Examples of Bankruptcy Fraud Investigations - Fiscal Year 2011
The following examples of bankruptcy fraud investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.
California Tomato Hauler Sentenced for Bankruptcy Fraud
On March 29, 2011, in Sacramento, Calif., James. D. Burke, of Vacaville, was sentenced to 15 months in prison, followed by three years of supervised release, and ordered to pay a $100,000 fine. Burke was convicted by a trial jury on May 27, 2010, of three counts of bankruptcy fraud. At trial, the evidence showed that Burke was formerly the president of Truck-A-Way (TAW), a Vacaville trucking company that hauled millions of dollars worth of tomatoes and other agricultural products throughout the Central Valley. After losing its largest client, Burke and his brother filed for bankruptcy on behalf of the company. During the course of the bankruptcy, he filed false documents and made false statements relating to TAW’s assets in an attempt to hide those assets from TAW’s numerous creditors. Those assets included numerous tractor-trailers that he had used to secure a $3 million loan, and approximately $4 million in TAW loans and revenue that Burke had diverted to his own accounts. According to the Indictment filed in September 2005, Burke and others created numerous trusts and shell companies to conceal TAW’s funds and assets. From on or about September 8, 2000 through November 2000, Burke deposited $2.15 million into a new TAW account. These funds consisted of checks from businesses for services provided by TAW and other TAW funds which had never been recorded on TAW's books or as income to the company.
Real Estate Broker Sentenced to Prison for Bankruptcy Fraud
On March 9, 2011, in Atlanta, Ga., Robert Negrelli, of Alpharetta, Georgia, was sentenced to 15 months in federal prison and three years of supervised release on bankruptcy fraud charges. According to the U.S. Attorney and other information presented in court, on March 25, 2005, Negrelli filed a bankruptcy petition in the United States Bankruptcy Court for the Northern District of Georgia. At the time, Negrelli was a licensed real estate broker and owned Negrelli Realty, a real estate company in Alpharetta that specialized in selling high-end homes and horse farms in the area. During his bankruptcy, Negrelli made a number of materially false statements that related to the merits of his bankruptcy case. Negrelli falsely stated that his income from employment or operation of his business was only $81,000 in the two-year period before his bankruptcy filing. In fact, Negrelli's federal income tax returns showed that in 2004 and 2005, he reported gross income of approximately $210,000 and $350,000, respectively. When confronted, he admitted he made significantly more income through the operation of Negrelli Realty. Similarly, Negrelli also falsely represented in the course of the bankruptcy case that he had listed all potential creditors in bankruptcy when he knew there were creditors with unsecured nonpriority claims that he failed to disclose. His manipulation of the bankruptcy process caused a number of his debts to be improperly discharged.
Minnesota Auto Mogul Sentenced for Bankruptcy Fraud and Conspiracy to Commit Wire Fraud
On February 11, 2011, in Minneapolis, Minn., Dennis Hecker was sentenced to 120 months in prison and ordered to pay more than $31 million in restitution for conspiracy to commit wire fraud and bankruptcy fraud in connection with his scheme to defraud financial lenders and others out of millions of dollars. According to court documents, Hecker owned and operated numerous Minnesota auto dealerships and businesses that provided fleet vehicles to car rental companies. Those businesses operated under different corporate names but, collectively, were known as the “Hecker organization.” Hecker admitted that from November of 2006 through June of 2009, he conspired with others to defraud Chrysler Financial Services and other commercial lenders from which he and the Hecker organization borrowed money for business operations. In the fall of 2007, Hecker conspired to present fraudulent documents to Chrysler Financial in an effort to obtain $80 million in financing for the purchase of 5,000 vehicles. Documents provided to Chrysler Financial failed to specify the true nature and value of the collateral acquired by Hecker and the Hecker organization to secure the financing requested. As a result of false statements and misrepresentations, Chrysler Financial loaned Hecker and the Hecker organization more than $80 million and ultimately lost more than $10 million. He also misled Chrysler Financial into financing vehicles from another vendor. As a result of those actions, other lenders suffered a collective financial loss of more than $10 million. Hecker filed personal bankruptcy in June of 2009, seeking to discharge, among other amounts owed, the $10 million debt to Chrysler Financial. After filing bankruptcy, however, Hecker admittedly concealed assets from the bankruptcy trustee. For example, he transferred $33,057 into someone else’s bank account, over which he exercised control. He also transferred approximately $80,000 to that same individual, arranging for that individual to deposit the money, with instructions to return it to him later.
California Couple Sentenced on Tax Evasion and Bankruptcy Fraud Charges; Extradited from Costa Rica to Face Charges
On January 24, 2011, in Sacramento, Calif., Lin Bartee and Christine Bartee, both formerly of Grass Valley, were each sentenced to 24 months in prison and ordered to pay $239,472 in restitution. The Bartees were indicted on June 26, 2008, for conspiring to evade income tax and fraudulently concealing property in connection with a bankruptcy case. According to court documents, Lin and Christine Bartee admitted to receiving at least $260,000 in taxable income in 2002. However, instead of filing a tax return Lin Bartee sent a document to the Internal Revenue Service (IRS) indicating he was not required to pay taxes. From August 2002 through March 2003, the Bartees admitted to transferring more than $230,000 to a third party, who then transferred much of the money to Costa Rica. In April of 2003, the Bartees filed a voluntary Chapter 7 bankruptcy petition, in which they claimed to have minimal assets and denied making any monetary transfers. On November 9, 2004, the bankruptcy court declined to discharge the Bartees’ debts, and the Bartees left the United States for Costa Rica. They were arrested in a remote area of Costa Rica on May 14, 2009, and brought to the United States in January of 2010.
Overland Park Man Sentenced on Bankruptcy Fraud Charges
On November 3, 2010, in Topeka, Kan., James Moser was sentenced to 121 months in prison and ordered to pay $1.5 million in restitution. According to court documents, Moser was found guilty in June 2010 on one count of conspiracy to commit bankruptcy fraud and eight counts of bankruptcy fraud. On April 27, 2005, Moser and his wife, Doris Elaine Moser, filed for Chapter 7 bankruptcy. During the trial, prosecutors presented evidence that James Moser concealed information about the Mosers’ option to purchase 16.5 acres of prime real estate in Olathe, Kan., where they operated Hallmark Arabian Farms, LLC, a fully equipped Arabian horse training facility including barn, stables, saddles, tack and personal property; concealed the fact the Mosers had $125,000 worth of gold and silver coins and collectable stamps. James Moser claimed the items had been transferred to F. Jeffrey Miller, who owned the land they rented for Hallmark Arabian Farms. In fact, the items only had been pledged as collateral for rent owed to Miller; concealed the Mosers’ right to a commission of up to $450,000 for marketing and sale of the property. Doris Moser was sentenced to three years probation and ordered to pay $5,000 restitution.
New Yorker Sentenced to 20 Years for Fraud Scheme and Bankruptcy Fraud
On October 22, 2010, in Manhattan, N.Y., Clyde "Peter" Hall was sentenced to 240 months in prison, followed by three years of supervised release, and ordered to forfeit $4.275 million and to pay over $1.9 million in restitution. Hall, who decades ago played football for the New York Giants, was also sentenced on separate charges of bankruptcy fraud. According to court documents, Hall held himself out as the "representative" or "attorney-in-fact" of two purported business trusts and told his victims that in exchange for upfront or advance fees he could obtain various bank instruments worth hundreds of millions of dollars which could be used as collateral for loans or to fund trading in high yield investment programs. Hall used the advance fees to pay personal and family expenses and for the benefit of his co-conspirators. In addition to the advance-fee scheme, Hall also committed bankruptcy fraud. In 2004, Clyde Hall filed or caused to be filed a series of bankruptcy petitions in U.S. Bankruptcy Court for the Southern District of New York, which contained false representations. These actions were for the purpose of halting the eviction of Hall and his wife from an apartment and allowing them to remain in the apartment without paying rent. The Halls eventually moved out of the apartment but never paid approximately $81,200 in rent.