Female White-Collar Crime Divas-Mordern Day Thieves

Bankruptcy Fraud- gets woman 27 months in prison

Bankruptcy Fraud

“Forgiveness. The experience of reconciliation following upon some breach of trust, marked on the one side by the acknowledgment of wrongdoing and the desire to make amends and on the other side by the capacity to understand and the willingness to resume friendly relations.” Anton T. Boisen

Forgiveness, isn’t that what bankruptcy suppose to be all about. But, how can you ask for forgiveness when your game is deception.

Today’s CrimeDiva is, Diana Stout, 56, of Bethesda, Maryland, pleaded guilty to false statement in bankruptcy, and concealment of assets, in connection with her Chapter 7 Bankruptcy case. You heard the old saying “what a tangled web we weave, when first we practice to deceive, ” Sir Walter Scott.

According to Ms. Stout plead agreement, from April 2010 through June 2011, Stout engaged in a scheme to defraud creditors in her Chapter 7 bankruptcy case.  The Chapter 7 bankruptcy process is designed to provide a “fresh start” by liquidating all assets of the debtor and distributing the proceeds of the bankruptcy estate to creditors. A Chapter 7 bankruptcy trustee is appointed to gather these assets and generally act on behalf of unsecured creditors.

The filing of the bankruptcy petition prevented Stout’s former boyfriend from proceeding in a civil complaint he had filed against Stout and two of her children claiming that Stout had misappropriated more than $1 million of his assets for her own use or the use of her children, including for the purchase of property in South Carolina. Stout and her daughter had purchased the property, which was titled in both their names, in February 2008, with funds provided by Stout and her boyfriend. In July 2009, after Stout’s relationship with her boyfriend had ended, Stout transferred her interest in the property to her daughter for $1.

In order to conceal her assets, when Stout filed her bankruptcy petition she failed to disclose: that she had transferred the South Carolina property to her daughter; that she owned a diamond bracelet with 75 individually set diamonds in 18kt white gold; that she owned 797 shares of common stock in Eagle Bancorp Inc.; and that she owned a 1993 Toyota Supra and 2005 Chevrolet Avalanche SUV, in addition to the two vehicles listed. Between October 2010 and May 2011, Stout sold the Toyota Supra for $14,000; the stock for a total of $10,125.91; and the diamond bracelet for $85,000, none of which she reported to the bankruptcy trustee.

Stout’s bankruptcy estate included a home in Hagerstown, Maryland. In November 2010, Stout filed an insurance claim seeking reimbursement for necessary repairs to the property, resulting from water damage. She did not notify the Chapter 7 Trustee that she was seeking to obtain insurance proceeds relating to property of the bankruptcy estate. After receiving the checks, which were issued jointly to her and the contractors who were to perform the work, Stout forged the signatures of the contractors, converted the proceeds of all three checks to her own use, and did not use any of the money to perform the needed repairs. The bankruptcy trustee was forced to use other assets of the bankruptcy estate to perform the needed repairs.

On February 13, 2011, the bankruptcy trustee initiated proceedings in the bankruptcy court which sought to recover Stout’s interest in the South Carolina property, alleging that the transfer was intended to defraud Stout’s creditors and that Stout did not receive reasonably equivalent value for the transfer. Shortly thereafter, Stout signed and had a revised deed filed which falsely stated that the property had been transferred to Stout’s daughter in exchange for $75,000 paid to Stout. Stout then filed an “Answer” to the Trustee’s complaint, which she signed on behalf of her daughter, falsely stating that her daughter had paid Stout $75,000 for her interest in the South Carolina property. Stout knew that the statements were false and she admitted that she made them with the intent to defeat the Chapter 7 Trustee’s legal action and to defraud her creditors.

Between March 15 and March 30, 2011, Stout also filed numerous false pleadings purporting to withdraw a claim for payment that had been filed by Stout’s creditors, and which bore either typewritten or forged handwritten signatures purporting to be from the named creditor. In fact, the creditor was not aware of the filing and had not signed, nor authorized such a filing. Many of the pleadings also contained a fraudulent certificate of service bearing the typewritten signature of Stout’s bankruptcy attorney, who in fact did not prepare or serve these pleadings, or authorize Stout to sign them on his behalf.

Ms. Stout was sentenced to 27 months in federal prison, three years of supervised release and ordered to pay $155,747.83 in restitution.

Wow!  Just think about this for a moment.  Ms. Stout put in a great deal of effort to not pay $155,747.83, which cannot be worth going to prison for over two and a half-years, plus three years of supervised release.  That is just like one foot in prison and the other out, and then still have to pay the money.  Did anyone learn anything from this unfortunate act of deception? I hope so.


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