The criminal provisions relating to bankruptcy fraud were enacted to preserve honest administration in bankruptcy proceedings and to ensure the distribution to creditors of as large a portion of the bankrupt’s estate as possible. These criminal sanctions are embodied in Title 18, United States Code, §§ 152 to 157. The provisions of 18 U.S.C. §§ 152 to 157 are applicable to any proceeding, arrangement or plan under the Bankruptcy Code, Title 11, United States Code.

Bankruptcy fraud can involve concealment of assets, false oath or account, false statements or declarations, false social security numbers, omission or assets, false claims, fraudulent receipt of property, extortion, bribery, fraudulent transfer or concealment, bust out schemes, destruction or alteration of records, falsifying records, embezzlement, disregard of bankruptcy laws, false claim to be in bankruptcy, and concealing a scheme to defraud.  Because bankruptcy fraud usually involves hiding property, many prosecutions also implicate the money laundering statutes.

Section 3057(a) of Title 18, United States Code, requires a judge, receiver or trustee having reasonable grounds for believing that any violation of laws of the United States relating to insolvent debtors, receiverships or reorganization plans has been committed, to report all the facts and circumstances to the appropriate United States Attorney (USA). Upon receipt of this report, the USA determines whether an investigation should be commenced; and upon completion of this investigation, the USA decides whether criminal action is warranted. A report by a judge, receiver or trustee of possible violations is not a condition precedent to the initiation of an investigation.

Representative Case

United States District Court, Middle District of Florida – Trombley & Hanes represented an attorney investigated by the United States Attorney’s Office for the Middle District of Florida for concealing assets, failing to disclose assets, and submitting false statements during a bankruptcy proceeding. Trombley & Hanes prepared a comprehensive analysis of the bankruptcy record to show that the assets had been disclosed. Despite a potentially viable defense, the attorney elected to resolve his case prior to trial.