Bankruptcy Fraud Lands Two California Women In Hot Water

Bankruptcy Fraud Lands Two California Women In Hot Water

By |December 19th, 2012|

Every person who files for bankruptcy needs to be absolutely, completely honest.  The penalty for dishonesty is a conviction for bankruptcy fraud, as two women in separate California bankruptcy cases found out.

california bankruptcy fraud

The rule in bankruptcy is, “disclose, disclose, disclose.”  The truth, as they, say, shall set you free.  If you follow the rules and disclose all of your assets and debts then you’ll likely have a good idea of the outcome of your bankruptcy case when the case is filed.

If, on the other hand, you play fast and loose with the facts and your disclosures then you risk the wrath of federal law.  Two California women in separate bankruptcy cases learned that lesson the hard way.

Bankruptcy Fraud

If you’ve ever wandered into bankruptcy court you’ve likely seen a big sign cautioning you against lying or making false statements under oath.  Under 11 USC 521, you can be fined or jailed for a maximum of five (5) years if you knowingly and fraudulently do any of the following in connection with your bankruptcy case:

  • conceal any property;
  • make a false statement or oath;
  • give, offer, receive, or attempt to obtain any money or property for acting or not acting;
  • transfer or conceal property;
  • conceal, destroy, mutilate, falsify, or make a false entry in any recorded information relating to your property or financial affairs; or
  • withhold any recorded information (including books, documents, records, and papers) relating to your property or financial affairs.

If you’re not the person filing for bankruptcy, there are other things you’re not allowed to do – but today we’re just talking about you.

The Undisclosed House In Monaco

Rockxanna Hawks, a 43 year-old woman in filed for bankruptcy in March 2008 in California and claimed that she owned no real estate. She seemed to forget, however, about that house in France.

This seems odd, given that she purchased the house with her ex-husband in in 1999 for the equivalent, in francs, of $182,000. As you can see, the view is quite nice.

Hawks was prosecuted for bankruptcy fraud about four (4) years after her bankruptcy discharge was entered.  Her sentencing by United States District Judge William Q. Hayes was to serve one year of probation.

Dripping In Jewels

54 year-old San Diego resident Ofelia DeAusen filed for Chapter 7 bankruptcy protection with her husband in the United States Bankruptcy Court for the Southern District of California in 2008 with about $631,000 in debt including their mortgage. At the time of filing she claimed that she owned about $1,000 worth of fur and jewelry.

In truth, Ofelia was holding onto quite stash.  There was a 1.64 carat diamond ring; a diamond-studded gold bangle; a 10-diamond white gold ring; a large, 16-diamond men’s ring; three Movado watches; a yellow and white gold ring with nine diamonds surrounded by baguettes; and one yellow gold engagement setting with one larger diamond surrounded by smaller diamonds and baguettes.

Clearly, Ofelia and her husband didn’t follow the rules of disclosure.

Their bankruptcy discharge was denied.

She pled guilty to knowingly and fraudulently concealing the jewelry and watches from the Bankruptcy Court and her creditors. United States District Judge Michael M. Anello sentenced DeAusen to serve three years of probation.

Both Represented by Lawyers

You’re probably wondering how this could have happened, and whether the bankruptcy lawyer hired by each of these women could have done a better job.  Personally, I doubt it.

If someone’s going to lie, they’ll do so whether they have a bankruptcy lawyer or not.  Both of these people copped to the fact that they intentionally lied about their assets – no lawyer could have reasonably shaken it out of them.

It’s Not Worth The Lie

Though the sentencing in both of these cases could have been worse, I’m sure either of these women had to pay their lawyers a tidy sum to get them through the process.

That money could have gone to paying out a Chapter 13 bankruptcy or even working out deals with the creditors – Hawks, for example, had about $24,000 in unsecured debt when she filed for bankruptcy.

If you’re filing for bankruptcy, you know you’re in over your head.  You can be honest with your lawyer and work though any issues, or you can lie and suffer the consequences.  Your choice.

News source:  FBI


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About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.