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N Cal Atty
N Cal Atty, Attorney
Category: Bankruptcy Law
Satisfied Customers: 9340
Experience:  Since 1983
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Can the DOJ make a bankruptcy fraud claim on a fully

Customer Question

Can the DOJ make a bankruptcy fraud claim on a fully discharged bankruptcy that was not objected to?
An indictment for bankruptcy fraud has been filed. The indictment claims that real estate were hidden in family member names.
In the bankruptcy, the largest creditor was the IRS. Agents attended the BK hearing and a 2004 examination was conducted.
The BK court granted the bankruptcy and it was discharged without any adversarial actions or objections.
Now Federal prosecutors, through their own investigations and the grand jury have filed an indictment.
So - are there examples of cases that were brought forward for bankruptcy fraud before the original bankruptcy discharge was revoked?
Submitted: 11 months ago.
Category: Bankruptcy Law
Expert:  Maverick replied 11 months ago.

Welcome! My name is Maverick. Please give me a few minutes to analyze and/or research your inquiry and I will be back.

Expert:  Maverick replied 11 months ago.

Based on the laws cited below the DOJ can prosecute a BK fraud action for up to five years from the date of discharge.

841. Concealment of Property—18 U.S.C. § 152(1)

The concealment of property can be charged under either 18 U.S.C. § 152(1) or § 152(7). One of the important differences between these two paragraphs is that under Subsection (1) the property which was concealed must be property of the bankruptcy estate.

Subsection (1) of Section 152 provides that:

A person who . . . 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;. . .shall be fined. . ., imprisoned. . ., or both.

The elements of the offense of concealment under 18 U.S.C. § 152(1) that the government must prove are:

  1. the bankruptcy proceeding was in existence;
  2. the defendant fraudulently concealed the property from the custodian; and
  3. the property belonged to the bankruptcy estate.

Devitt, Blackmar & O'Malley, 2 Federal Jury Practice and Instructions, § 24.03 (4th ed. 1990); United States v. Guiliano, 644 F.2d 85, 87 (2d Cir. 1981); United States v. Beery, 678 F.2d 856 (10th Cir. 1982),cert. denied, 471 U.S. 1066 (1985).

Title 18 U.S.C. § 3284 contains a special statute of limitations which applies to concealment of assets cases:

The concealment of assets of a debtor in a case under title 11 shall be deemed to be a continuing offense until the debtor shall have been finally discharged or a discharge denied, and the period of limitations shall not begin to run until such final discharge or denial of discharge.

    Where the debtor either receives a discharge or is denied a discharge by court order, the application of § 3284 is easy. The five year period begins with the date of the discharge or denial of the discharge.

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    Customer: replied 11 months ago.
    Hi Maverick,Thanks for the response, but my question wasn't really trying to get at the statute of limitations. The heart of the question is more - before the DOJ may pursue the criminal case, don't they have a duty to object with the bankruptcy court first? If they do believe that there is fraud, isn't not working to overturn the discharge first prejudicial to the creditors in the bankruptcy? Are there cases I can refer to where defendants were charged and found guilty of BK fraud without having an objection to or a reversal of their previously discharged BK? Better yet, are there any cases where courts have found that the existence of an intact bankruptcy, in the absence of any new evidence, formed a kind of estoppel for a fraud charge ?
    Expert:  Maverick replied 11 months ago.

    Please re-read the answer that I provided. What the law is saying is that the DOJ may pursue a fraud charge EVEN IF your BK was discharged. Also notice that the elements of the fraud claim do not depend on whether the case was discharged or not.

    Expert:  Maverick replied 11 months ago.

    Please see part answer above. I am finding some authority for the proposition that a BK judge can revoke a discharge and refer it to the US Atty's office for criminal prosecution; but I do not see anything that says that revoking the discharge is a prerequisite to criminal prosecution.

    Customer: replied 11 months ago.
    this is the track of thought I was pursuing. The DOJ must be referred a case. In this instance, the referring party was the IRS. The IRS has believed for years that there were hidden assets in this case as they pursued it. They attended the bankruptcy proceedings and called for a 2004 exam. They made their case to the judge that there was fraud, but the BK judge did not agree, and the bankruptcy was granted. There were no further follow up or objections (which it is their right to do). So then, they decided to take the case to the DOJ to continue pleading their case about hidden assets. The DOJ has followed through all the way through indictment and mention restitution to the IRS in their filings - however they make no effort to pursue restitution on behalf of any other creditors - this seems like unfair preference to the IRS - who is using the DOJ as their personal collection agency in this case. So I am hoping to see if there has ever been another case where a fraud indictment came BEFORE a discharge was overturned in BK court.
    Expert:  Maverick replied 11 months ago.

    I will have to opt out and let another expert try. I have spent well over an hour trying to find case law on this for you using the free legal databases that I have access to. If you do not find a satisfactory answer, please let me know as I may have to make a trip to the law library to find a definitive answer for you. My fee to do that would be $300.00

    Expert:  N Cal Atty replied 11 months ago.

    New Expert here.

    Has the government identified any specific property that was alleged to have been concealed during the bankruptcy case?