith Churn owned C & M Construction
Management, a Tennessee construction company specializing in
remodeling and rehabilitation, since the late 1990s. Around
October 2006, Churn entered a business agreement with Dustin
Rief, under which Rief would purchase real property at 2408
Clarksville Pike, Nashville, Tennessee, and Churn would
install a modular-or prefabricated-house on the property.
Churn would pay Rief rent during the six-to-eight months of
construction and would purchase the property from him upon
completion. For his efforts, Rief would receive $5, 000
initially and an additional $5, 000 after Churn's
purchase, for a total of $10, 000.
Rief financed the purchase and construction of the
Clarksville Pike property with a $187, 800 construction loan
from BancorpSouth Bank (“BSB”). Under the terms
of the loan agreement, a portion of the loan would be
distributed upfront to purchase the property, and the
remaining funds would be distributed in stages to pay for
construction. BSB disbursed $66, 758.19 for the purchase,
leaving $121, 041.81 for construction.
The same year, Churn proposed a similar investment to Milton
Thomas. Thomas agreed to obtain financing to purchase 956
Green Street, Franklin, Tennessee, and Churn agreed to
demolish the existing house and install a modular home. The
two would split any profits. To finance the project, Thomas
received a $226, 500 loan from BSB, $77, 976.83 of which was
distributed to fund the property purchase.
BSB distributed the portion of the loan for construction in
“draws.” For each draw, the bank would transfer
money from the loan to Rief's and Thomas's checking
accounts, which they could then use to pay contractors.
Before approving a draw, the bank might send an inspector to
the property, or it might review contractors' receipts,
to ensure that the claimed work was actually being performed.
There were four draws made for the Clarksville Pike property:
$25, 000 on October 31, 2006; $15, 000 on December 18, 2006;
$30, 000 on January 10, 2007, and $4, 500 on January 12,
2007. On December 5, 2006, Churn submitted an invoice for
$17, 733 to BSB for permit fees, disconnecting old utilities,
grading, and preparing footings and foundations. Based on the
invoice, BSB approved a $15, 000 draw on December 18.
On December 22, 2006, Churn submitted a specification sheet
and an invoice to BSB, which purportedly showed an order for
a modular house from All American Homes of N.C., LLC
(“AAH”). The invoice charged a down payment of
$33, 462, or approximately one-third of the total cost of the
modular house. Two weeks later, Churn informed a BSB loan
officer, Lisa Campsey, that the house would be set on
February 8, 2007. Campsey later approved draws of $30, 000
and $4, 500. During this period, a site inspector for BSB
submitted periodic reports to BSB indicating that demolition
of the existing structure had occurred and the lot was
There were four draws on the loan for the Green Street
property: $20, 000 on December 15, 2006; $8, 000 on January
10, 2007; $12, 000 on January 18, 2007; $22, 000 on January
23, 2007; and $668.91 on February 1, 2007. On January 17,
2007, Churn submitted a specification sheet and an invoice to
BSB, which purportedly showed an order for a modular house
from AAH. Like the invoice for the Clarksville Pike property,
the invoice charged a down payment of approximately one-third
of the total cost of the modular house, or $33, 638. Based on
the invoice, BSB approved draws of $12, 000 and $22, 000.
B. Questions Arise About the Projects.
At some point, Campsey grew suspicious about the progress of
the projects. For the Clarksville Pike property, although
some demolition had been done, Campsey learned that the tasks
listed on the December 5, 2006, invoice were not actually
completed, including “pulling” the construction
permit. Nor was the modular house set on February 8 as Churn
said it would be. Similarly, she visited the Green Street
property, but found no completed work.
An inspector dispatched by BSB made similar observations. On
his first visit to the Clarksville Pike property in October
2006, he noted that the existing structure had been torn down
and cleared. But a few months later, on March 23, 2007, the
inspector estimated that only 1.2 percent of the construction
project had been completed. He later found that no additional
work was performed from then through July 17. The inspector
also assessed the Green Street property on March 16 and
determined that only 1.2 percent of the construction project
had been completed; when he returned on July 17, he found
that no work had been done since his March 16 visit.
Questions about Churn's invoices arose as well. The
invoices he submitted to BSB to support draw requests
purportedly reflected purchases for two “Hot
Tamale”-style modular houses. But AAH never received
any orders or payments from Churn. AAH also did not prepare
the invoices Churn submitted to BSB. While the submitted
invoices reflected a one-third deposit on the total
purchases, as well as costs associated with installing
electrical and plumbing “tie-ins, ” AAH never
required more than a 10-percent deposit, the industry
standard. Indeed, AAH was not even able or licensed to
provide electrical or plumbing services.
On March 3, 2007, Campsey emailed Churn, stating that an AAH
representative told her that it had not received funds from
Churn and would not start construction on modular homes until
it received the money. She stated that Churn's
representations to BSB that he had paid deposits on the
houses using the loans “greatly conflicts” with
information given by AAH. Since Churn had previously said
that he would pay for the purchases through checks, Campsey
requested copies of cancelled checks and further information
about what charges Churn had paid, but she never received
any. She also pointed out to Churn that there was no pad (a
part of the foundation) laid on the Green Street property
even though Churn told her that it was already installed.
Two days later, Churn told Campsey that she would “have
the information that's needed by the end of the business
day.” Churn also said that BSB's inspector should
“go by [the] site at [the] end of this week” and
that Churn “will also have in writing this week [a]
guarantee from [the] manuf[acturer] that we will have product
this month on the sites.” (Id.) Campsey
replied by confirming an inspection date, requesting proof of
payment, and asking for a written guarantee from the
manufacturer. She never received any of the items. When
Campsey later went to the Green Street property, she observed
that “nothing had been done since the first time. It
was the same every single time....” (Trial Tr., R. 80,
Campsey later called Churn. He said that the houses were
coming, but from IBC instead, a different manufacturer. Churn
promised to perform additional work on the properties, but
Campsey said that she no longer trusted him.
On March 8, 2007, Churn told Campsey that he “will be
moving forward with the work on the projects” and that
she was “very wrong about [her] comments.” Churn
said that he would provide “[a]ll info” to Rief
and Thomas, who would “deal with [her] directly.”
(Id.) Campsey, who had been in contact with Rief and
Thomas throughout the projects, still never received any
In early May 2007, BSB sent formal demand letters to Rief and
Thomas, requesting written confirmation that modular houses
were being completed and verification of the delivery dates.
The letters warned that failure to provide the requested
documentation or to complete the site and foundation work by
May 18, 2007, would result in the loans being payable
On May 18, Churn sent an email with two attachments to BSB.
The first attachment was an invoice from “C & M
Construction Managment” [sic] to Rief, stating that the
“deposite [sic] has been paid for unit ordered for 2408
[Clarksville Pike] job site, ” and confirming a $33,
463 payment. The second attachment was a photo of modular
houses sitting on trailers. Churn told Campsey that the
structures depicted would be delivered to the Clarksville
Campsey quickly responded that “this information is not
sufficient.” She again demanded written confirmation
from AAH verifying production of the units and the dates of
delivery, site preparation, and foundation work.
Churn responded five days later, on May 23, stating that the
units were not from AAH, but that BSB would be getting
paperwork from C & M Construction Management directly.
BSB never received any paperwork. During its investigation,
BSB located the modular houses shown in the photographs.
After examining the houses' serial numbers, the bank
learned that they were owned by other people, not Churn.
Churn stopped making monthly payments on the loans sometime
in April 2007. While Rief attempted to make some payments
himself, he was ultimately unable to continue paying, leading
to the foreclosure of the Clarksville Pike property and
Rief's filing for personal bankruptcy. Thomas also
attempted to make some payments himself, but was unable to do
so after he lost his job; BSB foreclosed the Green Street
property and Thomas also filed for personal bankruptcy.
C. Churn's Explanation.
Churn had a different understanding of events. According to
him, he did place orders with AAH, but sometime in
mid-February to mid-March, it placed his orders on hold
“because of a lot of confusion that they said they were
having from the bank.” (Trial Tr., R. 82, PageID
629-30.) Churn attempted to contact other manufacturers to
provide him with modular houses, but was unable to locate any
that would sell him units at a comparable cost. Later, he
found some modular houses at a defunct AAH plant; the houses
were initially purchased by a nonprofit that eventually had
no use for them after a failed land deal. These, Churn
claims, were the units in the photograph he sent to BSB:
Churn speculates that the bank was confused because the units
were associated with what were likely the names of the
original buyers and not his.
Churn placed these newfound units “under
contract” and met with Chris Marketti of BSB to discuss
a deal. (Trial Tr., R. 82, PageID 632.) Churn purportedly
detailed a breakdown of expenses for the Clarksville Pike
property and tried to negotiate with BSB to pay him, but only
after delivery of the unit. BSB, however, “never
followed up.” (Trial Tr., R. 82, PageID 667.) Had the
bank not ceased working with him, Churn believed that he
could have completed the deals.
D. Churn Is Indicted.
. . . . The Clarksville Pike property is the subject of
Counts 1, 2, 3, 7, 8, 9, and 13 in the indictment; the Green
Street property is the subject of Counts 4, 5, 6, 10, ...