As bankruptcy filings increase and individual debtors' attorney offices get more stressed, it may be tempting to let office procedures get lax and to allow corners to be cut in the name of efficient service. As the seriousness of the difficult economy takes hold and some people feel victimized by circumstances beyond their control, there appears to be at least anecdotal indications that more debtors are resorting to cheating the system that they feel has cheated them. So let the following be a cautionary tale.
In one federal district, the Southern District of West Virginia, based in Charleston, the U.S. Trustee's office and the U.S. Attorney combined forces to investigate and charge four different individual debtors with diverse bankruptcy crimes. The details of the charges should both remind debtors' counsel of the kinds of details to pay special attention to and be a short lesson in the most common bankruptcy crime statutes.
Bankruptcy Crime Statutes 18 U.S.C. §§ 152 and 157
§ 152 is entitled "Concealment of assets; false oaths and claims; bribery." It lists nine types of sanctioned behavior, but these four cases involve only the first three types, the concealment of assets, making false oath and a false declaration:
The remaining six kinds of sanctioned behavior are noteworthy because many involve potential crimes by parties other than debtors. A summary of these include:
In one federal district, the Southern District of West Virginia, based in Charleston, the U.S. Trustee's office and the U.S. Attorney combined forces to investigate and charge four different individual debtors with diverse bankruptcy crimes. The details of the charges should both remind debtors' counsel of the kinds of details to pay special attention to and be a short lesson in the most common bankruptcy crime statutes.
Bankruptcy Crime Statutes 18 U.S.C. §§ 152 and 157
§ 152 is entitled "Concealment of assets; false oaths and claims; bribery." It lists nine types of sanctioned behavior, but these four cases involve only the first three types, the concealment of assets, making false oath and a false declaration:
A person who
(1) knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11, from creditors or the United States Trustee, any property belonging to the estate of a debtor;
(2) knowingly and fraudulently makes a false oath or account in or in relation to any case under title 11;
(3) knowingly and fraudulently makes a false declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, in or in relation to any case under title 11;
. . .
shall be fined under this title, imprisoned not more than 5 years, or both.
The remaining six kinds of sanctioned behavior are noteworthy because many involve potential crimes by parties other than debtors. A summary of these include:
(4) a creditor or alleged creditor filing a false proof of claim;
(5) a transferee wrongfully receiving property from a debtor after the filing of a bankruptcy case;
6) receiving a bribe--"any money or property, remuneration, compensation, reward, advantage, or promise thereof"--or order to take or avoid any action in a bankruptcy case;
(7) pre-petition transfers or concealment of debtor assets by the debtor or by others, including the debtor's agents and officers;
(8) pre-petition and post-petition concealment, falsification, or destruction of records about a debtor's property or financial affairs by the debtor or by others; and
(9) post-petition withholding of records about a debtor's property or financial affairs by the debtor or by others.§ 157 is entitled "Bankruptcy fraud," and states in its entirety:
A person who, having devised or intending to devise a scheme or artifice to defraud and for the purpose of executing or concealing such a scheme or artifice or attempting to do so -
(1) files a petition under title 11, including a fraudulent involuntary bankruptcy petition under section 303 of such title;
(2) files a document in a proceeding under title 11, including a fraudulent involuntary bankruptcy petition under section 303 of such title; or
(3) makes a false or fraudulent representation, claim, or promise concerning or in relation to a proceeding under title 11, including a fraudulent involuntary bankruptcy petition under section 303 of such title, at any time before or after the filing of the petition, or in relation to a proceeding falsely asserted to be pending under such title,
shall be fined under this title, imprisoned not more than 5 years, or both.
The Four Accused Debtors
Victoria Caudill, 51, was accused of transferring $60,000, that she had received in a workers' compensation settlement from the Florida Department of Labor and Employment Security, into another person's bank account and then failing to disclose this asset in her bankruptcy case. She was indicted by the federal grand jury for concealing assets (18 U.S.C. 152(1)), making a false declaration (18 U.S.C. 152(3)) and devising a bankruptcy fraud scheme (157(3)).
Clinton Smith, 62, was accused of falsely declaring in his 2004 bankruptcy case that his wife still owed a 50-acre parcel of land the couple had bought back in 1977 but had in fact been sold the previous year for about $207,000, his half-share of which was being paid to him in payments of $2,000 per month. He failed to disclose this income. He was indicted by the federal grand jury for concealing assets (18 U.S.C. 152(1)), making a false declaration (18 U.S.C. 152(3)) and devising a bankruptcy fraud scheme (157(3)).
Jennifer Longwell, 38, was accused of falsely disclosing that she had sold a parcel of real property for $20,000 when in fact she had sold it for $69,000; she falsely disclosed that she continued own another parcel when in fact she had sold it the day before. She also gave false testimony at the meeting of creditors about those transactions. She was indicted by the federal grand jury with two counts of making a false oath (18 U.S.C. 152(2)) and one count of concealing assets (18 U.S.C. 152(1)).
Tracy Helms, 42, was accused of concealing guns and jewelry in her bankruptcy case. She was not indicted by grand jury but rather the U.S. Attorney's office filed an "information" against her for concealing these assets (18 U.S.C. 152(1)).
Potential Criminal Penalties
As indicated in the quoted statutes above, both 18 U.S.C. § 152 and § 157 provide for a fine and/or up to 5 years of imprisonment. However local newspaper accounts state that that the three indicted individuals face up to 15 years in prison, and one story last month in the Charleston, West Virgina News & Sentinel said that Ms. Longwell faced 15 years in prison, three years probation and up to $750,000 in fines.
The U.S. Attorney's Warning
The local U.S. Attorney Charles T. Miller said that these cases should "serve as a warning to those who would abuse the [bankruptcy] system." The U.S. Trustee's Office refers suspicious circumstances to his office, the FBI then investigates, and then his office decides whether to prosecute. His parting words: "It's pretty straightforward in bankruptcy: You list what you have, you list what you owe, and you get a clean slate. It's when you hold [assets] back that [you] get into trouble."
Victoria Caudill, 51, was accused of transferring $60,000, that she had received in a workers' compensation settlement from the Florida Department of Labor and Employment Security, into another person's bank account and then failing to disclose this asset in her bankruptcy case. She was indicted by the federal grand jury for concealing assets (18 U.S.C. 152(1)), making a false declaration (18 U.S.C. 152(3)) and devising a bankruptcy fraud scheme (157(3)).
Clinton Smith, 62, was accused of falsely declaring in his 2004 bankruptcy case that his wife still owed a 50-acre parcel of land the couple had bought back in 1977 but had in fact been sold the previous year for about $207,000, his half-share of which was being paid to him in payments of $2,000 per month. He failed to disclose this income. He was indicted by the federal grand jury for concealing assets (18 U.S.C. 152(1)), making a false declaration (18 U.S.C. 152(3)) and devising a bankruptcy fraud scheme (157(3)).
Jennifer Longwell, 38, was accused of falsely disclosing that she had sold a parcel of real property for $20,000 when in fact she had sold it for $69,000; she falsely disclosed that she continued own another parcel when in fact she had sold it the day before. She also gave false testimony at the meeting of creditors about those transactions. She was indicted by the federal grand jury with two counts of making a false oath (18 U.S.C. 152(2)) and one count of concealing assets (18 U.S.C. 152(1)).
Tracy Helms, 42, was accused of concealing guns and jewelry in her bankruptcy case. She was not indicted by grand jury but rather the U.S. Attorney's office filed an "information" against her for concealing these assets (18 U.S.C. 152(1)).
Potential Criminal Penalties
As indicated in the quoted statutes above, both 18 U.S.C. § 152 and § 157 provide for a fine and/or up to 5 years of imprisonment. However local newspaper accounts state that that the three indicted individuals face up to 15 years in prison, and one story last month in the Charleston, West Virgina News & Sentinel said that Ms. Longwell faced 15 years in prison, three years probation and up to $750,000 in fines.
The U.S. Attorney's Warning
The local U.S. Attorney Charles T. Miller said that these cases should "serve as a warning to those who would abuse the [bankruptcy] system." The U.S. Trustee's Office refers suspicious circumstances to his office, the FBI then investigates, and then his office decides whether to prosecute. His parting words: "It's pretty straightforward in bankruptcy: You list what you have, you list what you owe, and you get a clean slate. It's when you hold [assets] back that [you] get into trouble."
by Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys
Andy@BLSforAttorneys.com
Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice or provide and legal services. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.
© 2008 Bankruptcy Litigation Support for Attorneys
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