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First Circuit Reverses One Count for Bankruptcy Fraud Defendant - U.S. v. Marston

September 27, 2012

Vincent Howard and our Chino consumer bankruptcy lawyers make a point of warning every bankruptcy client about the serious consequences of fraud in bankruptcy. Fraud includes hiding assets from the bankruptcy court, making large purchases directly before filing, and attempting to hide a previous bankruptcy that might suggest abuse of the bankruptcy courts. In U.S. v. Marston, however, the First U.S. Circuit Court of Appeals reversed one count of a conviction because the defendant, like all defendants, was entitled to full proof of the claims against her. Ramie Marston was convicted of bankruptcy fraud for failing to include information about her credit card fraud in her petition, but the court held that the prosecution failed to prove there were any current claims against her for the fraudulent charges when she filed for bankruptcy.

Marston filed for Chapter 7 bankruptcy in 2009, but failed to disclose, as required, any other names she'd used in the past eight years. In her case, that included the names of two acquaintances, Kristy Kromer and Susan Blake, which she had used to fraudulently obtain credit cards. She also listed Blake as a creditor without mentioning the credit card issuers who she had defrauded in Blake's name. After the trustee challenged Marston's right to a discharge, she dismissed the bankruptcy, but federal authorities charged her criminally with bankruptcy fraud. She was ultimately convicted on two counts: failing to disclose that she had used the other names, and failing to disclose the debts to the credit card issuers. She was sentenced to 37 months in prison but appealed, arguing the evidence was insufficient on both counts.

The First Circuit ultimately reversed as to the conviction for failing to disclose the claims of the credit card companies. To convict for the crime in question, making a false oath, prosecutors must prove that the defendant 1) made a false statement that 2) was material and 3) knew she was doing it. The appeals court found that these elements were proven as to her use of the other women's names, noting that the forms were not ambiguous and Marston knew she would be admitting to a crime if she had listed the names. It also found no controversy over the falsity, materiality or relevance of the convictions for failing to disclose the credit card debts. However, it said, prosecutors did not allege that the credit card companies' claims against Marston were current when she filed for bankruptcy. Prosecutors accepted a stipulation that did not say the claims remained unpaid when Marston filled out her bankruptcy forms. Though there is much evidence suggesting it, prosecutors failed to prove it, the First said, and thus it reversed the conviction on that count and suggested re-sentencing on the first count on remand.

At Howard Law, P.C., our Irvine individual bankruptcy attorneys can't stress enough that even the appearance of fraud can be fatal to a bankruptcy case. In some cases, bankruptcy filers exclude debt out of a misplaced sense of goodwill, such as intending to repay that particular debt in full. Good intentions are praiseworthy, but the end result can be cancellation of the bankruptcy case, requiring the filer to start over. In more serious cases, the filer can be denied a discharge--rendering bankruptcy pointless--or even criminally prosecuted, as Marston was. This is one reason why it's vital to be honest with Vincent Howard and our team of Riverside County personal bankruptcy lawyers, if you choose to have us represent you. To give you the best possible chance at a fresh start, we have to know the good and the bad about your case, even if you feel embarrassed about it.

Howard Law, P.C., represents Californians from all walks of life who are ready to consider bankruptcy as a solution to deep debt they can't seem to meaningfully pay down. To speak to Vincent Howard and our experienced team, call us today at 1-800-872-5925 or send us a message online.

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