Fraudulent Transfer or Concealment18 U.S.C. § 152(7)
As indicated previously the concealment of property can be charged under either 18 U.S.C. § 152(7) or § 152(1). An important difference between these two paragraphs is that subsection (7) is not restricted to property of the bankruptcy estate.
Subsection (7) provides:
The elements of the offense under subsection (7) which the government must prove are:
A person who...in a personal capacity or as an agent or officer of any person or corporation, in contemplation of a case under title 11 by or against the person or any other person or corporation, or with intent to defeat the provisions of title 11, knowingly and fraudulently transfers or conceals any of his property or the property of such other person or corporation;...shall be fined..., imprisoned..., or both.
Subsection (7) of Section 152 reaches both pre-petition and post-petition transactions and prohibits not only concealment of assets, but also transfers of assets. "Transfers or conceals" is to be read in the disjunctive so that proof of either in conjunction with the other elements of the offense is sufficient. Concealment is not a necessary element of a prohibited transfer. Burchinal v. United States, 342 F.2d 982, 985 (10th Cir.), cert. denied, 382 U.S. 843 (1965).
- the defendant fraudulently transferred or concealed the defendant's property or the property of another; and
- such act of transfer or concealment was done with the intent to defeat the provisions of Title 11, or in contemplation of a case under Title 11.
To the extent this statute prohibits the concealment of property of a bankruptcy estate, this subsection overlaps with subsection (1). However, subsection (7) is not limited to property of the bankruptcy estate. This statute prohibits a defendant, with the requisite intent, from transferring or concealing "any of his property or the property of such other person or corporation." Therefore a pre-petition concealment or transfer, with the necessary intent, of the defendant's own property is prohibited. For example, the disposal of an individual debtor's pre-petition property with the intent to defeat the provisions of the Bankruptcy Code would be covered. Moreover, the property which is concealed or transferred does not have to be property of the defendant. For example, an individual could transfer or conceal property of a corporation.
NOTE: Subsection (7) does not specify from whom the property must be concealed. It is safe to assume that the same group listed in subsection (1)-- a custodian, United States Trustee, United States Marshal, or other officer of the court-- would be included but others interested in the bankruptcy may also be included.
NOTE: In addition to being done "knowingly and fraudulently" under subsection (7), the concealment or transfer of the property has to be done with a special mens rea. The special mens rea required is that the concealment or the transfer be done either (1) in contemplation of the filing of a bankruptcy case, or (2) with the intent to defeat the provisions of the Bankruptcy Code. The first alternative mens rea-- that the concealment or the transfer was done in contemplation of the filing of a bankruptcy case -- requires proof of a connection between the defendant's actions and the filing of the bankruptcy case. In most cases this is not a problem since the defendant frequently controls both the acts in question and the filing of the bankruptcy petition. In the case of an involuntary bankruptcy, however, the necessary connection between the bankruptcy filing and the defendant's actions may be harder to prove. Frequently, inferences based upon statements about the defendant's financial condition or attempts to avoid creditor collection efforts can establish that the acts in question were done in contemplation of a bankruptcy case. United States v. Haymes, 610 F.2d 309 (5th Cir. 1980)(statements that company would go bankrupt unless sales were increased and that any money left in the company's account would be tied up in the bankruptcy were admissible to establish that the transfers were in contemplation of bankruptcy).
The second alternative mens rea-- that the concealment or the transfer was done with the intent to defeat the provisions of the Bankruptcy Code-- requires that defendant's actions lessen or reduce the bankruptcy estate. In the context of an 18 U.S.C. § 152(5) violation, the Tenth Circuit defined the intent to defeat the provisions of the Bankruptcy Code as follows:
[T]he provisions of Title 11 of the Bankruptcy Law are defeated when a person without Court approval acts in a manner that diminishes the estate of the debtor, and thus interferes with the equitable use of distribution of any material part of the assets of the estate.
United States v. Cardall, 885 F.2d 656, 678 n. 43 (reh'g denied)(10th Cir. 1989).
NOTE: The concealment of the assets of a debtor is a continuing offense. The statute of limitations does not begin to run until the debtor is granted or denied a discharge. See this Manual at 869 Statute of Limitations: 18 U.S.C. § 3284.
[cited in USAM 9-41.001]