Montgomery County Couple Guilty in Bankruptcy Fraud Conspiracy
HOUSTON, Texas - A Conroe, Texas couple has pleaded guilty to bankruptcy fraud conspiracy in the Southern District of Texas, announced Eastern District of Texas Acting U.S. Attorney Brit Featherston.
Richard Kent Harris, 73, and Darlene Ann Riley, 59, pleaded guilty to conspiracy to commit bankruptcy fraud today before U.S. District Judge Kenneth M. Hoyt.
According to information presented in court, on June 22, 2012, Richard Harris entered into a contract with a home builder to construct a custom home for Harris and his wife, Darlene Riley. In August 2012, Harris and Riley became embroiled in a dispute with the home builder over the design of their house and a lawsuit ensued. The lawsuit went to arbitration, where Harris and Riley were ordered to pay the home builder $54,686.55 in damages. Approximately two weeks later Harris and Riley consulted with a bankruptcy attorney.
Harris and Riley filed for divorce on April 1, 2013, but continued to reside at the same address. In the months leading up to the divorce filing, Harris and Riley made substantial charges on their credit card, which was used for their mutual benefit. On February 26, 2013, Riley withdrew $67,000 from the joint checking account she shared with Harris and deposited it into her own sole checking account.
Following Riley’s filing for divorce, a property settlement was entered into between Riley and Harris. All material assets of the marriage were awarded to Riley, which included a 2004 Jaguar XK8, a 2007 beachcomber boat, a utility trailer, all of their furnishings, 43 paintings, jewelry, 2012 federal income tax refund, and half of his net federal pension. On June 12, 2013, Harris also transferred his interest in their homestead by special warranty deed to Riley. The divorce was finalized on June 3, 2013.
On October 15, 2013, Harris filed for Chapter 7 bankruptcy in the Southern District of Texas. Harris claimed debts totaling $173,305.19 to various banks, credit cards, the home builder and other unsecured creditors. Harris failed to disclose on his bankruptcy petition the transfer of his homestead interest to Riley, the vehicle transfers, the sale of a truck for $5,500, and the $67,000 withdrawal from his joint account with Riley. A review of Riley’s bank records found that the $67,000 she transfered into her solely owned bank account was spent on mortgage payments and other joint household expenses. Riley’s transfer of the $67,000 from the joint account with Harris was done to hide those assets from being used to repay Harris’s creditors in the Chapter 7 bankruptcy. Further, Harris filed the bankruptcy petition with knowledge that the transfer was not disclosed to his creditors in the bankruptcy petition, as is required by law.
Under federal statutes, Harris and Riley face up to five years in federal prison at sentencing. The maximum statutory sentence prescribed by Congress is provided here for information purposes, as the sentencing will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the U.S. Probation Office.
The case was investigated by the Federal Bureau of Investigation and prosecuted by Eastern District of Texas Assistant U.S. Attorneys Christopher T. Tortorice and Paul Hable.