Last month I attended the California Bankruptcy Forum Conference in Santa Barbara, California that was chaired by our own Riverside Chapter 7 Trustee Howard Grobstein. I attended the Saturday afternoon program on Consumer Bankruptcy practice.
The first program of the program was on “Title 18–Criminal Investigations: The Process and How to Respond.” The panel consisted of the Hon. Judge Maureen Tighe, The Los Angeles Assistant United States Trustee Peter Anderson and Riverside Chapter 7 Trustee John Pringle.
The panel discussed what happens when the United States Trustee must start a criminal investigation. Judge Tighe mentioned that the Judges and the Trustees are by statute required to report all crimes to the United States Attorney. She said that no matter how sympathetic the client is, the Judge must report the crime.
Chapter 7 and Chapter 13 Trustees and Judges are under 18 USC 3057 and are Required by law to report criminal activity.
In addition the US Trustee must refer to the Attorney General under28 USC 586 a matter that may constitute a violation of criminal law.
This is important information as a bankruptcy lawyer walks a fine line when he advises a debtor on a criminal matter. The Judge suggested that criminal counsel be involved if the debtor may say something that may incriminate him. The discussion was sobering as many times during meetings of creditors, debtors say things that are not only damaging in their case, but could open the door to criminal investigations by the attorney general.
In an interesting sidelight on the presentation, Mr. Pringle related why debtors have to show proof of Social Security and photo identification at the meetings of creditors. Mr. Pringle said that there was an involuntary bankruptcy case filed against a debtor. At the meeting of creditors, the trustee (which may have been Mr. Anderson–who was a chapter 7 trustee at the time) asked the person who sat down at the table if he was the debtor. The individual said yes. then another person sat down and said he was the debtor. So there were two people who claimed to be the debtor.
It turns out the first person was lying. The first person was connected to the second mortgage holder on the debtor’s real property. The true debtor ‘s property was in foreclosure and the second mortgage holder filed an involuntary bankruptcy against the debtor to stop the foreclosure. The scheme was found out and the second mortgage creditor was in big trouble. The upshot of this criminal matter was that now all debtors have to show proof of social security and photo identification.