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Justice News

Department of Justice
U.S. Attorney’s Office
Northern District of Illinois

Wednesday, February 3, 2016

Former Bull Valley Man Sentenced to 9 Months in Federal Prison for Concealment of Assets from a Bankruptcy Trustee

ROCKFORD — A former Bull Valley, Ill. man was sentenced today in federal court by U.S. District Judge Frederick J. Kapala for the concealment of assets from a Bankruptcy Trustee.  JOSEPH MICHAEL PHELAN, 52, now of Augusta, Ga., was sentenced to 9 months in federal prison to be followed by 3 months of home confinement.  Phelan was also placed on 3 years of supervised release and ordered to pay $80,618.78 as restitution.  Phelan was the former President of Phezer Enterprises, Incorporated, located in Crystal Lake, Ill.

Phelan, who pleaded guilty to the charge on Sept. 17, 2015, caused a Chapter 7 Bankruptcy Petition to be filed for Phezer Enterprises on Aug. 18, 2008.  According to the written plea agreement, after Phelan closed Phezer Enterprises on Aug. 13, 2008, Phelan had three Phezer employees start cutting up and scrapping unused and used Phezer assets, including sheets of stainless steel and various metals.  On Aug. 18, 2008, the day Phezer filed for bankruptcy, Phelan sold 21,182 pounds of stainless steel to a scrap metal company.  Phelan personally received $15,251.04 for the steel.

As Phelan admitted in the plea agreement, between Aug. 18, 2008 and Aug. 29, 2008, two Phezer employees sold $13,399.24 worth of Phezer metals to a second scrap metal company.  The two employees received cash for the scrap and provided the cash to Phelan.

As further stated in the plea agreement, in September and October 2008, Phelan received two checks totaling $51,968.50 issued to him from another scrap metal company for Phezer metals sold to that company.  Phelan deposited both checks in his personal bank account.  Phelan did not advise the trustee or a secured creditor that corporate assets had been sold to the three scrap metal companies, or account and deliver to the trustee or the secured creditor the proceeds from the sales of Phezer assets.     

The sentencing was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Michael J. Anderson, Special Agent-In-Charge of the Chicago Office of Federal Bureau of Investigation.

The government was represented by Assistant U.S. Attorney Scott R. Paccagnini.

Financial Fraud
Updated February 3, 2016