Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-03-04049/USCOURTS-ca8-03-04049-0/pdf.json

Parties Involved:
United States of America
Appellant
Julie M. Waldron
Appellee

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 03-4049

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United States of America, *

*

Appellant, *

*

v. *

*

Julie M. Waldron, *

*

Appellee. *

Appeals from the United States

__________ District Court for the Southern

District of Iowa.

No. 04-1063

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United States of America, *

*

Appellee, *

*

v. *

*

Julie M. Waldron, *

*

Appellant. *

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Submitted: June 17, 2004

Filed: June 25, 2004

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Before MORRIS SHEPPARD ARNOLD, FAGG, and RILEY, Circuit Judges.

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FAGG, Circuit Judge.

Julie M. Waldron pleaded guilty to knowingly and fraudulently concealing

property from her Chapter 7 bankruptcy estate in violation of 18 U.S.C. § 152(1). At

sentencing, the district court declined to increase Waldron’s offense level by two

under U.S.S.G. § 2F1.1(b)(4)(B) (1998) for violating a judicial process. Although

Waldron had received an inheritance and refused the bankruptcy trustee’s directive

to surrender the money, the court concluded Waldron had not violated a judicial

process, but had merely taken “some actions that were inconsistent with the advisory

comments by the trustee.” The court sentenced Waldron to three years of probation

and ordered restitution. The Government appeals, and Waldron cross-appeals.

Waldron and her husband filed a voluntary petition for relief under Chapter 7

of the United States Bankruptcy Code on March 1, 1999. Their bankruptcy schedules

showed no interest in real property and only $1458 in personal property. The

Waldrons listed nearly $75,000 in unsecured, nonpriority debts, with over fifty

unsecured creditors. After the Waldron’s filed their petition, Waldron’s father died.

At the first meeting of creditors in late April 1999, the trustee asked the Waldrons

whether they would be inheriting any property within the next six months. Waldron

replied that her father had passed away and she would get something from the estate.

The trustee told Waldron any inheritance would be property of the estate and would

have to be turned over to the trustee. The trustee also spoke with one of the estate’s

executors, Waldron’s brother Gary, and told him the inheritance would be bankruptcy

estate property. In late September 1999, Gary went with Waldron to a bank with her

share of the inheritance, $22,832, and she deposited the money into two accounts

jointly held by her and Gary. Gary did not ask for his name to be on the accounts,

which were opened after the bankruptcy was filed and thus were not disclosed on

Waldron’s bankruptcy schedules. 

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The trustee learned in late November 1999 that the $22,832 inheritance had

been distributed, that Waldron had bought a car with part of the money, and that only

$12,000 remained unspent. The trustee called Waldron and told her to provide the

remaining funds to the bankruptcy estate and to provide a detailed accounting for the

rest. Waldron refused, stating she wanted to talk to her attorney first. The trustee

wrote to Waldron’s attorney, who then wrote to Waldron and told her to turn the

funds over to the trustee immediately. Despite the repeated demands of the

bankruptcy trustee and the admonitions of her own attorney, Waldron never

relinquished the funds to the bankruptcy trustee for distribution to her creditors.

Instead, she continued to spend the money, and withdrew the remaining balances in

August and October 2000. 

In its appeal, the Government contends the district court should have increased

Waldron’s sentence under § 2F1.1(b)(4)(B) because our precedent holds the

concealment of assets from a bankruptcy estate is a violation of judicial process as a

matter of law. United States v. Mohamed, 161 F.3d 1132, 1136 (8th Cir. 1998);

United States v. Cheek, 69 F.3d 231, 233 (8th Cir. 1995); United States v. Lloyd, 947

F.2d 339, 340 (8th Cir. 1991); see also U.S.S.G. § 2B1.1(b)(7) (recent amendment to

§ 2F1.1(b)(4)(B) directing a two-level increase if the offense involved “a

misrepresentation or other fraudulent action during the course of a bankruptcy

proceeding”). Waldron contends the increase does not apply because she did not

attempt to conceal the inheritance from the trustee, but merely failed to turn over

bankruptcy estate assets after discharge had already been granted. Contrary to this

contention, Waldron stipulated in her plea agreement that “she knowingly and

fraudulently concealed [the $22,832 in inheritance] from the Chapter 7 Trustee and

creditors,” and “[t]he $22,832 was property of the Waldron Chapter 7 bankruptcy

estate.” By refusing to turn over the inheritance, which Waldron conceded was part

of the bankruptcy estate, Waldron violated the judicial process as a matter of law.

See United States v. Novak, 217 F.3d 566, 575 (8th Cir. 2000) (§ 152 is a broad

provision attempting to cover all possible methods a debtor may use to defeat the

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bankruptcy law by keeping assets from being equitably distributed among creditors).

Thus, the district court should have imposed a two-level increase under §

2F1.1(b)(4)(B).

In her cross appeal, Waldron asserts the district court should not have increased

her offense level by two under U.S.S.G. § 2F1.1(b)(2) (1998) for more than minimal

planning or a scheme to defraud more than one victim because she did not engage in

a scheme to defraud. A scheme to defraud refers to “a design or plan to obtain

something of value from more than one person.” Id. n. 4. Behavior intended to allow

a debtor to retain concealed property that would otherwise be subject to bankruptcy

estate administration for the benefit of creditors is a scheme to defraud. United States

v. Shadduck, 112 F.3d 523, 531 (1st Cir. 1997). Here, the district court found

Waldron had a scheme in the sense that she knew she should not retain the money and

that it was part of the bankruptcy estate, but refused to turn the money over as

required. We conclude the increase applies in this case. 

We thus reverse on the Government’s appeal and remand the case to the district

court for resentencing consistent with this opinion. We affirm on Waldron’s cross

appeal.

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