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Bankruptcy Fraud - Federal Criminal Defense Lawyer

Bankruptcy fraud is defined as "[a] fraudulent act connected to a bankruptcy case; esp[ecially] any of several proscribed acts performed knowingly and fraudulently in a bankruptcy case, such as concealing assets or destroying, withholding, or falsifying documents in an effort to defeat bankruptcy-code provisions." Black's Law Dictionary 686 (8th ed. 2005). The criminal provisions for bankruptcy fraud are found at 18 U.S.C. §§ 151 et seq. (2007). Very often a defendant charged with committing bankruptcy fraud will also be charged with money laundering under 18 U.S.C. §§ 1956 or 1957. See, for example, United States v. Dennis, 237 F.3d 1295 (11th Cir. 2001); United States v. Butler, 211 F.3d 826, (4th Cir. 2000); United States v. Ladum, 141 F.3d 1328 (9th Cir. 1998); United States v. Levine, 970 F.2d 681 (10th Cir. 1992).

18 U.S.C. § 151 (2007).

Section 151 simply makes it clear that "debtor" refers to a "debtor concerning whom a petition has been filed under title 11." Title 11 contains the bankruptcy provisions in the United States Code.

18 U.S.C. § 152 (2007).

The Crime
Under section 152, it is a crime for a person to

• knowingly and fraudulently conceal any property belonging to the estate of a debtor 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; 18 U.S.C. § 152(1) (2007);
• knowingly and fraudulently make a false oath or account in or in relation to any case under title 11; id. § 152(2) (2007);
• knowingly and fraudulently make a false declaration, certificate, verification, or statement under penalty of perjury, in or in relation to any case under title 11; id. § 152(3) (2007);
• knowingly and fraudulently, in a personal capacity or as or through an agent, proxy, or attorney,
  • present any false claim for proof against the estate of a debtor, or
  • use any such claim in any case under title 11,; id. § 152(4) (2007);
• knowingly and fraudulently receive any material amount of property from a debtor after the filing of a case under title 11, with intent to defeat the provisions of title 11; id. § 152(5) (2007);
• knowingly and fraudulently give, offer, receive, or attempt to obtain any money or property, remuneration, compensation, reward, advantage, or promise thereof for acting or forbearing to act in any case under title 11; id. § 152(6) (2007);
• in a personal capacity or as an agent or officer of any person or corporation, in contemplation of a case under title 11 by or against the person or any other person or corporation, or with intent to defeat the provisions of title 11, knowingly and fraudulently transfer or conceal any of his property or the property of such other person or corporation; id. § 152(7) (2007);
• after the filing of a case under title 11 or in contemplation thereof, knowingly and fraudulently conceal, destroy, mutilate, falsify, or make a false entry in any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor; id. § 152(8) (2007); or
• after the filing of a case under title 11, knowingly and fraudulently withhold from a custodian, trustee, marshal, or other officer of the court or a United States Trustee entitled to its possession, any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor. Id. § 152(9) (2007).

The Punishment
A violaton of section 152 can be punished by

• a fine, imprisonment for not more than 5 years, or both. 18 U.S.C. § 152 (2007).

Case Law Interpreting Section 152
When the government brings a criminal bankruptcy fraud charge against a defendant, it does not need to present evidence regarding the substance of the federal bankruptcy laws to prove the intent to defeat bankruptcy laws. See United States v. Gibbs, 594 F.2d 125, 127 (5th Cir. 1979). To be convicted under section 152(1), (3), and (7), the "defendant must be proven to have acted 'knowingly and fraudulently.'" United States v. Hughes, 401 F.3d 540, 545 (4th Cir. 2005). Furthermore, "to support a conviction for making a false oath in bankruptcy under [section 2] the prosecution is required to establish"

1. the existence of bankruptcy proceedings,
2. that a false statement was made in the proceedings under penalty of perjury
3. as to a material fact
4. and that the statement was knowingly and fraudulently made. United States v. Cutter, 313 F.3d 1, 4 n.4 (1st Cir. 2002).

Under certain other provisions of section 152, in order to convict a defendant on a count of bankruptcy fraud, the jury is required to find beyond reasonable doubt four things:

1. that the defendant was adjudicated as bankrupt
2. that the defendant owned a cash receipt
3. that the defendant had concealed or aided and abetted the concealment of cash receipts from bankruptcy trustees; and
4. that he had done so knowing that a trustee had been appointed and he had the intent to defraud a creditor. United States v. Guiliano, 644 F.2d 85, 87 (2d Cir. 1981) (addressing an unspecified violation of section 152).

Above all, it is an essential element of a violation of section 152 that the concealment is made knowingly and fraudulently, and to establish such fraud, the government must show a false representation of material fact, made with knowledge of the statement's falsity and with intent to deceive. United States v. Beery, 678 F.2d 856, 866 (10th Cir. 1982).

There is some debate whether it is "improper or even illegal for a debtor to offer or for a creditor to receive any consideration for the dismissal of a complaint objecting to discharge." See In re Taylor, 190 B.R. 413, 416 n.3 (1995) (citing 18 U.S.C. § 152(6)).

Finally, please note that there is no right to a civil cause of action under section 152 for filing a false proof of claim in a bankruptcy proceeding. Heavrin v. Boeing Capital Corp., 246 F. Supp. 2d 728, 731 (W.D. Ken. 2003).

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