Examples of Bankruptcy Fraud Investigations - Fiscal Year 2014
The following examples of bankruptcy fraud investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
Virginia Businessman Sentenced on Fraud and Bankruptcy Charges
On March 10, 2014, in Charlottesville, Va., Michael Wayne Harding, of Keswick, Va., was sentenced to 30 months in prison and ordered to pay more than $2,019,403 million in restitution. Harding previously pleaded guilty to one count of wire fraud and one count of bankruptcy fraud. According to a statement of facts, Harding was the president and sole employee of a company called HMC Holdings. On numerous occasions, Harding attempted to secure mortgages for properties HMC Holdings owned based on improvements that had been made to those properties. However, in order to secure the mortgages, Harding was required to provide the mortgage companies with proof that work had been done to the properties. Harding created fake invoices in order to secure the mortgages. Harding also admitted that after being issued checks by the mortgage companies intended for the contractors, Harding took those checks to local businesses and had the funds converted for his own personal use. In April 2011, Harding filed for bankruptcy. During his bankruptcy proceedings he filed false Monthly Operating Reports, failed to deposit all income into his Debtor-in-Possession account, which is required by the Court, and lied about forging signatures on releases, liens and deeds of trust. The defendant also lied about his relationship with a business partner in connection with a proposed sale of property during his corporate bankruptcy.
Businessman Sentenced for Bankruptcy Fraud and Money Laundering
On March 4, 2014, in Sacramento, Calif., Steven K. Zinnel, of Gold River, was sentenced to 212 months in prison, fined $500,000 and ordered to forfeit real estate and corporate interests worth over $2.8 million. According to trial testimony, Zinnel concealed assets from the bankruptcy court by putting his property in other people’s names. One of the things that Zinnel hid from the bankruptcy court was an investment in an electrical infrastructure company in which he had invested as a “silent partner.” Zinnel invested hundreds of thousands of dollars and prepared the corporate filings, but his name did not appear in any public filing of this company. For years, the company paid distributions to Zinnel as an owner, but those distributions were disguised as payments to a shell company, Done Deal, Inc., held in the name of co-defendant Derian Eidson. The purpose of establishing Done Deal was to “raid the coffers” of the electrical infrastructure company without being identified anywhere. After the successful concealment of the property and the discharge of Zinnel’s bankruptcy, Zinnel laundered funds back to himself through Done Deal, Eidson's attorney-client trust account, and her personal bank account. Zinnel throughout this time used several different corporations registered in others’ names, including one registered with a forged signature, to disguise his control of property and to direct the disposition of money. Eidson gave Zinnel signature authority over her company’s bank account, which he used for his personal expenses. Eidson will be sentenced at a later date.
Hawaii Woman Sentenced for Bankruptcy Fraud
On Feb. 27, 2014, in Honolulu, Hawaii, Michelle Malufau, of Laie, Oahu, was sentenced to 12 months and one day in prison, three years of supervised release and ordered to pay $33,252 in restitution to her various creditors. A jury convicted Malufau on Nov. 12, 2013, of two counts of bankruptcy fraud related to the Chapter 7 bankruptcy that she filed in 2011. Malufau made false statements under penalty of perjury on documents filed in the 2011 bankruptcy, and also testified falsely under oath at a hearing in that same proceeding. According to evidence presented at trial, Malufau knowingly and fraudulently concealed at least three assets that she owned and/or controlled during her 2011 bankruptcy. Malufau received a discharge of over $1 million of debt through that proceeding.
New Jersey Woman Sentenced for Bankruptcy Fraud
On December 17, 2013, in Trenton, N.J., Marjorie Parise, of Manahawkin, N.J., was sentenced to 24 months in prison, three years of supervised release and ordered to pay $353,404 in restitution. Parise previously pleaded guilty to one count of bankruptcy fraud for concealing from a bankruptcy trustee profits she had made on a Ponzi scheme investment. According to court documents, in 2003, Parise and her husband invested approximately $115,750 with a company known as Global Trading Investments LLC and received in return profits totaling $429,154. However, the owners of Global Trading were operating a Ponzi scheme and the profits that Parise received were actually the investments of other individuals. Global Trading subsequently filed for Chapter Seven bankruptcy protection. On August 24, 2006, a judgment was entered against Parise requiring her to return the profits she had made from her investments in the scheme. Parise instead took numerous steps to fraudulently conceal a significant amount of funds and assets from the trustee, including making false statements and omissions during a deposition in the bankruptcy proceeding. On July 7, 2008, Parise filed for individual Chapter Seven bankruptcy protection. On her bankruptcy petition, she fraudulently failed to report millions of dollars in real estate holdings plus hundreds of thousands of dollars in personal assets.
North Carolina Doctor Sentenced for Tax Offense
On October 3, 2013, in Raleigh, N.C., Susan Marie Lee was sentenced to 36 months in prison and ordered to pay $496,854 in restitution to the IRS. Lee pleaded guilty on May 14, 2013 to a criminal information charging her with corrupt interference with the Internal Revenue laws. According to the investigation, from 1996 through and 2009, Lee endeavored to obstruct and impede the IRS by failing to file income tax returns or pay taxes she claimed to owe, filing false income tax returns, forming sham entities to disguise personal expenses as payments related to her dental practice, and transferring ownership of her real property to nominees. Lee sought to divert her income into sham corporations and hide her assets from seizure. Finally, in 2009, she filed for bankruptcy in an effort to discharge nearly $1 million in tax debt due and owing to the IRS.