CHAPTER 5-9: OTHER BANKRUPTCY RELATED CRIMES

"Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and, does not, as soon as possible, make known the same to some judge or other person in civil or military authority under the United States, shall be fined not more that $500 or imprisoned not more than three years, or both."

This statute, while a felony, carries a lesser penalty than most other bankruptcy criminal statutes. The United States Attorney may use this to prosecute individuals who aid in a bankruptcy violation, but are not the main participants.

5-9.1.1 Elements of the Offense

1. The defendant has actual knowledge of a crime under the laws of the United States.

   Violations of state law are not covered under this statute.

2. The defendant does some act to conceal the violation.

   Mere knowledge of the commission of a crime is not sufficient to convict. The defendant must do something to conceal the crime after learning of it. Where the defendant has an affirmative duty to report facts that would disclose a crime and the defendant does not make that report, then there is a concealment.

3. The defendant does not promptly report the crime to an officer of the United States.

5-9.2 BRIBERY OF PUBLIC OFFICIALS AND WITNESSES, 18 U.S.C. § 201

This statute covers two distinct groups of offenses. The first, "Public Officials," would, within the bankruptcy system, cover the offices of the United States Trustee, the clerk's office, and judges. It would not cover private trustees or professionals. Prosecutions under this part of the statute are covered in the Department's publication titled, Prosecution of Public Corruption Cases (1988).

The second part of the statute covers any attempt to bribe a witness, or an offer by a witness to take a bribe, in any case before a court, Congress, or other officer authorized to take testimony or hear evidence under the laws of the United States. Thus, a debtor who pays a witness to give false testimony could be prosecuted under this statute. A witness corruptly seeking payment for false evidence could also be prosecuted even if no payment or testimony was actually given.

5-9.3 CONSPIRACY, 18 U.S.C. § 371

This statute covers two distinct categories of offenses against the United States.

5-9.3.1 Conspiracy to Defraud the United States

Where two or more individuals agree to defraud the United States or any agency thereof, and then do at least one overt act in furtherance of that agreement, the crime of conspiracy is completed. There is no requirement that the actual fraud be accomplished. Interference or obstruction of a legitimate government function is a violation, just as is a scheme to obtain government property or money by fraud.

This section is useful when more than one defendant is involved and the scheme is not fully carried out. Because of favorable rules of evidence in conspiracy cases, the United States Attorney often uses this statute.

5-9.3.2 Conspiracy to Violate Laws of the United States

The second part of this statute covers any agreement between at least two people to violate any law of the United States, followed by at least one overt act to accomplish that violation. It is not necessary that the actual substantive violation be completed or that the overt act itself be illegal. An agreement to violate state law is not covered by this statute. Conspiracy charges often may be combined with substantive violations that are completed because of favorable rules of evidence. It also will allow a conviction in some cases even though the jury finds the defendant did not complete the substantive act charged.

5-9.4 CONTEMPT OF COURT, 18 U.S.C. §§ 401 AND 402

5-9.4.1 What Constitutes Contempt

Contempt of court may be defined generally as an act of disobedience or disrespect toward the judicial branch of the government, or an interference with its orderly process. It is an offense against a court of justice or a person to whom the judicial functions of the sovereign have been delegated. U.S. v. Trudell, 563 F.2d 889 (8th Cir. 1977).

Criminal contempt is designed to punish a defendant for his/her conduct and to vindicate the authority of the court. Downey v. Clauder, 30 F.3d 681 (6th Cir. 1994). Criminal contempt, unlike civil contempt, cannot be purged by later compliance with a court's orders. International Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821 (1994). It is critical to specify that criminal contempt is being considered. Failure to give a person fair notice that criminal contempt is being sought will result in reversal. Downey at 686.

5-9.4.2 Authority of the Bankruptcy Court

The rule in some circuits is that the bankruptcy court does not have the authority to hold a defendant in criminal contempt for conduct outside the court's presence. See In re Hipp, 895 F.2d 1503 (5th Cir. 1990), and the cases cited therein. (After remand, the defendant was convicted of criminal contempt by the district court because he violated a direct, personal order of the bankruptcy judge, In re Hipp, 5 F.3d 109 (5th Cir. 1993).)

Following the Supreme Court decision in Chambers v. NASCO, 501 U.S. 32 (1991), the Ninth Circuit recently switched sides on this question and now holds that under Bankruptcy Rule 9020 bankruptcy courts do have contempt powers. In re Rainbow Magazine, 77 F.3d 278 (9th Cir. 1996). Under Rule 9020, the bankruptcy judge can find a person in civil or criminal contempt after giving detailed notice and holding a hearing. The bankruptcy judge's order of contempt has the same effect as a district judge's order unless, within ten days of service of the order of contempt, the contemptor files objections under Bankruptcy Rule 9033. If objections are filed, the matter is heard de novo on the record or on such additional evidence as the district court desires to hear.

Chambers, In re Rainbow Magazine, and In re Skinner, 917 F.2d 444 (10th Cir. 1990), give the bankruptcy court power to impose civil sanctions under either Bankruptcy Rule 9011 or section 105(a) of the Bankruptcy Code.

5-9.4.3 Authority of the District Court

The district court, as an Article III court, has unquestioned civil and criminal contempt power. If a bankruptcy judge is concerned about jurisdiction or the law in the circuit is unclear, cases involving contempt, especially criminal contempt, can be certified or referred by the bankruptcy judge to the district court for action.

Except in cases where the contempt is in the presence of the court and the contempt is handled by summary punishment, the United States Attorney will handle the case as the prosecutor. Only in unusual cases will the United States Attorney decline to prosecute a contempt matter referred by a district judge.

The area of contempt is complex. The United States Attorney's office should be consulted before contempt proceedings are undertaken. Criminal contempt may be the only viable solution to petition mills, serial filers, and other defendants who abuse the bankruptcy system in a systematic way.

5-9.5 THEFT AND EMBEZZLEMENT FROM EMPLOYEE PENSION PLANS, 18 U.S.C. § 664

Any embezzlement, theft, or conversion of any asset of an employee benefit or welfare plan is a violation of this section, provided the plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). 29 U.S.C. § 1001 et seq.. Almost any type of retirement or benefit plan that provides retirement, health, or other benefits for employees will be covered under ERISA.

Jurisdiction to investigate violations of ERISA falls under the Office of the Inspector General, Department of Labor. The Federal Bureau of Investigation also has jurisdiction.

5-9.5.1 Elements of the Offense

1. The plan involved is a plan within the meaning of ERISA. 29 U.S.C. § 1001 et seq..

2. The defendant willfully depletes the assets of the fund. The acts of the defendant must be with fraudulent intent. The defendant does not have to be a trustee or other fiduciary of the plan.

This statute will often have application in bankruptcy cases involving companies. The owners and officers of a failing business will view the assets of the company health and benefit fund as a resource to be used for other than proper purposes. The Department of Labor is aggressive in protecting the assets of these plans and usually will attempt to work the cases where there is evidence of fraud. They also have civil remedies that can assist employees in some cases.

5-9.6 ARSON INVOLVING INTERSTATE COMMERCE, 18 U.S.C. § 844(i)

This statute punishes any person who maliciously damages or attempts to damage by fire or explosive any building, vehicle, and real or personal property used in interstate commerce or affecting interstate commerce. Individuals who destroy records or other property of an estate violate this statute. Investigations of 18 U.S.C. § 844 are conducted by agents of the Bureau of Alcohol, Tobacco and Firearms (ATF) of the Treasury Department. Depending on local conditions, these agents may be able to work a case that other agencies do not have the resources to timely investigate.

The definition of "interstate commerce" or "affecting interstate commerce" covers almost any type of commercial activity. In any case involving possible arson, consideration should be given to contacting agents of the ATF.

5-9.6.1 Elements of the Offense

1. The defendant maliciously damages or destroys real or personal property.

2. The damage was done by means of fire or explosives.

3. Such property was used in interstate or foreign commerce or in any activity affecting such commerce.

5-9.7 FALSE STATEMENTS AND SCHEMES, 18 U.S.C. § 1001

This section prohibits anyone within the jurisdiction of any department or agency of the United States from knowingly and willfully falsifying, concealing, or covering up, by any means, a material fact, or making a false statement or using any false document knowing that it contains false or fraudulent information.

5-9.7.1 Differences from 18 U.S.C. § 152

There is no requirement that the statement or document be under oath. Thus, unsworn statements, either oral or written, may be prosecuted under this section. Operating reports and other statements of a debtor in possession would be covered. There is no requirement that an intent to defraud be proved, U.S. v. Vaughn, 797 F.2d 1485 (9th Cir. 1986), but, as a practical matter, unless there is some intent to defraud, the case normally will be declined.

5-9.7.2 Statements Made to Courts

On May 15, 1995, the Supreme Court resolved a serious split in the circuit courts of appeals over whether statements made or submitted to courts are covered by 18 U.S.C. § 1001. The Court overruled U.S v. Bramblett, 348 U.S. 503 (1955), and held in Hubbard v. U.S., 115 S. Ct. 1754 (1995), that the term "department" did not include the legislative and judicial branches. The false statements in Hubbard involved filing false pleadings with the bankruptcy court.

5-9.7.3 Elements of the Offense

1. The defendant made or used a false statement, falsified anything, or concealed or covered up anything concerning a material matter to an agency or department of the executive branch.

   For years, the issue of materiality was a question of law to be decided by the court. In U.S. v. Gaudin, 115 S. Ct. 2310 (1995), however, the Supreme Court held that issues of materiality are mixed questions of law and fact that must be submitted to the jury as an element of the offense.

   The test is whether the statement or document has a natural tendency to influence or be capable of influencing the proceeding. There is no requirement that the statement or document actually harm a creditor or other person. U.S. v. O'Donnell, 539 F.2d 1233 (9th Cir.), cert. denied, 429 U.S. 960 (1976).

2. The act was within the jurisdiction of a department or agency of the United States. As noted above, this does not include statements made to courts or to Congress.

3. The act was done knowingly and willfully. An act can be done knowingly if the defendant has a reckless disregard of whether it is true and makes a conscious effort to avoid learning the truth. U.S. v. Evans, 559 F.2d 244 (5th Cir. 1977), cert. denied, 434 U.S. 1015 (1978).

5-9.8 FALSE STATEMENTS TO FINANCIAL INSTITUTIONS, 18 U.S.C. § 1014

This statute prohibits knowingly making a false statement or report, or willfully overvaluing any property or security, for the purpose of influencing any action of listed financial institutions in relation to loans or securities for loans. (10 year statute of limitation, 18 U.S.C. § 3293.)

5-9.8.1 Relationship to 18 U.S.C. § 152

In many bankruptcy cases, the debtor will have furnished financial statements to financial institutions around the time of the bankruptcy filing. A comparison of these financial statements with the bankruptcy schedules often shows significant differences. While the financial statements to banks use a fair market value and bankruptcy schedules tend to use forced sale values, the differences are often the result of fraud in one place or the other.

5-9.8.2 Elements of the Offense

1. The defendant made a false statement or willfully overvalued property or security, knowing the same to be false.

2. The purpose was to influence the action of a financial institution.

   There is no requirement that the financial institution actually be influenced or harmed, or that it even relied on the statement. It is sufficient if the act was capable of influencing the institution. U.S. v. Kay, 303 U.S. 1 (1938).

3. The financial institution was one listed in the statute.

   The statute lists almost every government agency dealing with credit and banks that are insured or supervised by the federal government.

5-9.9 MAIL, WIRE, AND BANK FRAUD, 18 U.S.C. §§ 1341-44

The mail and wire fraud statutes (18 U.S.C. §§ 1341 and 1343) prohibit any scheme or artifice to defraud or to obtain money or property by false promises, representation, or pretenses, or to attempt to do so.

As of September 13, 1994, the mail fraud statute also includes any matter or thing sent or delivered by any private or commercial interstate carrier. There is no requirement that the mail move in interstate commerce. Deliveries by private or commercial interstate carriers, such as UPS and Federal Express, are included even if the delivery is in-state.

The wire fraud statute requires that the wire, telephone, radio, fax, television, etc. message be transmitted in interstate commerce.

The bank fraud statute (18 U.S.C. § 1344) requires that the scheme or artifice, or the attempt, be directed against a financial institution as defined in 18 U.S.C. § 20. This includes all commercial banks insured or supervised by the United States. (There is a 10 year statute of limitation if the offense involves a financial institution, 18 U.S.C. § 3293.)

5-9.9.1 Elements of the Offenses

1. The defendant devised a scheme or artifice, or attempted to do so, to defraud or obtain money or property by means of false promises, representations, or pretenses.

2. The defendant used or caused the mail or private or commercial interstate carrier services to be used, or used any wire, radio, or television facility in interstate commerce, or sought to defraud a defined financial institution.

It is not necessary that the scheme be successful. The statutes also reach schemes or artifices designed to deprive anyone of the intangible right of honest services. This covers bribery of public officials, as well as bribery of employees of private businesses.

These statutes can easily reach bustout schemes in bankruptcy. They also reach credit card schemes where false information is furnished to obtain credit cards. In addition, they may reach typing mills and other types of fraudulent schemes. Jurisdiction for mail fraud rests with the Postal Inspectors; the Federal Bureau of Investigation has jurisdiction for the other statutes.

5-9.10 OBSTRUCTION OF JUSTICE, 18 U.S.C. §§ 1503 AND 1505

These sections prohibit anyone from corruptly using force, threats of force, or threatening communication to obstruct or endeavor to obstruct or impede the due administration of law before a court (section 1503) or before any department or agency or Congress (section 1505). These sections are designed to protect the integrity of the judicial and administrative systems. They also prohibit any retaliation against any juror or other officer carrying out duties involving the administration of justice. A threat against a United States Trustee employee conducting a section 341 meeting would be covered by this statute.

This section could arguably be applied to threats or actions against a case trustee and his/her employees for carrying out court directed duties or actions, such as conducting section 341 meetings or selling estate property.

5-9.10.1 Elements of the Offenses

1. The defendant corruptly uses force, threat of force, or threatening communications.
   
   Corruptly means with a specific intent to obstruct justice, i.e., with an improper motive or purpose. U.S. v. Haas, 583 F.2d 216 (5th Cir. 1978), cert. denied, 440 U.S. 981 (1979).

2. The acts were intended to influence, impede, or intimidate jurors or court officers or to obstruct the due administration of justice.

5-9.11 OBSTRUCTION OF COURT ORDERS, 18 U.S.C. § 1509

This statute prohibits anyone from willfully interfering or attempting to interfere with anyone carrying out court orders. The statute is a misdemeanor and could be used to prosecute defendants who refuse to obey turn over orders issued by the bankruptcy court. Use of this statute would allow the defendant to plead to a misdemeanor rather than a felony for section 152 violations.

5-9.11.1 Elements of the Offense

1. There is a judgment, decree, or order of a court of the United States.

2. The defendant, by threat or force, willfully obstructs or attempts to obstruct the exercise of rights or duties under that order.

5-9.12 TAMPERING WITH WITNESSES OR VICTIMS, 18 U.S.C. § 1512

This section was part of the Victim Witness Protection Act of 1982. It is designed to give broad protection to witnesses and victims, and to prevent any obstruction of investigations or proceedings. It prohibits any threats, intimidation, or retaliation against anyone because of their participation in investigative or judicial proceedings. It prohibits attempts to get anyone to withhold evidence, destroy or alter records or other evidence, or evade service of process.

This section is extremely broad and should be considered any time obstruction of justice is suspected. The Federal Bureau of Investigation has investigative jurisdiction in this area.

5-9.13 FALSE STATEMENTS IN A JUDICIAL PROCEEDING, 18 U.S.C. §§ 1621 AND 1623

5-9.13.1 Use of 18 U.S.C. § 1623 over § 1621

Section 1621 is the traditional perjury statute. It requires proof of perjury by two witnesses or one witness and independent corroborative evidence. U.S. v. Maultasch, 596 F.2d 19 (2d Cir. 1979). Section 1621 applies to any evidence or testimony given before a person authorized to administer an oath. It is not limited to testimony before a court or grand jury.

Section 1623 does away with the "two witness" rule and allows a defendant to be convicted where the defendant makes inconsistent statements in the same proceeding. With inconsistent statements, the government only has to show that the statements were irreconcilably contradictory and the defendant did not believe both to be true at the time they were made. The government does not have to prove which of the statements is false. This section can also be used to prosecute the "I don't remember" answer where it can be shown that the witness did know at one time and has, in fact, not forgotten. It also covers the use of false information or documents. The term "proceeding" covers any aspect of the same matter; two separate hearings in the same case would be covered.

Section 1623 applies only to statements made before a court or grand jury. It provides that it is a defense if the defendant recants a false statement in the same proceeding before the false statement substantially affects the proceeding or it is manifest that the falsity of the statement either has been or will be exposed.

Where false testimony is before a court or grand jury, section 1623 is almost always used.

5-9.13.2 Elements of the Offenses

1. The defendant must be under oath.

2. The defendant must make a false statement or, in the case of section 1623, use false documents or make either a false statement or irreconcilably inconsistent statements.

3. The false statement must be material. Materiality is a question of fact for the jury. U.S. v. Gaudin, 115 S. Ct. 2310 (1995).

4. The defendant must know the statement or document is false at the time it is made or used.

5-9.14 RECEIVER MISMANAGING PROPERTY, 18 U.S.C. § 1911

This statute prohibits any receiver, trustee, or manager in possession of property in any case pending before a court of the United States from willfully failing to manage or operate such property in accordance with the law of the state where the property is located.

5-9.14.1 Application in Chapter 11 Cases to Debtor in Possession

This statute is a misdemeanor which applies to a debtor in possession, as well as a trustee and other professionals who have charge of property. It may provide a misdemeanor charge that a defendant can plead to where the amount of loss is not sufficient to justify a felony charge.

5-9.14.2 Elements of the Offense

1. The defendant is a trustee, receiver, or manager of property in a case pending before a court of the United States.

2. The defendant willfully fails to manage or operate such property in accordance with the laws of the state where it was located in the same manner the former owner or possessor would have been bound to do if in possession.

5-9.15 MONEY LAUNDERING, 18 U.S.C. §§ 1956 AND 1957

These statutes were enacted in 1986 as part of the Anti-Drug Abuse Act. While they are primarily aimed at drug and drug-related offenses, they specifically include transactions that are based on violations of 18 U.S.C. § 152 insofar as they relate to concealing assets, false oaths, claims, and bribery.

Investigative jurisdiction may involve postal inspectors, Secret Service, Internal Revenue Service criminal investigators, or the Federal Bureau of Investigation, or a combination of agents. The penalties for violation of these sections are generally higher than for simple bankruptcy fraud. Prosecutions of these cases have a high priority with the Department of Justice. Accordingly, where it appears significant amounts of money (more than $10,000) have been moved about in bankruptcy cases, consideration should be given to these statutes.

5-9.15.1 Illegal "Financial Transactions," 18 U.S.C. § 1956(a)(1)

This section prohibits a person from conducting financial transactions with either: (1) the intent to promote a "specified unlawful activity" (which includes 18 U.S.C. § 152, but not the new § 157); or (2) the knowledge that the transaction is designed (a) to conceal or disguise the nature, location, source, ownership, or control of the proceeds of a specified unlawful activity or (b) to avoid a federal or state reporting requirement.

Financial transactions are defined to include any use of interstate or foreign commerce to move money or monetary instruments, or involves the transfer of title of real property or vehicle, vessel, or aircraft, or uses a financial institution.

A defendant who, while in bankruptcy, files false schedules concealing real property and thereafter transfers that property to another would violate this section.

This section is similar to 18 U.S.C. § 1956 (a)(1) except that instead of involving a "financial transaction" it requires the effort to move funds or monetary instruments to or from the United States from any point outside the United States.

5-9.15.3 Illegal Use of "Financial Institution," 18 U.S.C. § 1957(a)

This section is, in effect, a "receiving and depositing illegal proceeds" section. The offense is completed if the defendant: (1) engages in a monetary transaction; (2) at a financial institution; (3) with knowledge that the transaction involves the proceeds of some unlawful activity; (4) the unlawful activity is one of the specified unlawful activities; and (5) involves more that $10,000.

This statute would apply to a trustee or debtor in possession who stole money from an estate and then bought a $20,000 cashiers check to deposit in a secret bank account. While a literal reading of the statute would allow it to apply to any deposit of stolen bankruptcy money in a bank account by the thief, Department policy requires that the deposit be in a second transaction, i.e., once removed from the theft.

5-9.16 RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS (RICO), 18 U.S.C. §§ 1961 AND 1962

Application of this statute requires the approval of the Criminal Division of the Department of Justice before indictments or civil complaints can be filed. Because of the complex nature of this statute and the severe penalties involved, it is only used in cases involving significant criminal activity.

The statute lists as a "racketeering activity" any fraud under title 11, except 18 U.S.C. § 157. A "pattern of racketeering activity" means two acts of racketeering activity committed within ten years of each other.

18 U.S.C. § 1962 prohibits anyone from using the income from a pattern of racketeering activity in any way that affects interstate commerce, or from using a pattern of racketeering to control any business engaged in interstate commerce, or conducting the affairs of a business through a pattern of racketeering activities.

The statute also provides severe criminal and civil forfeiture penalties.

5-9.17 INTERSTATE TRANSPORTATION OF STOLEN PROPERTY, 18 U.S.C. § 2314

This statute prohibits the interstate transportation of property, securities, or money of a value of $5,000 or more if they are known to be stolen, converted, or obtained by fraud. The transportation may be by the defendant or he/she may cause the transportation to take place.

5-9.18 SALE OR RECEIPT OF STOLEN PROPERTY, 18 U.S.C. § 2315

This section prohibits a defendant from receiving, possessing, concealing, storing, selling, or disposing of property, securities, or money of a value of $5,000 or more which has crossed a state line after being stolen, converted, or taken, where the defendant knows the property has been stolen. There is no requirement that the defendant know the property crossed state lines, only that the property was stolen, converted, or taken.

5-9.19 FRAUDULENT USE OF CREDIT CARDS, 15 U.S.C. § 1644

The knowing use in a transaction affecting interstate commerce of a stolen, altered, or fraudulently obtained credit card to obtain anything of value of $1,000 or greater in a one year period is a violation of this section.

This statute would be appropriate where it appears a debtor obtained a credit card by fraud through use of false information and then ran up debts in excess of $1,000 in a year. Debtors who run up large credit card debts may try to discharge them through bankruptcy. Excessive credit card debt should be examined for the possibility of fraud. The Secret Service has investigative jurisdiction over this statute.

5-9.20 EQUITY SKIMMING, 12 U.S.C. § 1709-2

This statute prohibits anyone, with the intent to defraud, from willfully engaging in a pattern or practice of purchasing one- to four-family dwellings (including condominiums and cooperatives) that are subject to loans in default at the time or which go into default within one year from failing to make payments on the debt where the rents are collected and diverted to the defendant's use. The debt on the dwellings must be made, insured, or held by Housing and Urban Development (HUD) or the Veteran's Administration (VA).

Individuals involved in equity skimming may steal money and then, when HUD or the VA start foreclosure proceedings, file bankruptcy. Even if they stop stealing at the point of filing, this statute has been violated. If they continue to steal while acting as a debtor in possession, 18 U.S.C. § 152 will also be violated. Violations of this statute are investigated by the Federal Bureau of Investigation and the Inspector General of HUD.

5-9.21 TAX OFFENSES

The tax offenses identified in the following sub sections are investigated by agents of the Criminal Investigation Division (CID) of the Internal Revenue Service (IRS). Because of disclosure limitations, CID agents are not able to discuss tax investigations with anyone outside the IRS, except in very limited circumstances, until the matter has been formally referred to the Department of Justice. Prosecution of these violations also must be approved by the Tax Division of the Department of Justice before the local United States Attorney may prosecute.

Suspected violation of tax laws should be reported to the IRS either through their District Counsel or the CID.

5-9.21.1 Tax Evasion, 26 U.S.C. § 7201

This section prohibits anyone from willfully attempting to evade or defeat any tax imposed under title 26. This is a felony violation.

The IRS will not recommend prosecution unless there is a substantial tax due and owing and the proof of willfulness is strong.

5-9.21.2 Failure to Pay Withholding Taxes, 26 U.S.C. § 7202

This felony statute prohibits a defendant from willfully failing to collect, account, or pay over taxes he/she is required to collect, account for, or pay over. The normal use of this statute is the willful failure to pay taxes withheld from employee wages.

To establish willfulness under this section it must be shown that the defendant withheld taxes from the employee and then failed to pay when the defendant had the ability to pay. In many bankruptcy cases, the IRS is unable to establish the ability to pay. Accordingly, this section is seldom used despite the serious loss of revenue in many cases.

5-9.21.3 Failure to File, 26 U.S.C. § 7203

This section allows a misdemeanor prosecution of a defendant who willfully fails to file a return, keep required records, supply required records, or pay estimated or other taxes.

The IRS will not, as a rule, recommend prosecution under this section unless there are taxes due and owing and proof of willfulness is strong. For failure to file income tax returns, they normally require the failure to involve more than one year.

5-9.21.4 Fraud And False Statements, 26 U.S.C. § 7206

This section, in many ways, parallels 18 U.S.C. § 152 because it punishes submitting statements, returns, or other documents made under the penalties of perjury. It forbids the removal or concealment of property subject to taxes with the intent to evade payment, and the withholding, falsifying, or destroying of any documents relating to the estate of the taxpayer.

5-9.22 REPORTING MONETARY TRANSACTIONS, 31 U.S.C. §§ 5311-28

These statutes collectively set up requirements for the reporting of movements of cash and other monetary transactions within the United States and to and from the United States. Under regulation issued by the Secretary of the Treasury, cash transactions over $10,000 must be reported to the Department of Treasury.

"Financial Institution" is defined very broadly in 31 U.S.C. § 5312(a)(2). It covers travel agencies, real estate brokers, etc. Form 4789, Cash Transaction Report, is used to report these transactions. It requires a description of the transaction and the identification of the parties to the transaction. The financial institution must file this report on each covered transaction. A Form 8300, Report of Cash, (including many monetary instruments) is also used to report payments of over $10,000 received in a trade or business. This covers lawyers, doctors, car dealers, retail stores, etc. There are similar reports required for anyone taking money or monetary instruments in or out of the country.

Attempting to break covered transactions into several small transactions or providing false information is prohibited by 31 U.S.C. § 5324 and 18 U.S.C. § 1956.

These reports are collected in the Internal Revenue Service's Data Center in Detroit, Michigan. In some cases, the United States Trustee may want to secure information on these reports where it appears a debtor has engaged in covered transactions. Under the provisions of 31 U.S.C. § 5319, this information may be secured by a request of the Director through the Financial Crimes Enforcement Network (FinCEN) of the Department of Treasury.

5-9.23 USE OF FALSE SOCIAL SECURITY NUMBER, 42 U.S.C. § 408(a)(7)(B)

This section prohibits anyone, with an intent to deceive, from falsely representing a social security number to be assigned to the defendant or another person when in fact the social security number is not assigned to the defendant or such other person.

This section is very useful in prosecuting individuals who use false social security numbers in any way in the bankruptcy system. The intent to deceive is clear in cases where the debtor is using the false number to avoid detection of earlier bankruptcy cases, to hide assets, or avoid alerting creditors that the defendant has filed bankruptcy.

Violations of this section are investigated by the Inspector General of the Social Security Administration