18 U.S.C. § 152 "attempts to cover all the possible methods by which a bankrupt or any other person may attempt to defeat the Bankruptcy Act through an effort to keep assets from being equitably distributed among creditors." Stegeman v. United States, 425 F.2d 984, 986 (9th Cir.), cert. denied, 400 U.S. 837 (1970)(citation omitted; emphasis in original). Moreover, "18 U.S.C. § 152 was enacted to serve the important interests of government, not merely to protect individuals who might be harmed by the prohibited conduct." Id.
The nine paragraphs of the section prohibit the following activities:
- the concealment of property belonging to the estate of a debtor;
- the making of false oaths or accounts in relation to any case under Title 11;
- the making of a false declaration, certificate, verification or statement under penalty of perjury as permitted under Section 1746 of Title 28 or in relation to any case under Title 11;
- the making of false claims against the estate of a debtor;
- the fraudulent receipt of property from a debtor;
- Bribery and extortion in connection with a case under Title 11;
- transfer or concealment of property in contemplation of a case under Title 11;
- the concealment or destruction of documents relating to the property or affairs of a debtor; and
- the withholding of documents from the administrators of a case under Title 11.
The separate paragraphs of Section 152 create separate crimes, the violation of which may be indicted separately. United States v. Gordon, 379 F.2d 788, 790 (2d Cir.), cert. denied, 389 U.S. 927 (1967); United States v. Arge, 418 F.2d 721 (10th Cir. 1969). Separate violations of separate paragraphs of § 152 constitute multiple counts, because each requires proof of a different set of facts. United States v. Roberts, 783 F.2d 767 (9th Cir. 1985); United States v. Kaldenberg, 429 F.2d 161 (9th Cir.), cert. denied, 400 U.S. 929 (1970); United States v. Christner, 66 F.3d 922, 928 (8th Cir. 1995).
However, it is not appropriate to allege two offenses and impose two convictions as a result of the same set of facts. See United States v. Ambrosiani, 610 F.2d 65 (1st Cir. 1979), cert. denied, 445 U.S. 930 (1980). In United States v. Graham, 60 F.3d 463 (8th Cir. 1995) the charging of three separate counts of making false statements was not permitted even though the debtor told the same false statement to three different people at three successive meetings of creditors because the repetition of the false statement did not add to the harm sustained by the bankruptcy estate.
KNOWINGLY AND FRAUDULENTLY: All the crimes described in the various paragraphs of Section 152 require that the criminal act be done "knowingly" and "fraudulently." An inadvertent error does not support a violation of Section 152 because the statute proscribes only false statements that are made "knowingly and fraudulently." United States v. Ellis, 50 F.3d 419, 426 (7th Cir.), cert. denied, 116 S. Ct. 143 (1995).
The term "fraudulently" means that the act was done with the intent to deceive. United States v. Diorio, 451 F.2d 21, 23 (2d Cir. 1971), cert. denied, 405 U.S. 955 (1972). Fraudulent intent may be proven circumstantially. United States v. Goodstein, 883 F.2d 1362, 1370 (7th Cir. 1989), cert. denied, 494 U.S. 1007 (1990); United States v. Weichert, 783 F.2d 23 (2d Cir.), cert. denied, 479 U.S. 831 (1986)(fraudulent intent inferred from the hurried formation of a new company after the debtor company has filed Chapter 11 and from the diversion of assets before a trustee is appointed); and United States v. Catabran, 836 F.2d 453, 459 (9th Cir. 1988)(removal of the carpeting which belonged to the landlord was admissible to show intent to start new business with old business' assets, even though carpeting was not an asset of the estate.
The statutory requirement that the underlying acts be performed knowingly requires only that the acts be voluntary and intentional; the government does not have to show that the defendant knew that he or she was breaking the law. United States v. Zehrbach, 47 F.3d 1252 (en banc)(3d Cir. 1995), cert. denied, 115 S. Ct. 1699 (1995).
A jury instruction that "an act is done 'knowingly' when that act is done voluntarily and intentionally, not because of mistake or accident" does not need to be qualified by the phrase "or other innocent reason" where the jury is otherwise instructed on a good faith reliance defense. United States v. Smithson, 49 F.3d 138, 142 (5th Cir. 1995).
IN CONTEMPLATION OF BANKRUPTCY: Failure of the government to show that the defendant was contemplating a bankruptcy or intended to defeat the bankruptcy laws can result in a reversal of a conviction for transferring property in contemplation of bankruptcy. See United States v. Tashjian, 660 F.2d 829, 842 (1st Cir.), cert. denied, 454 U.S. 1102 (1981). However, the jury is entitled to "put two and two together" to decide how far back defendant actually contemplated bankruptcy. For example, in United States v. Haymes, 610 F.2d 309 (5th Cir. 1980) the jury found a contemplation of bankruptcy at the time defendant started trying to generate a greater cash flow.
Circumstantial evidence of pre-petition activity such as secret deals among officers and the weak financial condition of a company can be used to show that the defendant's acts were in contemplation of bankruptcy. United States v. Martin, 408 F.2d 949, 954 (7th Cir.), cert. denied, 396 U.S. 824 (1969); United States v. Ayotte, 385 F.2d 988, 991 (6th Cir. 1967), vacated on other grounds sub nom Giordano v. United States, 394 U.S. 310 (1969)(defendant's renting warehouse space before bankruptcy, secretly emptying store inventory into warehouse and failing to pay debts were in contemplation of bankruptcy); United States v. Butler, 704 F. Supp 1338, 1347 (E.D.Va. 1989), aff'd w/o op., 905 F.2d 1532 (4th Cir.) cert. denied, 498 U.S. 900 (1990) (defendant's awareness of debtor's cash flow problems and defendant's efforts to get payment from debtor for his legal fees prior to declaration of bankruptcy showed that defendant's acts were in contemplation of the debtor's bankruptcy); United States v. Willey, 57 F.3d 1374, 1380 (5th Cir.), cert. denied, 116 S. Ct. 675 (1995)(defendant's statement that he was forced to "consider relief through the Federal Bankruptcy Court" in an affidavit in a divorce proceeding four years before he actually filed bankruptcy followed by transfer of assets out of his name showed that defendant's acts were in contemplation of bankruptcy).
PRACTICE TIP: The district within which the actual concealment of assets takes place is immaterial. Venue is proper in the district in which the bankruptcy proceeding is located, United States v. Schireson, 116 F.2d 881, 884 (3d Cir. 1940); United States v. Brimberry, 779 F.2d 1339, 1345 (8th Cir. 1985); United States v. Martin, 408 F.2d 949, 953 (7th Cir.), cert. denied, 396 U.S. 824 (1969), or the district which is the situs of the trustee. United States v. Gordon, 379 F.2d 788, 791 (2d Cir.), cert. denied, 389 U.S. 927 (1967); United States v. Zimmerman, 158 F.2d 559 (7th Cir. 1946).
[cited in USAM 9-41.001]