parkville business owner sentenced for bankruptcy fraud
KANSAS CITY, Mo. - David M. Ketchmark, Acting United States Attorney for the Western District of Missouri, announced that the owner of a local construction company was sentenced in federal court today for bankruptcy fraud.
Armando Diaz, 47, of Parkville, Mo., was sentenced by U.S. District Judge Brian C. Wimes to two years in federal prison without parole, followed by three years of supervised release.
“This was an egregious abuse of the bankruptcy system,” Ketchmark said. “Chapter 7 bankruptcy is designed to give debtors a fresh start and to give creditors an orderly distribution of the debtor’s assets. But Diaz attempted to cheat his creditors and deceive the bankruptcy court. He provided false information and tried to conceal significant assets. In other words, Diaz attempted to get a free pass on $5.3 million in liabilities.”
“Concealing assets in a bankruptcy proceeding is a crime that threatens the integrity of the bankruptcy process and public confidence in that process,” stated Nancy J. Gargula, United States Trustee for Missouri, Arkansas and Nebraska (Region 13). “We are grateful to all of our law enforcement partners in this case, and in particular to Acting U.S. Attorney David Ketchmark for his commitment to pursuing those who commit bankruptcy fraud.” Region 13 of the U.S. Trustee Program is headquartered in Kansas City, with additional offices in St. Louis, Little Rock and Omaha. The U.S. Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws.
Diaz, who pleaded guilty to bankruptcy fraud on Aug. 4, 2011, owned several companies, including Fortis Construction Company. Diaz admitted that he fraudulently transferred property and concealed assets from his bankruptcy trustee in order to hide assets from his creditors. The total intended loss amount of the fraud was $244,390.
According to court documents, when times became financially tough for Diaz in his construction business in 2005, he resorted to illegal practices to try to keep his companies afloat. During the same time period of financial difficulty, Diaz maintained his comfortable lifestyle (vacationing in the Cayman Islands, for example, and building a million-dollar home in Briarcliff).
When Diaz was building his home in Briarcliff, he had many of his employees work on the construction of the new home but fraudulently paid them with public funds from his contracts for the Zorinsky Federal Building project in Omaha, Neb., and the Gardner-Edgerton school construction project.
Court documents cite several more improper business practices. Diaz gave false statements to the bank about his companies’ work to induce the bank to keep a line of credit open for his business. He unlawfully had office employees alter documents to falsely claim work completed on federal buildings that was not done. Diaz was required to certify and submit compliance reports informing unions whether employee fringe benefits had been paid. Diaz falsely claimed he was properly paying his union workers their fringe benefits, when in actuality he was not. For example on the Zorinsky Federal Building project, over $62,000 in union benefits were not paid as claimed by Diaz.
The bonding company on the Zorinsky Federal Building project, Universal Surety, eventually had to fund Diaz’s obligations on the project which included the $62,000 in fringe benefits. Universal Surety, in total, had to fund 14 of Diaz’s defunct projects that totaled $3.9 million.
His employees became frustrated with Diaz’s financial priorities, according to court documents. They were upset that he apparently prioritized soccer over treating his employees fairly. Diaz would pay for soccer uniforms, but at the same time, could not or would not make payroll or pay the union dues. Employees also were upset about Diaz’s extravagant lifestyle when payroll or union benefits were not covered.
This case was prosecuted by Assistant U.S. Attorney Roseann A. Ketchmark and Special Assistant U.S. Attorney Adam Miller. It was investigated by the Department of Labor, the U.S. Department of Defense and the General Services Administration with assistance from the Kansas City Office of the U.S. Trustee and members of the Western District of Missouri Bankruptcy Fraud Working Group.