Rancho Santa Fe Pair Arrested, Accused of Massive Bankruptcy Fraud
A couple who allegedly moved hundreds of thousands of dollars worth of furniture, wine, furs and other property from their Virginia home to a rented house in Rancho Santa Fe have been arrested on charges of attempting to defraud the bankruptcy court in Alexandria, Va.
Prosecutors said Thursday that David and Annette DeFusco, who have been living in the exclusive North County community since they fled Virginia last April, were being held in the Metropolitan Correctional Center in San Diego pending a bail hearing today.
They also face mail fraud charges in Texas in connection with their direct-mail solicitation business, which purportedly made false promises of expensive gifts such as automobiles and gold bullion to prospective buyers of time-share resorts.
Awakened by FBI
The high-living pair was arrested Wednesday morning by FBI agents, who awakened them and took them away in handcuffs, according to Assistant U.S. Atty. Cynthia Bashant. In California, the DeFuscos alternately have been using three last names, Brown, Hagen and Stone, Bashant said.
Annette DeFusco, 28, wept openly when she was taken into court Wednesday, Bashant said. U.S. Magistrate Irma Gonzalez ordered her and her 34-year-old husband held without bond until today’s full detention hearing.
The DeFuscos have pleaded not guilty to the Texas charges and were free on $50,000 bond in that case, but were arrested on new charges filed Monday by federal prosecutors in Alexandria, who also obtained a search warrant for their home in Rancho Santa Fe, Bashant confirmed.
The new complaint charges that the DeFuscos illegally concealed expensive assets from the bankruptcy court in Alexandria and shipped them out of the state under assumed names.
Charged With Lying
The DeFuscos are also charged with lying to the bankruptcy court, Bashant said. They allegedly had told the court that they had never before filed for bankruptcy, when they had done so at least twice under different names and in different places, she said.
Prosecutors will seek permission from a magistrate in San Diego to remove the couple to Virginia to face the charges that they violated bankruptcy laws for personal gain, Bashant said. They also are under investigation for running a mail-solicitation scheme in the state of Washington, she said.
The couple were paid by companies that ran time-share resorts for each person who responded to a solicitation. Because the DeFuscos promised potential buyers expensive gifts, they were able to deliver a high volume of responses, prosecutors said.
The DeFuscos, who ran their direct-mail business from offices in Manassas Park, Va., filed for bankruptcy in 1987 and owe creditors $1.3 million, according to bankruptcy court filings. The Washington Post reported that the DeFuscos are indebted to almost 100 Washington-area merchants who supplied them with everything from the stationery they used in their mailings to the $102,000 Rolls-Royce automobile they drove between their Great Falls home and their Fauquier County farm. The figures are contained in their 13-volume filing in U.S. Bankruptcy Court in Alexandria, the newspaper said.
Cars Valued at $257,000
Their cars alone were valued in 1987 at $257,500, according to bankruptcy affidavits, including one Mercedes-Benz registered to Annette with the Virginia license plate “EVIL ONE,” the Post said. Despite the bankruptcy filing, they continued to spend lavishly, the newspaper said.
The newspaper quoted Henry E. Hudson, the U.S. attorney in Alexandria, as saying the DeFuscos masterminded “one of the most aggravated cases of bankruptcy fraud that I have ever seen.”
On Wednesday, FBI agents seized dozens of expensive items from their house in Rancho Santa Fe, including a wine collection insured for $50,000, a coin collection, an Audi automobile, “lots of jewelry,” at least 10 furs, leather furniture and marble bookcases, according to Bashant.
Most or all of the items were believed to be from the DeFuscos’ Virginia home, she added.
Attempts to reach the DeFuscos’ San Diego attorney, Michael Littman, were unsuccessful Thursday.
In the Texas case, which is scheduled for trial next month, more than 2,000 written consumer complaints have been collected by the prosecutor, who alleges that the DeFuscos’ mailings promised recipients gifts such as BMWs and gold bullion but actually delivered dime-store products such as bathtub bubble machines.
The assets seized Wednesday could be used to pay off creditors in the bankruptcy, prosecutors said.