Randall Webb's indictment (available here) in the Southern District of Ohio on multiple bankruptcy criminal charges is one of the more interesting cases I have seen in a while. According to the indictment, Webb devised a now familiar mortgage foreclosure scheme in which he contacted persons whose homes were imminently facing foreclosure proceedings, collected fees, and in some cases mortgage payments, from the victims and without them knowing used fraudulent bankruptcy filings (and the automatic stay) to forestall foreclosures while the scheme continued. For its part, a grand jury saw fit to charge Webb with eight counts of various bankruptcy crimes and one count of mail fraud. The bankruptcy charges include 3 counts of bankruptcy fraud for filing bankruptcy petitions as part of the scheme to defraud the homeowners (18 U.S.C. 157(1)); 2 counts of making a false declaration for falsely omitting to disclose in his own bankruptcy case several additional creditors and numerous lawsuits to which he was a party (18 U.S.C. 152(3)); and 3 counts of falsifying documents with intent to impede or obstruct the administration of a bankruptcy case in violation of new 18 U.S.C. 1519 (text available here).The section 1519 counts are those I find most intriguing. This is a very new statute, under which there have been very few prosecutions. Consequently, judicial construction is still in its infancy. The statute provides criminal penalties for whoever:
knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record [or] document . . . with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case
Now, Webb is charged with violating this statute three times in the course of preparing bankruptcy petitions in the names of homeowners during the foreclose scheme. In one instance, Webb allegedly failed to disclose himself as the true bankruptcy petition preparer and entered N/A on the petition preparer signature line (Count 5). Another time, Webb allegedly left blank the disclosure section for a bankruptcy petition preparer (Count 6). A final time, Webb allegedly inserted the name of another person as the petition preparer on the bankruptcy petition (Count 7). While it seems clear that inserting false information in a bankruptcy petition falls within the "falsifies" proscription of section 1519, it will be interesting to see in this case (assuming there is not a plea) whether a court will consider the conduct of not inserting information (or omitting information) from the petition can constitute "falsifying" as well. If so, it seems that section 1519 could be utilized to prosecute nearly every case of a false declaration in the schedules - a crime that typically is brought under 18 U.S.C. 152(3), and which carries a statutory maximum sentence of 5 years, which is one quarter of the 20 year maximum for violations of section 1519.