Bankruptcy Fraud Resource Center | Wayne D. Holly, P.C.

City Payroll Clerk Charged with Filing Fraudulent Document in Chapter 13 Case

As reported in the news, a city payroll clerk was indicted in the Southern District of Alabama on charges that she falsified city records and altered check stubs to make it falsely appear that payroll deductions were being made to properly fund her chapter 13 plan payments, according to the indictment.  Sheila Milner Jackson was charged with filing a fraudulent document in a bankruptcy proceeding and 14 counts of mail fraud for each check mailed from the city to the chapter 13 trustee.

Attorney Indicted on Allegations of Creating Sham Secured Creditor to Shield Assets from Other Creditors

According to a press release from the U.S. Attorney's Office for the Western District of Wisconsin, Chicago attorney Edward Lee Filer, consultant Robert Joseph Gereg and business owner Paul Michael Kelly have been indicted on wire and bankruptcy fraud charges alleging that they created a sham secured creditor with a senior lien on all of the assets of Kelly’s Chicago company, Barsanti Woodwork Corporation, for the purpose of fraudulently shielding the assets from legitimate creditors.

The 10 count indictment charges Filer with two counts of wire fraud and eight counts of bankruptcy fraud; Gereg with two counts of wire fraud and seven counts of bankruptcy fraud; and Kelly with two counts of wire fraud and three counts of bankruptcy fraud.

Attorney Michael Avennati Indicted on Charges of Filing False Operating Reports and Making a False Oath

A 36 count indictment filed today (April 10) charged high profile California attorney Michael Avennati with a host of charges related to bank fraud, tax fraud and bankruptcy fraud.  The indictment is available here.  According to the four bankruptcy fraud charges, Avennati, submitted, under penalty of perjury, monthly operating reports on behalf of a law firm Eagan Avennati a debtor and debtor in possession, that failed to report all of the firm’s accounts receivable.  A separate count charges Avenatti with making a false oath by allegedly denying during a bankruptcy hearing that the firm had received any fees related to a lawsuit when Eagan Avenatti had actually received more than $1.3 million, which included attorney’s fees in relation to that case.

Funeral home operator indicted on charges of concealing assets and faking funeral expenses

Eunice Roper-Allen, of the Allen Funeral Home, who was indicted last month in the Central District of Illinois, has entered a not guilty plea to charges that she concealed assets in her bankruptcy case and defrauded a funeral home client by falsifying a decedent's funeral expenses.

In the three bankruptcy-related counts, the indictment charges Roper-Allen with concealing two bank accounts, a van and real estate located in Michigan.  The defendant is also charged with failing to disclose a 2005 judgment against her in the approximate amount of $70,000.

In other charges, Roper-Allen is accused of committing mail fraud in a scheme to defraud a customer of $44,000.  According to the indictment, Roper-Allen advised the customer to deposit into Roper-Allen's account $84,000 that belonged to a deceased relative in order to circumvent probate proceedings.  Roper-Allen later returned $40,000 together with falsified checks and receipts of fake funeral expenses to account for the difference.

Woman charged with filing fraudulent bankruptcy petitions in alleged foreclosure scheme

Sonia Alburez was charged last week with four counts of bankruptcy fraud for allegedly filing fraudulent bankruptcy petitions in the Northern District of California. 

According to the indictment, Alburez solicited homeowners who were delinquent in their mortgage payments and convinced them that her company, Community Home Saver Program, could prevent or delay foreclosure if the homeowners would transfer a fractional interest in their home to one of several fictitious entities and paid Alburez' fees.  She is accused of then filing fraudulent bankruptcy petitions listing the properties to trigger the automatic stay while she collected between $1,500 and $2,500 per month from the homeowners.

Italian fashion designer charged with fraudulent bankruptcy in Rome

According to this AP story, Italian financial police have said that they have arrested fashion designer Gai Mattiolo on charges of fraudulent bankruptcy in Rome.  The charges relate to Mattiolo's allegedly siphoning funds from his fashion house before filing bankruptcy.

As described, the charge of fraudulent bankruptcy appears to be the more serious of two potentially applicable charges under Italian bankruptcy law.  Fraudulent bankruptcy carries a jail sentence of 3-10 years while the lesser "bankruptcy offence" provides for a sentence of six months to two years.

Bankruptcy fraud sweep announced in Southern District of West Virginia

Four defendants in the Southern District of West Virginia have been charged in separate cases with various bankruptcy crimes in a small fraud sweep that U.S. Attorney Charles T. Miller hopes will "serve as a warning to those who would abuse the [bankruptcy] system."

Victoria Caudill was charged with 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)) for allegedly transferring a $60,000 workers' compensation settlement payment to a bank account not in her name and then failing to disclose the account in multiple filings in her bankruptcy case.

Clinton Smith was indicted and charged with 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)) for allegedly failing to disclose in his bankruptcy case his interest in an income stream from the sale of a 50 acre parcel of property formerly jointly owned with his then wife.

Jennifer Longwell was charged by indictment 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)) in her bankruptcy case for allegedly not disclosing the proceeds she received from the sale of two parcels of real estate and then giving false testimony at the meeting of creditors concerning the same transactions.

A fourth defendant, Tracy Helms was charged by information with violating 18 U.S.C. 152(1) by allegedly concealing guns and jewelry in her bankruptcy case.

Debtor charged with making false statements by submitting false tax returns to U.S. Trustee

Now that debtors must produce copies of their tax returns in bankruptcy cases as part of the bankruptcy laws' already numerous disclosure requirements it was only a matter of time before we began to see some criminal cases built on debtors' making or using false writings (or documents containing false statements) within an executive branch matter in violation of 18 U.S.C. 1001.

Don W. Reinhard, whose indictment in the Northern District of Florida we first commented on here, is  charged with 2 counts of violating 18 U.S.C. 1001 by allegedly submitting to the Assistant U.S. Trustee 2002 and 2005 U.S. Individual Income Tax Returns knowing that each contained false entries.  The 2002 return (filed in January 2007) allegedly falsely claimed a net operating loss carry back from Reinhard's 2005 return that enabled him to avoid paying $385,064 in taxes.  The 2005 return allegedly falsely overstated Reinhard's basis in real property that he sold by approximately $1.9 million.

The United States Trustees' broad authority to act and be heard in bankruptcy cases translates into extensive executive agency jurisdiction under 18 U.S.C. 1001.  Consequently, nearly any false statement made or false writing submitted to the U.S. Trustee's Office in a bankruptcy case could be prosecuted under the false statement statute, subject to proof that it was done "knowingly and willfully."

Florida investment advisor arrested and arraigned on multiple bankruptcy criminal charges

Following a two year federal investigation, Don W. Reinhard, a former Tallahasee investment advisor, has been charged in a 23 count indictment in the Northern District of Florida with numerous federal charges, including making false delcarations in his bankruptcy case, fraudulently concealing or transferring assets, making false statements by submitting false income tax returns to the United States Trustee and money laundering relating to the bankruptcy fraud charges.

According to this news report, Reinhard was arrested this morning and will be arraigned in Tallahassee.  As the indictment becomes available we will analyze this case further - with particular reference to the relatively rare false statement charges for submitting false tax returns to the U.S. Trustee's Office.

Collapse of alleged foreign currency trading scheme leads to fraudulent transfer charges

A federal jury in the Eastern District of Tennessee has indicted Louis Rivas on multiple charges of mail fraud, money laundering and fraudulent transfers in contemplation of bankruptcy relating to the collapse of Rivas' alleged foreign currency exchange firm - and its investment endeavor,  The Forex Project - which the indictment (available here) alleges was nothing but a classic Ponzi scheme.

According to the indictment, Rivas represented himself to be an experienced trader in foreign currency exchange operating through The Forex Project, which invested in "off market foreign currency exchange."  In approximately March 2007, Rivas devised a scheme to defraud by raising raising more than a million dollars in investments through false promises of high rates of return, recruiting investors as "equity agents" for the purpose of recruiting additional investors and paying early investors with income from later investors.  Rivas allegedly misapplied investor's funds for his personal use by purchasing numerous lavish assets.  As the scheme began to unravel, according to the indictment, several creditors filed an involuntary bankruptcy petition against Rivas on May 15, 2008.  Rivas, however, had already allegedly transferred hundreds of thousands of dollars - presumably to a safe place.

Those transfers gave rise to the bankruptcy criminal charges.  Counts _-_ charge Rivas with violating 18 U.S.C. section 152(7) by fraudulently transferring nearly $300,000 on May 19th and 20th allegedly "in contemplation of" the involuntary bankruptcy filing on May 15th and with "the intent to defeat the provisions of title 11."  In so charging, prosecutors followed the common practice of charging both alternative mental states present in the statute.  Section 152(7) requires proof that a defendant acted "knowingly and fraudulently" and either (a) "in contemplation of" a bankruptcy filing or (b) "with intent to defeat the provisions of title 11." 

While it is not uncommon for indictments to charge fraudulent intent together with both "contemplation" and intention to defeat the bankruptcy code, the charging pattern in this case appears unusual because of the timing of the alleged transfers in relation to the bankruptcy filing.  How, one may ask, could a person make a fraudulent transfer "in contemplation of" a case that already has been filed?  Does not the phrase "in contemplation of" refer to an expectation of a future event?  The Pattern Criminal Federal Jury Instruction for the Seventh Circuit (this case is not in the Seventh Circuit) says it does by stating that the phrase "in contemplation of" means "in expectation of, or planning for, the future probability of a bankruptcy proceeding."

Be that as it may, while the charging pattern here appears to be unusual on the facts it does not appear to be legally defective and perhaps additional facts will develop to explain it.  More to come?