Bankruptcy Bulletin
Contributing Editor: Alexander J. Beeby, Sapientia Law Group, PLLC
According to a press release issued by the U.S. Attorney’s Office, U.S. District Court Judge Tostrud sentenced a former Minnesota bankruptcy attorney on December 9, 2022, to eighteen months in federal prison for bankruptcy fraud as part of a plea agreement (for purposes of this article, I will refer to the now-disbarred attorney as the “attorney”). See United States v. Anderson, No. 21-CR-153 (D. Minn.). According to the plea agreement, the attorney admitted to assisting a client in committing bankruptcy fraud to avoid paying creditors. The client also plead guilty to bankruptcy fraud and was sentenced to 24 months of probation. See United States v. Rothers, No. 19-CR-239 (D. Minn.).
According to the court filings and press release, the attorney filed a chapter 7 bankruptcy petition in 2015 on behalf of his client, seeking discharge of approximately $175,000. Bankr. No. 15-43828 MER (Bankr. D. Minn.). However, the bankruptcy schedules failed to disclose multiple assets, including $100,000 in gold coins, $686,000 in company bank accounts, and $455,484 in uncashed checks. The attorney apparently knew about these assets as he had apparently helped the debtor try to hide these interests, including, for example, telling the gold-metal dealer to not list his client’s name on the receipt.
As to the companies, the attorney apparently helped the debtor create the companies to hide the debtor’s assets and then represented in the bankruptcy schedules these companies as having no net value to the estate or that the debtor had no equity interest in them. To do so, the attorney even apparently helped the client arrange for a sham lawsuit against one company to obtain a sizeable judgment against that company and offset the company’s assets on its balance sheet.
While the debtor initially received a discharge, in February of 2016, the trustee hired additional assistance to help investigate the debtor’s finances. By July of that year, the trustee began seeking 2004 examinations of the debtor and various third parties, including, by January of 2017, the attorney. By that month, the trustee began filing adversary proceedings to recover property. On June 6, 2017, the court revoked the debtor’s discharge. By the bankruptcy case closed, in 2018, the trustee had collected and distributed over $1 million to claimants and $230,000 for administrative expenses.
On July 14, 2021, the attorney was indicted on two federal criminal counts, including mail and wire fraud and bankruptcy fraud. On August 8, 2022, the attorney pled guilty to fraudulent concealment of property of a bankruptcy estate, under 18 U.S.C. § 152(1). The client was charged, on September 17, 2021, on one count of fraudulent concealment of bankruptcy assets, to which he pled guilty on November 7, 2022.
Helping his client hide over $1.3 million to avoid paying $175,000 ended up costing his client it all and garnering the debtor’s attorney a federal prison sentence. While this is certainly an extreme situation, it provides insight into the bankruptcy provisions of the Criminal Code.
Editors-in-Chief
C.J. Harayda, Stinson LLP
David M. Tanabe, Winthrop & Weinstine, P.A.
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