Indictment for Bankruptcy Crime in Palm Beach County

An indictment a few days ago against a chapter 7 debtor in Palm Beach County provides an occasion to review the bankruptcy crimes provisions of title 18 of the United States Code.  This indictment gives credence to the rule of thumb to beware of the debtor who mentions the words "Rolex watch." 

Recent IndictmentThe indictment for a bankruptcy crime against the former chapter 7 debtors in alleged that they "did knowingly and fraudulently conceal and cause to be concealed property belonging to the bankruptcy estate" in violation of 18 U.S.C §152.  First on the list of undisclosed property - a Rolex watch.

18 U.S.C. §152Section 152 of title 11 provides that [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) knowlingly and fraudulently makes a false oath or account 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 U.S. Attorney Manual provides some guidance. It explains that that elements of the offense of concealment under 18 U.S.C. § 152(1) are
1. the bankruptcy proceeding was in existence
2. the defendant fraudulent concealed the property from the custodian (such as the bankruptcy trustee)
3. the property belong to the estate

The manual makes reference to the cases of United States v. Guiliano, 644 F.2nd 85, 87 (2nd Cir., 1981) and United States v. Beery, 678 F. 2nd 856 (10th Cir. 1982), cert. denied, 471 U.S. 1066 (1985).

Jury not a Bankruptcy Judge
The U.S. Attorney's manual sets forth that it is a question for a jury to determine whether assets are property of the debtor and belong to the bankruptcy estate.  Query how this difference to this same determination being made by a bankruptcy judge in a bankruptcy case.  Interestingly enough, the manual makes reference to a bankruptcy judge testifying in the criminal case, but that the bankruptcy judges testimony "that property is an asset of the estate is inadmissible to prove that the assets in question belong to the bankruptcy estate."

"Might Be" Property of the EstateThe U.S. Attorney's  refers to the case of United States v. Cherek, 734 F.2d 1248, 1254 (7th Cir. 1984), cert. denied,  and takes the position that the all-encompassing definition of "estate" in section 541 of the Bankruptcy Code, even requires the debtor to disclose information about all property that "might be" property of the bankruptcy estate and to disclose "the existence of assets whose immediate status is uncertain."  It further takes the position that even if the asset is not ultimately determined to be property of the estate under the Bankruptcy Code, section 152 of title 11 "properly imposes sanctions on those who pre-empt a court's determination by failing to report the asset."

Concealment  The U.S. Attorney's manual also sets forth its position on the definition of concealment. It states that conceal "does not mean merely to secrete or hide away" but concealment also means to "prevent the discovery of the asset or to withhold knowledge of the asset."   United States v. Schireson, 116 F.2d 881, 884 (3d Cir. 1941); Burchinal v. United States, 342 F.2d 982, 985 (10th Cir.), cert. denied, 382 U.S. 843 (1965). It further explains that the concealment may take prior to the filing of the bankruptcy as well as after the filing of the bankruptcy. Concealment prior to the filing of a bankruptcy constitutes a single offense as there is only a single duty to disclose the existence of all assets but that each asset concealed after the filing of the bankruptcy petition constitutes a separate offense because each concealment represents a separate act with intent.

Further ReferencesOutlines on the topic of bankruptcy and related crimes is available here  and here. Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankruptcy Cases and Mortgage Modifications (305) 891-4055