Opinion ID: 2832672
Heading Depth: 3
Heading Rank: 1

Heading: Conspiracy to Commit Bankruptcy Fraud

Text: With respect to the conspiracy count, the government charged Knight under 18 U.S.C. § 157. One commits bankruptcy fraud under § 157 by (1) devising a scheme to defraud, and (2) filing a document in a bankruptcy proceeding or making false or fraudulent statement in relation to the bankruptcy proceeding for the purpose of executing or concealing the fraudulent scheme. 18 U.S.C. § 157; United States v. White, 737 F.3d 1121, 1131 (7th Cir. 2013), cert. denied, 134 S. Ct. 2717 (2014). To obtain a conviction for conspiracy, the government must prove beyond a reasonable doubt that there was an agreement to achieve some illegal purpose [i.e., § 157 bankruptcy fraud], that the defendant knew of the agreement, and that the defendant knowingly became a part of the conspiracy. United States v. Adams, 401 F.3d 886, 893 (8th Cir. 2005) (quotation omitted). We begin our analysis by noting the government has not clearly articulated the underlying fraudulent scheme that Barber and Knight supposedly agreed to conceal during Barber's bankruptcy proceeding. The government contends, and we agree, that the jury could have reasonably concluded that at least some of the money that passed through the IOLTA belonged to Barber and that Knight and Barber used the IOLTA to impede creditors from learning about and pursuing these funds. What the government has not clearly explained, however, is why Barber's and Knight's conduct was fraudulent as to Barber's creditors. The government certainly does not claim that debtors generally must keep creditors apprised of where their assets are located, particularly before the creditor has obtained a judgment against the debtor or utilized lawful means to locate and execute upon the debtor's assets.10 Cf. In re Addison, 540 10 Everett testified that, in his opinion, Knight did not have an obligation to inform Barber's creditors that Barber had funds in Knight's IOLTA unless and until Knight was served with a writ of garnishment or had some other legal obligation to -21- F.3d 805, 814 (8th Cir. 2008) ([I]t is well established that [absent additional indicia of fraud] a debtor's conversion of non-exempt property to exempt property on the eve of bankruptcy for the express purpose of placing that property beyond the reach of creditors . . . will not deprive the debtor of the exemption to which he otherwise would be entitled. (quotation omitted)). Nor does the government contend that Barber and Knight concealed Barber's assets when he was negotiating debt settlements with his creditors. See Pasquantino v. United States, 544 U.S. 349, 356 (2005) (suggesting that such conduct might constitute common-law fraud). Instead, the Indictment and the jury instructions indicate the government charged Knight on a theory that he knowingly allowed Barber to transfer money through the IOLTA in order to buy time so that Barber could spend the money before filing for bankruptcy.11 The government further alleges that Barber, with Knight's assistance, concealed his efforts to hinder or delay his creditors by making false or fraudulent statements in his bankruptcy filings. See 11 U.S.C. § 727(a)(2)(stating the court may deny a discharge if the debtor, with intent to hinder, delay, or defraud a creditor . . . [has transferred or concealed] property of the debtor, within one year before the date of the filing of the petition). Having closely reviewed the record, we cannot say the district court abused its discretion in concluding the evidence heavily preponderated against a finding that Knight conspired with Barber to commit bankruptcy fraud. As discussed in more disclose the funds. 11 We interpret the rather vague language of the Indictment in this manner primarily because the government points us to no evidence suggesting that Knight knew or believed that Barber had any assets left at the time he filed for bankruptcy. Although there is evidence that Barber omitted certain reportable assets from his bankruptcy filings, the record strongly suggests he took affirmative steps to prevent Knight from discovering these omissions. -22- detail below, the government has offered little direct or circumstantial evidence that Knight's use of his IOLTA was motivated by an intent to defraud Barber's creditors in bankruptcy or that Knight knowingly assisted Barber in making any false or fraudulent statements in his bankruptcy filings. Accordingly, we affirm the district court's decision to grant Knight a new trial on the conspiracy count.