Bethesda Woman Indicted for Bankruptcy Fraud
Greenbelt, Maryland - A federal grand jury today has indicted Diana J. Stout, age 55, of Bethesda, Maryland, on charges of bankruptcy fraud, false statement in bankruptcy, fraudulent conveyance of property, and concealment of assets, in connection with her Chapter 7 Bankruptcy case.
The indictment was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; and the Greenbelt Office of the United States Trustee Program, the Department of Justice agency that supervises bankruptcy cases and trustees.
The 16 count indictment alleges that from April 2010 through June 2011, Stout engaged in a scheme to defraud creditors in her Chapter 7 bankruptcy case, the Trustee and the Bankruptcy Court. According to the indictment, Stout filed a Chapter 7 bankruptcy petition on April 20, 2010. 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 also 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 had purchased the property 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.
The indictment alleges that 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 Cartier 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. The indictment further alleges that 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.
The indictment further alleges that Stout filed an insurance claim seeking reimbursement for necessary repairs to a property she owned in Hagerstown, Maryland, resulting from water damage. 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 and 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 showing that the property had been transferred to Stout’s daughter in exchange for $75,000 paid to Stout. According to the indictment, on June 22, 2011, Stout caused her daughter to transfer the South Carolina property to Ryan White, LLC., which was created at the direction of Stout for the sole purpose of accepting title to the South Carolina property, in order to obstruct the bankruptcy trustees’ efforts to recover Stout’s interest in the property.
The indictment alleges that between March 15 and March 30, 2011, Stout also filed numerous pleadings labeled “Withdrawal of Claim,” which purported to withdraw a claim for payment that had been filed by Stout’s creditors, and which bore either typewritten or 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. In addition, each bogus “Withdrawal of Claim” 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.
Stout faces a maximum sentence of five years in prison on each of the 16 counts. No court appearance has been scheduled.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
United States Attorney Rod J. Rosenstein praised the FBI and the U.S. Trustee’s Office for their work in the investigation. Mr. Rosenstein thanked Special Assistant United States Attorney Liza Collery and Assistant U.S. Attorney Stuart A. Berman, who are prosecuting the case.