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Craig D. Robins, Esq. New York Bankruptcy Attorney, Longisland bankruptcy attorney

“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”

Craig D. Robins, Esq.

Bankruptcy Crime

Debtors Denied Discharge in High-Debt Case for Failing to Report Info on Petition

Posted on Tuesday (March 29, 2011) at 11:55 pm to Bankruptcy Crime
Bankruptcy Tips Consumers Should Know
Recent Bankruptcy Court Decisions

Getting a fresh financial start in bankruptcy is for the honest debtor.  Written by Craig D. Robins, Esq.
A decision from the 7th Circuit Court of Appeals last week illustrates the importance of providing accurate information in the bankruptcy petition.  In that case,  debtors from Michigan failed to do so and were denied a discharge.  (Stamat v. Neary, 7th Cir. Mar. 24, 2011).
This Bankruptcy Filing Was Far From Ordinary
Dr. and Mrs. Stamat of Illinois filed a high-debt Chapter 7 bankruptcy case in July 2007.  Dr. Stamat is a medical doctor who operates a pediatric clinic.  The wife owns a medical billing company.  They sought to discharge over $1.5 million in debt.
After being examined, the trustee alleged that the debtors failed to list numerous assets and transactions including past business interests, two limited partnerships, a $10,000 law suit settlement payment, and $90,000 obtained from a refinance.  The trustee also alleged that they misreported their 2006 income.
Accordingly, the trustee sought to deny their discharge by bringing an adversary proceeding under Bankruptcy Code section 727, arguing that the debtors concealed estate assets with intent to defraud their creditors, fraudulently made false statements under oath, and failed to satisfactorily explain the loss of assets — some pretty serious charges.
The bankruptcy court agreed with the trustee, denying the debtors a discharge.  The debtors unsuccessfully appealed to both the District Court and the Court of Appeals, who held that the debtors made numerous material omissions which displayed a reckless disregard for the truth. 
Debtors Were Far From Candid and Honest
The debtors indicated in their petition that their 2006 gross income was $53.000.  However, their 2006 tax return indicated that Dr. Stamat grossed $265,000 from his medical practice and his wife grossed $22,000 from her billing business.  That’s quite a disparity.
In addition, the debtors failed to disclose past investment and business interests, as well as ownership interests in various limited partnerships, which information they were required to list in the Statement of Financial Affairs, which is one of the schedules of the bankruptcy petition.
The debtors also refinanced their home twice in the two years before filing the bankruptcy petition, receiving over $90,000 in cash, and they failed to report that as well.
Bankruptcy Relief is for Honest Debtors
The decision underscores a basic tenet of consumer bankruptcy — that an honest debtor is entitled to a fresh new financial start.  Honesty and candidness are paramount.
The Court stated that the debtors knew or should have known that the information they provided was inaccurate and that the cumulative effect of their false statements was material.  This established a pattern of reckless indifference to the truth.
What Can We Learn From This Case?
First, the debtors in this case are both intelligent and educated.  They ran a medical practice.  So they were smart enough to know what they were doing.  When it came to their bankruptcy petition, they made not one omission, but many.  It appears that they did so to deceive the court.
If the debtors had merely neglected to schedule one particular asset, or if they merely provided inaccurate information about their income, they likely would have been able to coast, assuming that they were immediately forthright about amending their schedules to provide accurate information.
However, in this case, the debtors’ failure to provide accurate information was so wide-spread, that it was impossible for the court to overlook, as the only reasonable conclusion was that the debtors intentionally acted to withhold important information.
The bottom line is that it is important to be as accurate as possible when disclosing information about your financial situation.  Failure to do so can result in having the court deny your dischage.
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Agape World Ponzi Victim, Forced to File Bankruptcy, Later Sued by Agape Trustee

Posted on Monday (March 28, 2011) at 2:00 am to Bankruptcy and Society
Bankruptcy Crime
Bankruptcy Practice
Chapter 7 Bankruptcy
Current Events

Victim of Ponzi Scheme Sued by Bankruptcy TrusteeWritten by Craig D. Robins, Esq.
Losing money in a Ponzi Scheme is bad enough.  Being forced to file for bankruptcy relief because of these losses is even worse.  But how about getting your bankruptcy discharge, and then being sued by the bankruptcy trustee overseeing the failed Ponzi business?
That’s exactly what happened to one of our clients last month.
Agape World, Inc. Lands in Bankruptcy Because of Ponzi Fraud
In February 2009, several creditors forced Agape World into an involuntary Chapter 7 bankruptcy in the Central Islip Bankruptcy Court, here on Long Island in the Eastern District of New York.
I previously wrote that Ken Silverman was Appointed Chapter 7 Trustee in Agape World Case .  Around that time, it was discovered that Agape president Nicholas Cosmo  perpetrated a Ponzi scheme involving several hundred million dollars.
Many Long Island consumers lost their life savings after falling victim to his scheme.  As a result, many of them filed bankruptcy cases themselves.
We recently represented one of them and filed his Chapter 7 bankruptcy petition last year.  The unfortunate debtor lost hundreds of thousands of dollars.  Our client’s bankruptcy case itself was unremarkable and was routinely processed and closed as a no-asset case.  The client got his discharge last month.
Out of the blue, Ken Silverman, the Agape World trustee, brought an adversary proceeding in the Agape World bankruptcy case against our client.  He alleged that our client had received some distributions from Agape shortly before Agape was put into an involuntary bankruptcy, and that these payments now had to be returned to the Agape bankruptcy estate under several different legal theories.
We had not even scheduled Agape as a creditor in our client’s bankruptcy as we had no idea that there was any potential liability to them. 
Trustee Recognizes Bankruptcy Discharge
In response to the adversary proceeding, we contacted an attorney in the trustee’s office and explained the circumstances of our client’s bankruptcy filing.  It appeared that the trustee was totally unaware of our client’s prior bankruptcy as we had not included Agape or its trustee as a potential creditor.
We were concerned that the trustee would nevertheless seek to go forward with the adversary proceeding because the debtor had not listed Agape in the schedule of creditors.
However, we advised the trustee that failure to schedule a creditor in a no-asset Chapter 7 case does not, in and by itself, prevent the debtor from discharging that debt.  I previously wrote about Inadvertently-Omitted Creditors in Chapter 7 Bankruptcy Cases
Much to the trustee’s credit, he acknowledged that any possible liability of our client to Agape was discharged by virtue of the prior bankruptcy, and within 24 hours of advising his office of our client’s bankruptcy discharge, he withdrew the adversary proceeding.
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Update on Ponzi Scheme Attorney Who Committed Suicide, Leading to Involuntary Bankruptcy for his Law Firm

Posted on Friday (March 11, 2011) at 3:00 am to Bankruptcy and Society
Bankruptcy Crime

Ponzi scheme on Long Island causes involuntary bankruptcy 
Written by Craig D. Robins, Esq.
In November I wrote about a Long Island attorney, Jay Korn, who, on March 24, 2010, had just jumped eight stories to his death amidst an investigation into whether he fleeced millions in a Ponzi scheme.
He jumped from the roof of his the Hempstead building where his law office was located at 50 Clinton Street.
That led several investors in the scheme to put Korn’s firm, Korn & Spirn, into an involuntary Chapter 7 bankruptcy.
See:  Korn & Spirn — Involuntary Bankruptcy Just Filed Against this Beleaguered Long Island Law Firm  for a post that contains a fairly detailed discussion of the situation, the bankruptcy case, and an explanation about involuntary bankrutpcy.
Nasssau County D.A. Completes Investigation
The Nassau County District Attorneys Office just concluded, after examining Korn’s financial affairs for a year, that Korn was solely responsible for the Ponzi scheme.
In a statement, Nassau County District Attorney Kathleen Rice said, “The credible evidence did not establish that anyone other than Jay Korn was involved in the alleged criminal wrongdoing.”  She added that the D.A. was closing the case.
The Involuntary Bankruptcy Case Continues
The bankruptcy case, which had been filed in November, was assigned to Chapter 7 bankruptcy trustee, Andrew M. Thaler, who is in the process of investigating the decedents financial affairs to ascertain if there are any assets to liquidate for the beneift of creditors, who primarily consist of scammed investors.
The trustee may likely adopt some of the legal theories currently used by the trustee in the Bernie Madoff Ponzie scheme case to “claw back” from those investors who benefited from the scheme.
So far, about $13.1 million in claims have been filed in the involuntary bankruptcy case.  However, reported assets so far consist of a mere $2,500 representing funds that were in the law firm’s bank account.
How Did Korn Defraud His Friends and Clients?
Korn told friends and clients that he was administering a real estate investment program and he promised to pay investors returns of 12 to 15 percent per year.
As an attorney, Korn also represented parties in real estate transactions.  In one of those transactions, he represented a Manhattan doctor who was purchasing a condo.  Two weeks before Korn committed suicide, the doctor wired him $2.5 million for that real estate purchase.  The doctor has not seen the money since.
Long Island Bankruptcy Attorney David Baram, a colleague of mine who was with me at the National Association of Consumer Bankruptcy Attorneys Workshop in Puerto Rico last fall, represents Arthur Spirn, who was Korn’s law partner.  Spirn says he was a victim of his Korn. 
The Nassau County D.A. has not pursued him at all and appears to have been cleared by the D.A.’s investigation.
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Update on Bankruptcy Attorney Sanctioned for Cheating on Credit Counseling Requirement

Posted on Saturday (March 5, 2011) at 7:00 am to Bankruptcy Crime
Issues Involving New Bankruptcy Laws
Lawyer to Lawyer

attorney misconduct in bankruptcy court caseWritten by Craig D. Robins, Esq.
Two years ago I wrote about a scandalous situation in which a consumer bankruptcy attorney in New York thought he had found a way to by-pass the requirement of having his clients go through mandatory credit counseling.  He had his secretary do it for them!
I wrote a detailed post about that attorney:  Attorney Caught Cheating on Credit Counseling Requirement .
This attorney didn’t even bother telling his clients about their obligation to do credit counseling.  He just had his secretary do it for them, in their names.  When the Chapter 7 trustee discovered this “irregularity” he told the debtor that there were serious problems with the case.
That debtor wound up coming to me for advice since he no longer trusted his attorney (and for good reason).  I took the case over and was successful in getting the former attorney to refund the debtor’s legal fees and pay my fees as well.
The U.S. Trustee then went on to investigate the attorney and sanctioned him $40,000.  In addition, the bankruptcy court suspended the attorney from practicing bankruptcy before the court for a year.  He was also required to take 16 hours of continuing legal education covering bankruptcy law, four hours of which had to be for ethics.
Here’s the update:  The New York Appellate Division for the Second Judicial District learned of the suspension and misconduct.  It disciplined the attorney by giving him a public censure.  This is the highest form of discipline short of suspension.
The attorney paid the full $40,000 sanction, took the required continuing legal education courses, and has since been reinstated to practice before the bankruptcy court.
In short, a very expensive price to pay for taking a foolhardy and highly improper shortcut around a bankruptcy law requirement.
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Korn & Spirn — Involuntary Bankruptcy Just Filed Against this Beleaguered Long Island Law Firm

Posted on Thursday (November 18, 2010) at 11:45 pm to Bankruptcy and Society
Bankruptcy Crime
Bankruptcy Terms

 Ponzi schemers often end up in involuntary bankruptcy filings
Written by Craig D. Robins, Esq.
Firm of Lawyer Who Jumped Eight Floors to his Death Now in Involuntary Chapter 7 Bankruptcy in Central Islip Bankruptcy Court
The Long Island law firm of Korn & Spirn has had more than its share of woes this year.  In March, partner Jay Korn of Rockville Centre committed suicide at the age of 70 by jumping to his death.  He shared aHempstead law practice with Arthur Spirn for more than 30 years in a firm known as Korn & Spirn.
He jumped off the roof of the Hempstead office building where he maintained his law practice, landing on an awning eight stories below. That Wednesday morning in March he died about half an hour later.
The big news after the suicide was that it appeared that Korn defrauded dozens of clients out of millions of dollars in a Ponzi scheme.  Nassau County District Attorney Kathleen Rice began investigating him the day after he killed himself. 
A large number of clients immediately filed complaints thereafter.  Garden City attorney Jerome Resiman, who is representing a number of the alleged victims, called Korn “a mini-Madoff,” according to news reports, and said that Korn promised 15% annual returns on investments.
As of April, there were close to a hundred complaints from victims alleging that Korn defrauded them out of about $30 million.  In news reports from that time, The District Attorney’s office commented that neither the firm nor Korn’s partner, Arthur Sprin, were under investigation.
Law Firm of Dead Attorney Investigated for Ponzi Scheme Must Now Answer to Creditors in Bankruptcy Court
Yesterday, three creditors who asserted that they had claims against the law firm partnership filed an involuntary Chapter 7 Bankruptcy Petition against the firm.  The case is now pending before Central Islip Bankruptcy Judge Dorothy Eisenberg under Case No. 10-79012
The petitioning creditors are Steve Prince of New York, represented by Thomas J. Perkins, Esq., who claimed he was owed $600,000; Lewis J. Rubin of New York, represented by Herbert Kramer, Esq. of New York, who claimed he was owed $2,565,000; and Ahron Glambosky of East Meadow, represented by David Grill, Esq. of New York, who claimed he was owed $1,250,000.  That’s a total of $4.4 million in claims for three creditors.
The Creditors Appear to be Victims of the Ponzi Scheme
It appears that these creditors were victims of the Ponzi scheme as they indicated that the nature of their claims were funds entrusted for investments and real estate purchases.  It was unclear, however, whether they were alleging that the firm had any involvement in Korn’s alleged Ponzi activities other than financial liability.
The creditors served the involuntary petition papers upon Arthur L. Spirn, P.C., the new law firm of the surviving partner, who moved his office to Garden City after the suicide.
The actual involuntary bankruptcy petition was rather short, consisting of only two pages and no schedules.
What is Involuntary Bankruptcy?
When creditors feel that their funds may have been diverted or embezzled, they have several options.  They can litigate in state court or they can force the debtor into bankruptcy, which can often enable the litigation to proceed at a faster pace before a trustee who has considerable legal authority.
One of the powerful remedies a trustee in a bankruptcy case has is the ability to recover payments or wrongful transfers that the debtor made.
Once the court appoints a trustee, the trustee has the right to thoroughly examine the debtor and hold the debtor accountable.  However, the trustee can also pursue other parties as well if the debtor transferred funds or valuable assets to those parties without receiving reasonable value in return..
In order to force a debtor into an involuntary bankruptcy, there must be at least three petitioning creditors who are owed at least $10,000 combined.  The petitioning creditors must also be able to allege that there are no fewer than 12 creditors overall.  In addition, the claims cannot be subject to a bona-fide dispute. 
After the petitioning creditors file the involuntary bankruptcy petition, the Bankruptcy Court issues a summons that the debtor has 20 days to respond to.  In the Korn & Spirn case, Judge Eisenberg issued the summons today.
Involuntary Bankruptcy Cases Involving Ponzi Schemes Seem to Be Getting More Widespread
The victims of Ponzi schemes often use involuntary bankruptcy proceedings to protect their rights.  This is the case with Agape World and Bernie Madoff.
Earlier this week I attended the 2010 Bankruptcy Roundtable at the Nassau County Bar Association.  One of the interesting presentations that night was given by David Mahoney, Esq. about issues that arise in bankruptcy proceedings involving debtors who had engaged in illegal Ponzi Schemes. 
David is an associate in SilvermanAcompora, the firm of Chapter 7 Trustee Ken Silverman who is presiding over the bankruptcy case of Agape World.  I wrote about that case previously — Ken Silverman Appointed Chapter 7 Trustee in Agape World Case
Judge Eisenberg is also the judge in the Agape World case.  She will certainly become a judicial expert in Ponzi schemes.
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Big No-No: Using Credit Cards After You’ve Decided to File Bankruptcy

Posted on Tuesday (September 15, 2009) at 3:45 pm to Bankruptcy Crime
Bankruptcy Tips Consumers Should Know
Chapter 13 Bankruptcy
Chapter 7 Bankruptcy

If you are considering filing bankruptcy, do not use your credit cards!Written by Craig D. Robins, Esq.

Once you’ve made the decision to file for bankruptcy, any credit card use after that point becomes highly scrutinized and very suspect.  This should be obvious.  After all, if someone decides that they are seeking to eliminate their credit card debt through bankruptcy, then incurring additional credit card debt can be considered fraudulent.

 If a credit card company learns that a debtor used a card without any intention of making full payment, then the credit card company has the right to object to the debtor’s discharge of that particular debt. 

 What’s more, if the case trustee or United States Trustee learns that the debtor intentionally “charged up” his or her cards before filing, then the either trustee can seek to have the debtor’s discharge denied or case dismissed.  There is also the possibility that the debtor can be found to have engaged in bankruptcy fraud — a criminal offense.

 Bankruptcy is a very powerful consumer protection tool that can enable you to eliminate all credit card debts and get a fresh new financial start.  Don’t jeopardize your ability to take advantage of the federal bankruptcy laws by being greedy or foolish.   Don’t create unnecessary red flags that can expose your case to additional review.  So don’t use your credit cards once you’ve decided to file bankruptcy.

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Bankruptcy Crime Does Not Pay

Posted on Saturday (October 23, 2004) at 10:32 am to Bankruptcy and Society
Bankruptcy Crime
Suffolk Lawyer

Written by Craig D. Robins, Esq.

We are all aware of people who cheat on their taxes, and crooked accountants who sometimes assist them. Unfortunately there are a few bad apples in the bankruptcy arena as well: debtors who lie in their bankruptcy proceedings and attorneys who may help them. Authorities estimate that ten percent of all bankruptcy cases contain some element of fraud.

The Bankruptcy Code imposes an affirmative duty on a debtor to truthfully list all assets and other information required in the petition. This must be done under the federal penalty of perjury. Not only can dishonesty in connection with a bankruptcy case result in the denial of a discharge pursuant to Bankruptcy Code section 727, but it can also land the guilty party in the jail.

Increased Investigations of Bankruptcy Crimes. Now that the U.S. Trustee’s office has embarked upon a quest to sniff out bankruptcy abuse and bankruptcy fraud through its Civil Enforcement Initiative, it appears that an increasing number of those individuals who commit bankruptcy crime are being caught. The U.S. Trustee, which is a division of the Department of Justice (DOJ) also now has a Criminal Enforcement Unit.

Criminal procedure aspects of bankruptcy fraud are set out in Title 18 of the United States Code. Section 152 of that title states that whoever knowingly and fraudulently conceals assets, makes false oaths, presents false claims, receives property with the intent of defeating the provisions of the Bankruptcy Code, destroys records of the debtor, or withholds documents from a trustee, shall be imprisoned for up to five years or fined up to $5,000. The same statute also imposes liability upon any agent or officer of any person or corporation involved in such fraud.

Section 155 of that title states that a debtor’s attorney who knowingly and fraudulently enters into an agreement with another attorney for the purpose of fixing the fees to be paid to any attorney for services rendered, with such fees to be paid from the bankruptcy estate, shall be imprisoned for up to a year or fined up to $5,000.

Another part of that title, section 3057, imposes a congressional directive to the district offices of the U.S. Attorney to become more active in the prosecution of bankruptcy fraud cases. Bankruptcy fraud can involve other federal statutes as well.

Although bankruptcy fraud is committed by a very limited few, it nevertheless has at times cast a negative reflection upon everyone who files for bankruptcy relief.

Some lawyers might not recognize criminal activity that the DOJ now targets for investigation. Examples include filing for bankruptcy using an incorrect Social Security number, and receiving payments from a bankruptcy debtor that were not approved by the bankruptcy court. In both of these examples, DOJ investigations led to convictions and jail time. The decision to prosecute is based on the level of loss or injury, the existence of sufficient evidence, and the clarity of the law. In some cases, civil penalties for fraud are deemed sufficient to punish and deter.

The DOJ often issues press releases about recent indictments and convictions for bankruptcy fraud. Consumer Bankruptcy News, an excellent periodical for practitioners, now regularly reports news of bankruptcy crime. The following cases, which were gleaned from recent issues and press releases, highlight some interesting bankruptcy crimes involving not only debtors, but their attorneys as well.

Colorado attorney suspended because he secured his legal fees by taking liens against client’s homes. Conrad Kindsfather not only secured his unpaid legal fees by having his bankruptcy clients give him a mortgage on their property, he then failed to disclose his interest in the property in the bankruptcy proceeding. Practical Tip: If you become a secured creditor of the debtor, you have a conflict of interest in a bankruptcy proceeding and may not represent the debtor. Also, and this probably goes without saying, do not prepare a petition and intentionally conceal material information, as this is a deceptive practice.

Identification Theft in Bankruptcy Proceeding Lands Defendant in Prison. Rodney Jones obtained a fraudulent identification card and used it to impersonate someone by filing a bankruptcy petition in that person’s name in order to stop a foreclosure proceeding. Practical Tip: Always ask for and check your client’s driver’s license and social security card at the time they retain you, and make sure your client is who he or she appears to be.

Debtor lied about assets owned by his corporation and was convicted for bankruptcy fraud. Duncan Edwards filed a Chapter 13 petition and listed his corporation as an asset, but indicated that it had only nominal value. It turned out that the corporation owned stock options in another corporation. Edwards later converted his case to Chapter 7 and did disclose the stock options, but testified that they were worthless. A few days later the trustee learned that the debtor had sold the options two weeks prior to the hearing for $445,000. Needless to say, Edwards will be serving time. Practical Tip: Try to make sure your client is realistic about the value of scheduled assets. Remind your client that pulling a fast one and trying to cheat in the bankruptcy system can result in a felony conviction.

Attorney and client are both indicted for scheme to defraud creditors. Arnold Stuart retained Gregory Lyons, Esq. The U.S. Attorney alleged that they schemed to prevent certain creditors from obtaining and recording a judgment lien on Stewart’s property. While Stewart was in bankruptcy, the men allegedly entered into a coal-mining investment encumbering the debtor’s property, but never disclosed that fact to the creditors, the bankruptcy court or the trustee. Instead, they led creditors to believe they were following the order of the bankruptcy court to sell the land and to pay proceeds to the creditors, according to the investigators. When it appeared that some creditors had learned of the scheme, the defendants attempted to conceal the fraud by dismissing the bankruptcy case; however, they were caught. Practical Tip: Practitioners should be aware that there may be criminal law consequences based on advice given and actions taken in the planning and conduct of a bankruptcy case.

Bankruptcy crime seminar in November. Stephanie Wickouski is one of the country’s leading experts on bankruptcy crime. She is the author of the leading treatise on that subject. On November 17, 2004, she will be joined by Southern District Bankruptcy Judge Cornelius Blackshear and Deidre Martini, U.S. Trustee for Region 2, for a roundtable discussion of bankruptcy crimes, their genus and aftermath. The panel will explore the effects that these crimes have on the economy and on confidence in the economic system. The seminar, which will be at the Milleridge Cottage in Jericho, is being sponsored by the Long Island Chapter of the Turnaround Management Association. For information, contact Chapter President Jeff Wurst at (516) 663-6535.

 About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the October 2004 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Medford, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.

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Craig D. Robins, Esq. is a Long Island bankruptcy lawyer, who is focused primarily on helping individuals and families, find solutions to their debt problems. Read more »


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Craig D. Robins, Esq.
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