Bankruptcy Fraud Working Group:
WESTPORT MAN PLEADS GUILTY TO
BANKRUPTCY FRAUD CHARGE
David B. Fein, United States Attorney for the District of Connecticut, announced that DANIEL STEINBERG, 42, of Westport, waived his right to indictment and pleaded guilty today before United States Magistrate Judge Holly B. Fitzsimmons in Bridgeport to one count of bankruptcy fraud.
According to court documents and statements made in court, STEINBERG was the agent and manager of Reservoir Corporate Group, LLC, a limited liability company that owns a commercial office building in Shelton, and which is involved in chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court in the District of Connecticut. As a chapter 11 bankruptcy debtor, the LLC was required to file monthly operating reports with the Bankruptcy Court to disclose, among other things, the amount of cash held each month in debtor-in-possession bank accounts belonging to the bankruptcy debtor. The LLC also was required to provide periodic financial information to the Office of the United States Trustee.
Between approximately August 2009 and August 2010, STEINBERG transferred approximately $700,000 without authorization from the Bankruptcy Court and used the money for personal expenses and the expenses of other businesses that he owned or controlled. STEINBERG also falsified the books and records of the LLC during the bankruptcy proceedings, and provided false financial information to the Office of the U.S. Trustee, to conceal the ongoing fraud.
In pleading guilty today, STEINBERG also admitted that, prior to the bankruptcy filing, he transferred additional funds without authority from the LLC’s owners so that the aggregate amount embezzled funds totals more than $950,000.
After the fraud was discovered in August 2010, a chapter 11 bankruptcy trustee was appointed by the Bankruptcy Court to operate the company.
Reservoir Corporate Group, LLC, remains in bankruptcy and, according to Bankruptcy Court records, has creditors claiming they are owed approximately $47 million.
STEINBERG is scheduled to be sentenced by United States Judge Janet C. Hall on October 21, 2011, at which time STEINBERG faces a maximum term of imprisonment of five years, an order of restitution to repay the victims and a fine of up to $250,000.
This matter has been investigated by the Federal Bureau of Investigation with the assistance of the U.S. Trustee Program.
The U.S. Trustee Program is the Department of Justice component that promotes and protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the civil bankruptcy laws.
Members of the public can report suspected bankruptcy fraud via email to USTP.Bankruptcy.Fraud@usdoj.gov.
In the District of Connecticut, the U.S. Attorney’s Office coordinates a Bankruptcy Fraud Working Group that includes representatives from the U.S. Attorney’s Office, the Office of the United States Trustee, the United States Postal Inspection Service, the Internal Revenue Service – Criminal Investigation, the Federal Bureau of Investigation, the United States Secret Service, and the Social Security Administration Office of the Inspector General.
This case is being prosecuted by Assistant United States Attorneys Ann M. Nevins.
PUBLIC AFFAIRS CONTACT:
U.S. ATTORNEY'S OFFICE