The concealment of property can be charged under either 18 U.S.C. § 152(1) or § 152(7). One of the important differences between these two paragraphs is that under Subsection (1) the property which was concealed must be property of the bankruptcy estate.
Subsection (1) of Section 152 provides that:
A person who . . . knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11, from creditors or the United States Trustee, any property belonging to the estate of a debtor;. . .shall be fined. . ., imprisoned. . ., or both.
The elements of the offense of concealment under 18 U.S.C. § 152(1) that the government must prove are:
- the bankruptcy proceeding was in existence;
- the defendant fraudulently concealed the property from the custodian; and
- the property belonged to the bankruptcy estate.
Devitt, Blackmar & O'Malley, 2 Federal Jury Practice and Instructions, § 24.03 (4th ed. 1990); United States v. Guiliano, 644 F.2d 85, 87 (2d Cir. 1981); United States v. Beery, 678 F.2d 856 (10th Cir. 1982), cert. denied, 471 U.S. 1066 (1985).
Although § 152, itself, does not provide a definition, the phrase "property belonging to the estate of the debtor" has been construed broadly to include "any legal, equitable, or beneficial interest of the debtor in property on the date the bankruptcy petition was filed or that [the debtor] may have acquired after the commencement of the case other than earnings from personal services or loan proceeds." United States v. Moody, 923 F.2d 341, 348 (5th Cir.), cert. denied, 502 U.S. 821 (1991) (approving instruction with quoted language); United States v. Cardall, 885 F.2d 656, 677 (reh'g denied)(10th Cir. 1989)(11 U.S.C. § 541 is to be broadly construed to include all property interests wherever located and by whomever held). This all-encompassing definition requires the debtor to disclose information about all property that might be part of the bankruptcy estate.
It is a reasonable reading of 18 U.S.C. § 152 to conclude that the statute requires a bankrupt to disclose the existence of assets whose immediate status is uncertain. Even if the asset is not ultimately determined to be property of the estate under the technical rules of the Federal Bankruptcy Code, Section 152 properly imposes sanctions on those who pre-empt a court's determination by failing to report the asset.
United States v. Cherek, 734 F.2d 1248, 1254 (7th Cir. 1984), cert. denied, 471 U.S. 1014 (1985).
A defendant may not conceal equitable interests in property of the bankruptcy estate. The fact that legal title to an asset is not held by the bankruptcy estate does not relieve a defendant of the duty to disclose the estate's equitable interest in such an asset. United States v. Weinstein, 834 F.2d 1454, 1461 (9th Cir. 1987), post conviction relief denied, 931 F.2d 899 (1991); United States v. Moynagh, 566 F.2d 799, 803 (1st Cir. 1977), cert. denied, 435 U.S. 917 (1978); United States v. Schireson, 116 F.2d 881, 883 (3d Cir. 1941). Even property which is ultimately determined not to be the property of a bankruptcy estate can be considered concealed for purposes of prosecution. United States v. Martin, 408 F.2d 949, 953 (7th Cir.), cert. denied, 396 U.S. 824 (1969).
PRACTICE TIP: It is a question of fact for the jury to determine whether assets are property of the debtor and belong to the bankruptcy estate. United States v. Weinstein, 834 F.2d 1454 (9th Cir. 1987), post conviction relief denied, 931 F.2d 899 (1991); United States v. Robbins, 997 F.2d 390, 392 (8th Cir.), cert. denied, 114 S. Ct. 391 (1993).
CAVEAT: Where the law is uncertain as to whether the debtor really would be receiving the property, such uncertainty may be relevant in determining whether the defendant had a knowing and fraudulent intent in not disclosing the potential asset. United States v. Collins, 424 F. Supp. 465 (E.D.Ky. 1977)(suspended member of police department did not disclose that he could receive back wages if he was reinstated; evidence held insufficient to show fraudulent intent since law was uncertain as to whether defendant could receive such back wages for the period he was suspended).
"Conceal" does not mean merely to secrete or hide away. In fact the defendant does not have to physically hide the property at all. "Conceal" also means to prevent the discovery of the asset or to withhold knowledge of the asset. United States v. Schireson, 116 F.2d 881, 884 (3d Cir. 1941); Burchinal v. United States, 342 F.2d 982, 985 (10th Cir.), cert. denied, 382 U.S. 843 (1965). Therefore, since the debtor has an affirmative obligation to list all estate property in the debtor's schedules, failure to list an asset on the bankruptcy schedules can constitute concealment under the statute. Coghlan v. United States, 147 F.2d 233 (8th Cir. 1945), cert. denied, 325 U.S. 888 (1945); United States v. Grant, 971 F.2d 799, 807 (en banc)(1st Cir. 1992).
PRACTICE TIP: A bankruptcy judge's testimony that property is an asset of the estate is inadmissible to prove that the assets in question belong to the bankruptcy estate. A judge's findings may be admitted only on the question of notice, and the jury must be given a limiting instruction. United States v. Robbins, supra, at 393.
PRACTICE TIP: The abandonment of the asset by the trustee in the course of the civil administration of the estate does not bar a later prosecution for the concealment of the asset. United States v. Grant, 971 F.2d 799, 806 (en banc)(1st Cir. 1992).
The concealment of property belonging to a bankruptcy estate can take place before (pre-petition) as well as after (post-petition) the bankruptcy is filed. Sultan v. United States, 249 F.2d 385 (5th Cir. 1957). This does not mean, however, that the initial act of concealing must occur after the filing of the petition, it merely means that the property must remain concealed after the commencement of the bankruptcy proceeding. In addition, there must be a concealment from one of the persons enumerated in the first paragraph of 18 U.S.C. § 152. If there is a concealment from more than one of the persons mentioned, it is a separate and independent offense as to each person. An indictment charging concealment from one person will not bar a subsequent indictment charging concealment from another. United States v. Yacht, 135 F. Supp. 911 (S.D.N.Y. 1955).
When multiple assets are concealed prior to the filing of a bankruptcy petition, there is only a single offense since there is only a single duty to disclose the existence of all assets. United States v. Moss, 562 F.2d 155, 159 (2d Cir. 1977), cert. denied, 435 U.S. 914 (1978). Pre-petition concealment charges can be combined into one count to avoid multiple convictions based on a violation of the single statute of bankruptcy fraud. United States v. White, 879 F.2d 1509, 1512 (7th Cir.), cert. denied, 494 U.S. 1027 (1989); United States v. McClellan, 868 F.2d 210 (7th Cir. 1989); United States v. Kaldenberg, 429 F.2d 161 (9th Cir.), cert. denied, 400 U.S. 929 (1970).
Each asset concealed after the filing of the petition constitutes a separate offense. United States v. Moss, 562 F.2d 155, 159 (2d Cir. 1977), cert. denied, 435 U.S. 914 (1978). Post-petition concealment of assets or property represents individual counts for each act of concealment, because each concealment represents a separate act with intent. United States v. Melton, 763 F.2d 401 (11th Cir. 1985); United States v. Montilla Ambrosiani, 610 F.2d 65, 69 (1st Cir. 1979), cert. denied, 445 U.S. 930 (1980).
PRACTICE TIP: Where the concealed asset charge involves assets acquired after the filing of the bankruptcy petition, the government must prove that the assets were acquired with pre-petition assets or proceeds from pre-petition property. United States v. Robbins, 997 F.2d 390, 393 (8th Cir.), cert. denied, 114 S. Ct. 391 (1993).
PRACTICE TIP: An indictment must describe the concealed property adequately, United States v. Schireson, 116 F.2d 881 (3d Cir. 1940); Beitel v. United States, 306 F.2d 665 (5th Cir. 1962), including the time and place of the concealment, United States v. Arge, 418 F.2d 721, 724 (10th Cir. 1969), and from whom the property was concealed, United States v. Yacht, 135 F. Supp. 911 (S.D.N.Y. 1955).
NOTE: The concealment of the assets of a debtor is a continuing offense. The statute of limitations does not begin to run until the debtor is granted or denied a discharge. See this Manual at 969, Statute of Limitations: 18 U.S.C. § 3284.
[cited in USAM 9-41.001]