He Milked it For All it Was Worth

A Dairy Farm Bankruptcy Fraud

 


roger-stone-80x80   Case in Point

Bankruptcy fraud, which is a form of financial statement fraud, is perpetrated by concealing assets through misappropriation and/or a misclassification of accounts. In the following case, we will show how delayed bankruptcy schedule filings, inaccurate bankruptcy schedules and incorrect monthly operation reports can create an opportunity for a dishonest debtor to misappropriate assets of a bankruptcy estate.

The consequences of this particular bankruptcy fraud case resulted in $1.5 million in misappropriated assets, negligence action against the attorney and the convicted debtor receiving a 10-year prison sentence.

THE DAIRY FARMER CASE

The wayward debtor in this case, a dairy farmer (we will call him Stan), was suspected of gambling away the majority of the misappropriated $1,528,502 from the estate at casinos.

Eight months prior to filing bankruptcy, Stan submitted a signed personal financial statement showing $5,582,103 of assets and $4,842,505 of liabilities, which set his net worth at $739,598.Three months prior to filing bankruptcy, Stan submitted a signed personal financial statement showing $11,607,450 of assets and $4,981,100 of liabilities, which then made his net worth $6,626,350.

 

When he finally filed, the assets of the farmer's bankruptcy estate consisted of farmland, farm equipment, buildings, dairy cows, growing crops and crops in storage. The bankruptcy schedules showed real property of $1,116,000 and personal property of $574,370, for total assets of $1,690,370. The farmer's liabilities consisted of secured creditors and priority creditors holding claims of $4,661,866, and unsecured creditors holding claims of $293,202. This brought the total claims to $4,955,068. 


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