Appeals court orders reduced sentences in estate fraud case

8/31/2018

COLUMBUS — A federal court Thursday ordered reduced sentences for two people who conspired to steal a deceased retired Toledo city employee’s $2.2 million estate.

The Cincinnati-based U.S. 6th Circuit Court of Appeals ruling was tied to a plot to use a fraudulent will to defraud the estate of the late Martin Fewlas by former Toledo attorney Susan Pioch, along with Kurt Mallory and Margaret McKnight — upstairs tenants of the South Toledo duplex owned by Fewlas.

The appeals court found that U.S. District Court Judge James Carr should not have enhanced the sentences of Pioch and Mallory by applying a standard that did not exist in sentencing guidelines at the time of their crimes.

He enhanced their sentences because he found that they had caused a financial hardship to the estate’s real beneficiary — Fewlas’ great-nephew Jimmy McLaughlin — under the terms of a 1993 will. The court sent the cases back for resentencing.

The appeals court also found that the district judge applied the wrong legal standard when considering Mallory’s motion for a new trial. It overturned the judge’s denial of that motion.

“In the end, the manifest weight of the evidence may support the verdict,” the court ruled. “But as an appellate court, that is not for us to say. The judge that saw the witnesses and sat with the evidence at trial must make that call.”

It appeared at the time that Fewlas died in 2010 that he’d left his estate to tenant McKnight, who proceeded to go on a $600,000 spending spree, making 171 withdrawals under $10,000. That drew the attention of the Internal Revenue Service.

Gary Mallory, Kurt Mallory’s father who sometimes shared their share of the duplex, reached a plea deal in which he told investigators that he, at his son’s request, forged Fewlas’ signature on a fake will written by Pioch and filed with the Lucas County Probate Court.

The trio was convicted of numerous counts of bank fraud, mail fraud, conspiracy, identity theft, and money laundering. McKnight was also convicted of structuring cash withdrawals, tax violations, and causing a financial institution to fail to file a required report.

Pioch, 62, is serving a sentence of nine years and three months in a Kentucky federal prison and McKnight, 43, a four-year sentence in Illinois. Kurt Mallory, 55, is serving an 8½ year sentence in Texas.

Contact Jim Provance at jprovance@theblade.com or 614-221-0496.