Valentin Valdés-Ayala Arrested For Bankruptcy Fraud
SAN JUAN, Puerto Rico – On November 26, 2013, a federal grand jury in the District of Puerto Rico returned a 31-count indictment against Valentin Valdés-Ayala, charging him with bankruptcy fraud, destruction, alteration or falsification of records in bankruptcy, wire fraud, aggravated identity theft and contempt of court, announced Rosa Emilia Rodríguez-Vélez, United States Attorney for the District of Puerto Rico. The Federal Bureau of Investigations, in collaboration with the US Trustee, is in charge of the investigation.
According to the indictment, the purpose of the fraudulent scheme was to obtain financial gain and to hinder, delay, and obstruct collection efforts by the Commonwealth of Puerto Rico, through ASUME, and/or by child support pension beneficiaries against child support debtors who had failed to comply with their child support obligations.
Valdés-Ayala incorporated a non-profit organization called Fundacion Lucha Pro-Padres Convictos por Pencion, Corp. [sic] with the alleged purpose of defending the principles and dignity of every father convicted for failure to make child support payments and obtaining and promoting the release of all inmates as well as defending father-child relationships. He also created Tears in Prison, Inc., a for-profit corporation that was incorporated with the stated purpose of preparing bankruptcy petitions.
The defendant, through Fundacion Lucha Pro-Padres Convictos por Pencion, Corp. [sic], solicited individuals who were incarcerated or facing incarceration for failure to comply with their child support payments, promising those individuals that – in exchange for fees paid to him and/or his entity -- they would be released from prison and/or avoid imprisonment without first having to make any payments towards their child support debt. Valdés-Ayala at times also promised that he would obtain the elimination and/or reduction of child support debt.
The defendant would then file or cause to be filed Chapter 13 bankruptcy petitions which allowed the debtors to be released from prison without first having to pay overdue child support to ASUME due to the operation of bankruptcy’s automatic stay against collection actions.
With respect to his fees, Valdés-Ayala indicated to his prospective clients that his fee included legal representation (even though he is not a lawyer), filing fees, and a term membership in his entity, which would guarantee them legal representation in their child support case throughout the duration of their term membership. Upon receipt of payment the defendant would coordinate a meeting with the individual subject to incarceration and/or his or her family member(s) and provide a receipt.
The defendant prepared and filed and/or caused to be filed Chapter 13 bankruptcy petitions in the clients’ names. The Chapter 13 petitions were not filed for the purpose of having the clients engage Chapter 13 reorganization of their debts, but for the improper purpose of using the United States bankruptcy laws to collect fees by promising relief from incarceration.
It was further part of the scheme to defraud that Valdés-Ayala assisted hundreds of debtors with the filing of false and fraudulent Chapter 13 bankruptcy petitions. From August 2010, up to November 2013, 412 applications for credit counseling certificates were processed through Valdés-Ayala’s account with the Credit Advisors Foundation.
“The U.S. Attorney’s Office in Puerto Rico will continue to investigate and prosecute cases involving bankruptcy fraud”, said U.S. Attorney Rosa Emilia Rodríguez-Vélez. “The defendant defrauded not only his clients, but also child support beneficiaries and the government Puerto Rico, and he did so by using the United States Bankruptcy courts. Valdés-Ayala sought to obtain as much money as possible, for as long as possible, from his clients. When the fraudulent bankruptcy petitions ultimately were dismissed by the bankruptcy courts, the defendant ceased contact with his clients, who again faced imminent incarceration for past due child support payments.”
“The bankruptcy process is based on the honor system and when used appropriately allows many debtors to get a fresh start. However, when this trust is abused by debtors intentionally making false statements to the bankruptcy court, the FBI will work with the U.S. Attorney’s Office and Bankruptcy Trustee to hold them accountable to ensure the public’s continued trust in the bankruptcy process,” said Carlos Cases, Special Agent in Charge of the FBI in Puerto Rico.
The case is being prosecuted by Assistant U.S. Attorney Mariana Bauzá. If convicted, the defendant could face a maximum of 30 years in prison and a mandatory consecutive sentence of two years for each of the two aggravated identity theft charges. An indictment is a formal accusation of criminal conduct, not evidence. A defendant is presumed innocent unless and until convicted through due process of law.