Tennessee Federal Criminal Lawyer Blog

Earlier this month, Danielle Denson claimed she never knew she had to file income tax returns for her income as an adult "exotic" dancer. However, she filed 323 tax returns in other citizen's names claiming more than $1.6 million in refunds from tax years 2008 to 2011. Sentencing Judge Susan Bucklew presiding over the case, expressed disbelief over Denson's claim that she was unaware that she was supposed to file tax returns on her income as a stripper, and stated: "What did you think the IRS did? Just give money back? Yet you were filing hundreds of tax returns? I have a hard time believing that." Judge Bucklew then proceeded to issue a Judgment for Denson to serve 6 years and 4 months in federal prison for her tax crimes.

Denson's defense attorney's attempted to convince the Judge that Denson's hard life led her to engage in fraud as a way to simply survive. Denson's attorney stated Denson's mother died of AIDS and her father abused her. One of the victim's mothers was not persuaded by Denson's attorney's argument. Her daughter is a 27 year old autistic female that resides in a group home. On the false returns, Denson listed the victim as a student which resulted in a $9,046 tax return. The mother of the victim stated the she had also been severely abused as a child, yet she had maintained her job for 29 years. The mother of the autistic female asked the court to give Denson the maximum sentence possible.

The prosecution was also not persuaded by Denson's arguments.
The Government argued that Denson did not just participate in tax fraud to survive but rather to support her lavish lifestyle, which included a new Mercedes, spending over $300,000 at the Hard Rock Casino in 2007, and spending $14,000 at Gucci.

Sources
The Tampa Tribune - "Tampa Exotic Dancer Sentenced for Tax Fraud"

The Tampa Tribune - "Woman Set to Plead Guilty in Tax Fraud of $1 Million Plus"

Newspitter.com - "A Stripper, Danielle Denson Gets 6 Years for Tax Refund Fraud"

On December 7, 2012, President Barack Obama signed the Child Protection Act, which doubles the potential sentences for those convicted of certain sex and child pornography crimes. The Child Protection Act (CPA) also provides more resources for investigating online crime and a more efficient way to issue subpoenas. As an additional weapon in the fight against online child crime, the CPA creates a civil action and new offenses for harassing or intimidating a child victim or witness.

This new law amends the federal criminal code to impose a fine and/or prison term from 10 years up to 20 years for transporting, receiving, distributing, selling, or possessing pornographic images of a child under the age of 12, provided in 18 U.S.C. § 2252(b)(2). In 18 U.S.C. 1514(b)(2), the new law allows a U.S. district court to issue a protective order prohibiting harassment or intimidation of a minor victim or witness as long as the court finds evidence that the conduct could adversely affect the willingness of the minor to participate in a federal criminal case. If an offender is to violate this protective order, then he or she can be imprisoned for up to 5 years and/or be fined. The U.S. Marshals Service can now issue an administrative subpoena for the investigation of unregistered sex offenders by the U.S. Marshals Service.

Finally, the Child Protection Act of 2012 further amends the PROTECT Our Children Act of 2008 in the following ways:
(1) Doubles the amount from $2,000,000 to $4,000,000 annually that the Attorney General can award a non-law enforcement agency to establish and conduct training courses for the National Internet Crimes Against Children Task Force Program.
(2) Requires that the Attorney general designate a senior official at the Department of Justice with experience in child exploitation cases as the National Coordinator for Child exploitation Prevention and Interdiction, and he or she will be responsible for coordinating the development of the new system.
(3) Requires the Attorney General to report within 90 days after the enactment of this Act on the status of the establishment of the system.

Some of the most challenging cases for criminal defense attorneys to take on are cases involving possession of child pornography. As one might imagine, a person accused of possessing child pornography is not likely to garner much support or sympathy from a jury member. Oddly enough, the person in the court most likely to show mercy to such a client may just be the sentencing judge.

The Kingsport Times recently linked an article from the Associated Press regarding the continuing debate over how to properly sentence those persons convicted of violating the child pronography laws, which are primarily federally codified at 18 U.S.C. § 2252. The article claims that the U.S. Sentencing Commission plans to release a report at the end of the year that would propose changes to the sentencing guidelines used on defendants convicted of possessing or distributing child pornography. The reasons for the proposed sentencing changes lie primarily with the severity of the sentencing for child pornography possessors, which have resulted in offenders who distribute and possess child pornography receiving longer prison sentences than those who actually sexually molest or even rape a child.

Perhaps surprisingly, federal court judges may actually agree with proposals to reduce the punishment for such offenses. According to a 2010 survey of federal judges, 70% said the sentencing structures were too high for child pornography convictions. In practice, federal judges issued child pornography sentences that were lower than the sentencing guidelines 45% of the time in 2010. Yet even though the sentences were lower than the sentencing guidelines, the average sentence for child pornography was still higher than all other offenses except murder and kidnapping.

On the other side of the debate are prosecutors and advocates for the victims. As one victim stated, "[those who view or distribute child pornography] need to be taught how much pain they inflict and a greater term of imprisonment will teach them that, (and) will comfort victims seeking justice." A congressman showed dismay over the number of judges who are already issuing lower sentences. "I am concerned that the federal judiciary is failing to consider the severity of child pornography and its victims. This departure rate is disturbing and threatens the most vulnerable among us, our children."

In a recent article for the journal of the National Association of Criminal Defense Lawyers, former Sen. Arlen Specter of Pennsylvania and former AUSA Linda Dale Hoffa criticized the approach by Congress. "The fact that child pornography offenders can be given longer sentences than child abusers or violent offenders reflects a lack of care by Congress," Specter and Hoffa wrote. "In the rush to prove itself hostile to individuals who possess or distribute child pornography, Congress has obscured the real distinctions between different offenders."

Even with the Sentencing Commission's upcoming report and criticisms by judges, there are those who believe that Congress will most likely not act. As Professor Jelani Exum from the University Of Toledo College Of Law stated, "You don't have a built-in sympathy. Who's going to stand up and say, 'I'm fighting for child porn possessors [?]'" Former federal prosecutor Linda Hoffa shared Professor Exum's views. "If you vote against these harsher penalties, the sound bite is that you're protecting child pornographers, and that could be the end of somebody's career."

Abraham Lincoln is credited with saying, "He who represents himself has a fool for a client." I too have often thought the same thing when I hear of people venturing into the dangerous waters of criminal defense without a skilled lawyer. One such person to venture into these dangerous waters is Hiram Dane, who was convicted on four counts of felony tax evasion in Utah.

Up until 2 weeks ago, Dane had been on the lam for almost three years. In 2008, he was a pilot for SkyWest Airlines in Utah when he was arrested for four counts of felony tax evasion. The prosecution claimed that Dane failed to file tax returns for 2005 and 2006, and that he also falsified returns for other tax years.

Dane's case came to trial in 2009. He went pro se before the court during the morning session. He was due back in the afternoon but never showed. He was later convicted of tax evasion and failure to file a proper tax return. For close to three years, he has been on the run from authorities. In 2010, he registered a company called Bavarian Securities in Sanford, North Carolina. This act ultimately led to his arrest.

Dane made three mistakes that I hope no one else will make: 1) representing himself, 2) abandoning his defense in the midst of trial, and 3) fleeing. I can only imagine that Dane will receive no leniency from his sentencing judge upon his return to Utah, and he may face additional penalties and/or charges for fleeing and contempt of Court.

According to the Department of Justice's website in an article titled "Barney Davis, Christen, Altman, and Jeffrey Bradford Plead Guilty to Horse Protection Act Violations," three Tennessee residents pled guilty in October to "soring" horses. The "soring" of horses is defined in the article as "...an unlawful practice where items like bolts are screwed against the soles of horse's hoofs or chemicals are applied to the pastern and hoof areas to produce pain and sensitivity to alter the gait of a horse."

According the article from the U.S. Attorney's Office for the Eastern District of Tennessee, the United States Department of Agriculture, Office of the Inspector General began investigating the case in August of 2010. In April of 2011, a grand jury in Chattanooga returned a thirty-four count superseding indictment against the three Shelbyville, Tennessee residents. Among the charges were violations of the Horse Protection Act of 1970, which is codified at 15 U.S.C. § 1821, and financial crimes related to the incident. The original charges were later amended to charge Davis with witness tampering. Davis pled guilty to the amended charges and waived presentation to the grand jury.

Violators of the Horse Protection Act are prosecuted federally and can be charged with both felony and/or misdemeanor crimes. Unites States Attorney Bill Killian expressed that he hoped that the prosecution of Davis, Altman, and Bradford will deter others in the industry from committing these types of crimes. Killian went on to say, "...we have been given dominion over the earth and its creatures, and we must exercise that privilege by being good stewards of this gift. Maiming and mutilating horses for sport and profit betrays that charge of stewardship."

Sentencing in this case has been set for February 13, 2012, at 9:00 a.m., in the United States District Court in Chattanooga.

An Atlanta, Gerogia chiropractor was sentenced to nearly five years in prison for conspiracy to commit health care fraud, according to a press release from the United States Attorneys' Office. Andrew Sokol pleaded guilty to charges that he fraudulently billed several private insurance companies for millions of dollars in physical therapy services that he never actually provided his patients. In addition to his prison sentence, Sokol was also ordered to pay restitution of over $6.5 million.

According to the Government's press release, Sokol defrauded insurance companies by offering services like chiropractic care, personal training, and massages to the patients at his "WellnessOne" clinics in the Atlanta area. He would then bill insurance companies for the services, claiming he provided patients with physical therapy. Sokol specifically targeted employees at companies that offered Blue Cross Blue Shield policies because their plans provided generous physical therapy benefits. Sokol would offer promotional incentives to these employees such as massage gift cards, restaurant and gas cards, gift bags, and free lunches to entice them to use the clinic's services. He also waived deductibles and co-payments, so his patients were actually compensated for the services they received. Sokol did employ doctors and physical therapists, but they saw very few WellnessOne patients. These professionals were merely on the payroll so that Sokol could bill the insurance companies for their higher rates, while massage therapists were actually providing the massages. The scheme allowed Sokol to pocket millions of dollars by billing personal training sessions and massages as physical therapy.

Sokol's case is another example of the Government's crackdown on health care fraud as a means to help control skyrocketing health care costs. According to the FBI, fraudulent billing to private insurance companies and public health care programs such as Medicare and Medicaid account for an estimated 3 to 10 percent of total health care expenditures in the U.S., a potential cost of over $200 billion annually. Because of these enormous costs, federal law enforcement agencies are increasing their efforts to detect these schemes. In 2010, the government recovered $4 billion from health care fraud enforcement and prevention efforts relating to public programs alone. There are huge sums of money at stake for both public health programs and private insurers, so cases like Andrew Sokol's are likely to be prosecuted vigorously well into the future.

Federal Criminal Defense Attorneys are celebrating a decision by the United States Sentencing Commission will affect the length of sentences being served by thousands of people imprisoned for crack cocaine-related offenses. As discussed previously, under sentencing guidelines enacted in 1986, a person convicted for an offense involving crack cocaine could face significantly longer prison terms than a person caught with the same amount of powder cocaine.

On August 3, 2010, President Obama signed the Fair Sentencing Act of 2010 ("FSA") into law. The FSA was intended to reduce the dramatic disparity in sentencing between individuals convicted of drug offenses involving crack cocaine compared to powder cocaine.
While critics of the old guidelines applauded the FSA, it was unclear whether these changes in sentencing should be applied retroactively to cases where a defendant had already been charged prior to the FSA taking effect. Courts were divided on the issue. Some courts applied the FSA's guidelines while others did not, leading to widely varying sentences for almost identical offenses.

As reported in the New York Times on June 30th, the Sentencing Commission clarified the situation by voting that the FSA's guidelines should be applied retroactively. The Commission determined that retroactive application of the FSA was the appropriate decision given the inherent unfairness of the previous guidelines. The decision affects approximately 12,000 federal inmates currently incarcerated for crack-related offenses. Those inmates can apply to a judge for a sentencing reduction. If approved, prisoners could see an average sentence reduction of around three years. The Sentencing Commission's decision is not final; Congress can overrule the Commission before the revised policy takes effect on November 1.

The United States Supreme Court's decision last week in Tapia v. United States (2011 WL 2369395 (U.S.)) could affect how long a number of criminal offenders spend in prison. Alejandra Tapia was convicted of smuggling unauthorized aliens into the country. The District Court found that the United States Sentencing Guidelines recommended that Tapia be sentenced to 41 to 51 months in prison. At Tapia's sentencing, the judge imposed a 51-month sentence, stating that Tapia could benefit from the Bureau of Prison's Residential Drug Abuse Program ("RDAP"), and that Tapia should spend enough time in prison to qualify for and complete the program.

Tapia appealed the sentence to the Ninth Circuit Court of Appeals, where she argued that 18 U.S.C. § 3582(a) prohibited lengthening her sentence so that she could participate in RDAP. The Ninth Circuit disagreed with Tapia, but the United States Supreme Court reversed, holding that courts are not permitted to either impose imprisonment or lengthen a prison term in order to promote the offender's rehabilitation. The Supreme Court thus resolved a split among several Courts of Appeals on this issue.

The Supreme Court's decision was based primarily on the language of 18 U.S.C. § 3582(a), part of the Sentencing Reform Act of 1984 ("SRA"). Section 3582(a) states that when courts determine whether to sentence an offender to prison and for how long, the court should "recogniz[e] that imprisonment is not an appropriate means of promoting correction and rehabilitation." The Court also cited a provision related to the Sentencing Guidelines instructing the Sentencing Commission to "'insure that the guidelines reflect the inappropriateness of imposing a sentence to a term of imprisonment for the purpose of rehabilitating the defendant or provide the defendant with needed educational or vocational training, medical care, or other correctional treatment." 28 U.S.C. § 994(k).

The Court found this to be so even though the SRA states that rehabilitation is one of the primary purposes behind sentencing. 18 U.S.C. § 3553(a)(2). The Court distinguished these provisions, finding that while rehabilitation is a purpose of sentencing generally, it is not a factor in determining the appropriateness of imprisonment or the duration of a prison sentence. Congress made clear its determination that imprisonment is not the way to achieve rehabilitation by enacting § 3582(a).

The Court also examined additional evidence of Congressional intent. The opinion notes that there are no provisions in the SRA that give courts the power to order offenders to participate in prison rehabilitation programs; the Bureau of Prisons has complete authority over those decisions. For example, in this case, the trial judge clearly hoped Tapia would participate in RDAP, but she never enrolled.

The Court was careful to state that it approves of lower courts discussing the rehabilitation and education programs that are available to offenders who have been sentenced to prison. What courts may not do is extend the term of imprisonment so that these services are available to offenders who otherwise would not have adequate time to complete such a program.

Federal sex crimes encompass a wide variety of criminal action, and as a result, the sentences handed down by federal district court can vary greatly. Here's a quick summary of a few recent sentences involving federal sex crimes around the nation:

1. A Florida man received a 72-month sentence last week for receipt of child pornography. The defendant was reportedly in possession of approximately 17,500 images of child pornography, including sadistic and masochistic images and depictions of sex acts with children
under twelve.

2. Last month, a North Dakota man was sentenced to 30 years in federal custody on child pornography charges. A federal jury found the defendant guilty of using the internet to download visual depictions of minors engaging in sexually explicit conduct. The sentencing judge ordered the defendant to serve 20 years for receipt of materials involving the sexual exploitation of minors, to be followed by 10 years on a charge of possession of those materials.

3. A 66-year-old California man was sentenced last week to almost 22 years in federal prison after he admitted to persuading a minor to participate in sexually explicit acts for the purpose of filming it. Reportedly, the defendant Baldwin came under investigation by the Federal Bureau of Investigation's Modesto Office and the local Sheriff's Office after a minor victim reported being molested by him from 2005 through early 2010.

4. Last month, a Texas man was sentenced to 20 years after he pled guilty in November 2010 to one count of receiving child pornography. After executing a search warrant at the defendant's residence, a forensic examination of his computer and officers discovered more than 100 images of child pornography. Further, according to the affidavit filed with a criminal complaint, a 16-year-old victim described details of sexual encounters with the defendant that occurred at the defendant's home. The victim stated that they had sexual intercourse and that during one of the sexual encounters, the defendant recorded it and stored it on his computer.

As these cases indicate, child pornography and sexual exploitation of minor cases can carry severe penalties. If you are suspected of being involved with a federal sex crime, act immediately to consult with an experienced federal criminal defense attorney.

In a rare move, the United States Sixth Circuit Court of Appeals overturned a sentence handed down in the Eastern District of Tennessee and remanded the case to the trial court for resentencing. In U.S. v. Evelyn Worex, the Sixth Circuit concluded that the sentence was substantively unreasonable.

The defendant, Evelyn Worex, entered a guilty plea to an indictment charging her with one count of unlawful possession of firearms and ammunition by a convicted felon, in violation of
18 U.S.C. § 922(g)(1). Ms. Worex was sentenced to 48 months confinement, but her advisory United
States Sentencing Guidelines range was 18-24 months. The trial court sentenced Ms. Worex to a 24-month upward variance based upon her alleged involvement in uncharged criminal activity that had not been established by a preponderance of the evidence. The information concerning Ms. Worex' involvement in the uncharged criminal activity was derived from the Presentence Investigation Report.

Ms. Worex' appeal is essentially that the sentencing court abused its discretion by imposing an above-Guidelines sentence based upon the factual circumstances of her case when her potential involvement in the uncharged shootings had not been proven by a preponderance of the evidence. Accordingly, Ms. Worex claims that the 24-month upward variance from the 18-24 month Guidelines range, which resulted in a 48-month sentence, was premised upon improper judicial fact-finding.

The Sixth Circuit agreed with Ms. Worex' appeal because the uncharged criminal conduct was not proven by the "preponderance of the evidence" standard. The Appeals Court wrote:

...the district court may consider uncharged conduct for sentencing purposes, but in order to do so, it "must make findings by a preponderance of the evidence." Here, it is undisputed that, at the time of her sentencing, Worex had not yet been charged for her role in the Piatt and Burrell shootings. Moreover, the district court conceded that the evidence regarding this uncharged conduct, albeit incriminatory, was insufficient to establish her involvement by a preponderance of the evidence. (citations omitted)

Defendants and attorneys alike should be very careful of which "facts" provide the basis for a defendant's sentence. Presentence reports can be a potential back door for unproven information to be presented to a sentencing judge. Timely objections to both the Presentence Report and to a sentencing judge may be necessary for any unproven information used to sentence a defendant.

While most non-lawyers are aware that a person's prior criminal history can impact their sentencing for future crimes, few people are aware of how drastic the sentences can be for convicted felons who continue to possess firearms. One such example of an enhanced punishment due to one's past deeds is contained in the Armed Career Criminal laws found at 18 U.S.C. § 924(e) and in the United States Sentencing Guidelines § 4B1.4.

Earlier today, Tennessee resident Bradlee Thomas was sentenced to a 15-year sentence for being an armed career criminal. According to a press release from the U.S. Attorney's Office for the Eastern District of Tennessee, Thomas pleaded guilty to being a convicted felon in possession of a firearm, in violation of 18 U.S.C. § 922(g). Due to Thomas' prior criminal history, which included convictions for burglary, he was exposed to enhanced punishment as an armed career offender.

18 U.S.C. § 924(e) provides:

In the case of a person who violates section 922 (g) of this title and has three previous convictions by any court referred to in section 922 (g)(1) of this title for a violent felony or a serious drug offense, or both, committed on occasions different from one another, such person shall be fined under this title and imprisoned not less than fifteen years...

Further, the Sentencing Guidelines § 4B1.4 will typically provide a beginning base level of 33 or 34. Based on a person's criminal history, the Sentencing Guidelines range will be anywhere from 188-327 months. Of course, a defendant may be able to lower his/her guideline level through such avenues as Acceptance of Responsibility and providing "substantial assistance" to the Government. Regardless of these potential sentencing reductions, a defendant with certain classes of prior felonies who is found in possession of a firearm is looking at a potential lengthy prison sentence.

Apparently, even though all may be fair in love and war, all is not legal in love and war. According to the U.S. Attorney's Office in Idaho, Ricky Barry, a 60-year-old resident of Montana, was sentenced earlier this week to a year and a day in federal prison for unauthorized use of an access device by pretending to be his ex-wife while ordering a mattress and a laptop. Barry also paid $7,700 in restitution.

Barry's plea agreement states that in May, 2008, Barry opened a line of credit in his ex-wife's name and ordered a Tempur-Pedic bed and sheets. The unauthorized access device used during the transaction was the Tempur-Pedic account number opened in his ex-wife's name. Tempur-Pedic recorded telephone calls Barry made on May 30 and July 3, 2008. In those calls, Barry pretended to be his ex-wife when speaking to company representatives and placing the order. Barry also signed the delivery documents with his ex-wife's name at the time the merchandise was delivered. The bed and sheets were later seized by federal agents when Barry's residence was searched pursuant to a federal search warrant.

This type of crime is codified generally in 18 U.S.C. § 1029 [Fraud and related activity in connection with access ­devices]. "Unauthorized access device" is defined at 18 U.S.C. § 1029(e)(3) as "any access device that is lost, stolen, expired, revoked, canceled, or obtained with intent to defraud." The relevant Sentencing Guidelines provision for this crime is found in USSG § 2B1.1, which covers economic fraud crimes generally.

Federal and state prosecutions have been steadily increasing for medical doctors who issue medically unnecessary prescriptions, usually in the form of pain pills. The latest doctor in East Tennessee to be punished for such activities is Elizabeth Reimers of Winchester, Tennessee, who, according to a press release from the U.S. Attorney's Office for the Eastern District of Tennessee, was sentenced yesterday to 70 months incarceration in the Eastern District of Tennessee at Chattanooga by the Honorable Harry S. Mattice, Jr., United States District Judge.

According to the press release, Reimers first came to the attention of law enforcement by a citizen who reported that Reimers was inappropriately prescribing addictive pain medication to drug-seeking patients without medical justification. Reimers allegedly prescribed pain-killers and other addictive substances even after her patients had overdosed on those medications or had been treated for addiction to them. Additionally, pharmacy records disclosed an abnormally high rate and amount of prescriptions issued by Dr. Reimers of pain medications.

The Government eventually set up an undercover sting operation, wherein an agent posed as a drug-seeking patient and was able to obtain addictive medications without any appropriate medical examination or justification. The press release reports that the undercover agent was even able to obtain such prescriptions for his fictional "brother" who Dr. Reimers never saw at all, and in whose existence she voiced disbelief.

United States Attorney Bill Killian stated what every prosecutor would echo:

I hope that this prosecution helps sound the alarm that we are experiencing a epidemic of prescription pill abuse in East Tennessee. Anyone, including a licensed doctor, who unlawfully distributes these pills will face substantial penalties. Dr. Reimers chose to ignore the oath all physicians take to "do no harm." Her actions had a devastating effect on several of her patients and the community at large. Our office will continue to target and prosecute those individuals who are responsible for illegally putting these powerful drugs on our streets.

Federal child pornography crimes can be very subtle in their distinction from one another, and these subtle differences can result in severe sentencing discrepancies. For instance, one such discrepancy occurs when analyzing the difference between receipt of child pornography (18 U.S.C. § 2252(a)(2)) and possession of child pornography (18 U.S.C. § 2252(a)(4)(b)). The former crime (receipt) requires a minimum 5-year statutory sentence, while the latter crime (possession) does not have a minimum statutory sentence.

Another comparison that was addressed in United States v. Daniel Szymanski (6th Circuit, February 7, 2011), was whether the mental element of "knowledge" was required in order to convict someone of receipt of child pornography. In Szymanski, the Defendant pled guilty to receiving child pornography and received the minimum mandatory sentence of 5 years. The Defendant appealed his sentence on a number of grounds, but the Sixth Circuit, on its own initiative, overturned the sentencing court's decision because "a defendant charged with receipt of child pornography must have knowledge, not only as to the act of receipt itself, but also as to the fact that the material he is receiving features minors engaged in explicit sexual conduct."

The Sixth Circuit relied heavily on the U.S. Supreme Court case United States v. X-Citement Video, Inc., 513 U.S. 64 (1994), which previously addressed this issue and decided that knowledge was a required element of the crime of receipt of child pornography. The Sixth Circuit court wrote in reference to X-Citement Video:

In other words, the Supreme Court interpreted § 2252(a)(2) to mean that defendant convicted of receiving child pornography must have known, not just that he was receiving something, but that what he was receiving was child pornography.

The Court also succinctly pointed out a crucial difference between the crimes of receipt and possession of child pornography by writing:

But there is a difference between the two offenses, and it is one highlighted by the very Supreme Court case that no one in this proceeding ever explicitly mentioned: the prosecution must prove that the defendant knew at the time of receipt that the material he received featured underage subjects engaged in sexually explicit conduct. See Malik, 385 F.3d at 760 (noting that "the possession offense lacks [this] scienter requirement").

Bankruptcy Fraud Attorneys are familiar with the law codified at 18 U.S.C. § 157, which sets forth the law concerning federal bankruptcy fraud. An Iowa couple, Gerald and Fay Schuerer, have also been forced to become familiar with this law as they were sentenced earlier this week to a combined 6 years in federal prison and nearly $400,000 in restitution for their role in a "complicated bankruptcy scheme."

Prosecutors argued that the Schuerers made sham sales of assets, such as vehicles, jewelry and stocks, to relatives with an agreement that they would get receive their possessions back after going through bankruptcy. Prosecutors further claim that the Schuerers then claimed to move to Florida where bankruptcy exemptions are more liberal than in their home state of Iowa, filed for bankruptcy protection, and then returned to Iowa to retrieve their property.

The U.S. Attorney's Manual states:

Title 18 U.S.C. § 157 prohibits devising or intending to devise a scheme or artifice to defraud and, for purposes of executing or concealing the scheme either (1) filing a bankruptcy petition; (2) filing a document in a bankruptcy proceeding; or (3) making a false statement, claim, or promise (a) in relationship to a bankruptcy proceeding either before or after the filing of the petition; or (b) in relation to a proceeding falsely asserted to be pending under the Bankruptcy Code.

Bankruptcy fraud cases will vary from cases like the Scheurers to false filings, multiple filings, concealment of assets, and petition mills. The penalties for bankruptcy fraud are up to 5 years imprisonment, fines, and restitution. Additionally, bankruptcy fraud cases often are accompanied by tax evasion charges, wire and bank fraud charges, and mail fraud charges.