St. Peters, MO Woman Indicted for Fraud in Connection With Preparation of Bankruptcy Petitions
Yesterday, a federal grand jury for the Southern District of Illinois returned an indictment charging Phebe Ibrahim, formerly known as "Phebe Khan," 50, of St. Peters, MO, with 21 counts of bankruptcy fraud and related charges, announced Donald S. Boyce, United States Attorney for the Southern District of Illinois. Ibrahim was indicted as part of the U.S. Attorney’s Office’s continuing effort to crackdown on those who commit fraud in the U.S. Bankruptcy Court for the Southern District of Illinois.
According to the indictment, Ibrahim, a non-lawyer, worked as a bankruptcy petition preparer, preparing bankruptcy petitions and other documents for debtors who wished to file bankruptcy in the Southern District of Illinois. The Bankruptcy Code imposes certain restrictions on bankruptcy petition preparers, including requiring them to disclose their names on any documents they prepare, and allowing the Bankruptcy Courts to set maximum fees that they can charge their customers. The practice in the U.S. Bankruptcy Court for the Southern District of Illinois is that bankruptcy petition preparers are not allowed to charge fees of more than $150.
The indictment alleges that Ibrahim defrauded the debtors for whom she prepared bankruptcy petitions by routinely charging fees that exceeded the maximum allowable amount. The indictment further alleges that Ibrahim attempted to conceal her fraud by not disclosing her name on the documents she prepared, and by instructing her customers not to mention her name during their bankruptcy cases.
The Bankruptcy Code also requires that debtors attend a credit counselling briefing prior to filing a bankruptcy case. The indictment charges that Ibrahim circumvented and defeated this provision of the Bankruptcy Code by causing false "Certificates of Counselling" to be filed on behalf of her customers. These Certificates represented that Ibrahim’s customers had attended the required credit counselling briefing.
"Bankruptcy petition preparers who fail to comply with the requirements of the Bankruptcy Code and circumvent its provisions prey on consumers in financial distress," stated Nancy J. Gargula, United States Trustee for Southern and Central Illinois and Indiana (Region 10). "We appreciate the efforts of the U.S. Attorney’s Office, FBI and our law enforcement partners who serve on the Southern District of Illinois Bankruptcy Fraud Working Group as we work together to protect consumers and the integrity of the bankruptcy system. We welcome information that will help detect unscrupulous bankruptcy petition preparers and we encourage citizens to report suspected bankruptcy fraud through our Internet hotline at USTP.Bankruptcy.Fraud@usdoj.gov."
Ibrahim is charged with seven counts each of bankruptcy fraud, causing false statements to be made under penalty of perjury in a bankruptcy case, and falsifying records in a bankruptcy case. Each of the bankruptcy fraud and false statements under penalty of perjury counts carries a maximum sentence of five years in prison and a fine of up to $250,000. Each of the falsification of records charges carries a maximum sentence of twenty years in prison and a maximum fine of $250,000.
The arraignment for Ibrahim will be conducted on Thursday, October 26, 2017, at 11:00 a.m. at the Federal Courthouse in East St. Louis, IL.
An indictment is a formal charge against a defendant. Under the law, a defendant is presumed to be innocent of a charge until proved guilty beyond a reasonable doubt to the satisfaction of a jury.
The charges resulted from a referral by the U.S. Trustee for Indiana and Southern and Central Illinois (Region 10) to the U.S. Attorney for the Southern District of Illinois. The investigation was conducted by agents from the Springfield Division, Fairview Heights Resident Agency, of the Federal Bureau of Investigation ("FBI"), in collaboration with the Southern Illinois Bankruptcy Fraud Working Group coordinated by the U.S. Trustee. The case is being prosecuted by Assistant United States Attorney Scott A. Verseman.