Bankruptcy Fraud Is Local Growth Industry
For Kurken Alyanakian, a building contractor in Sun Valley, the nightmare started in May 1993, with an early morning phone call from Dun & Bradstreet, the business information firm.
“Your company just filed bankruptcy,” the caller said. “What’s your status?”
In fact, Alyanakian’s construction business was doing reasonably well, considering the weak economy. What he quickly learned was that a wealthy businessman with whom he had been sparring in court had escalated the conflict by falsely petitioning Alyanakian’s company into bankruptcy.
The action nearly ruined both the business and Alyanakian’s life.
“The amount of pain it has caused . . . I look back on it and I’m just shocked,” Alyanakian said in an interview Thursday.
Alyanakian thus could take some satisfaction from the indictment this week of businessman Yasuhiro Ikeda on federal bankruptcy fraud charges.
Ikeda, 41, a Japanese citizen with a home in La Canada, could not be reached for comment. He was one of 35 people indicted in Los Angeles as part of a nationwide crackdown on bankruptcy fraud announced Thursday in Washington by U.S. Atty. Gen. Janet Reno and in Los Angeles by U.S. Atty. Nora M. Manella and FBI Special Agent in Charge Charlie Parsons.
One fact that emerges from the ongoing investigation--dubbed Operation Total Disclosure--is that Southern California remains not only the U.S. bankruptcy capital but the bankruptcy fraud capital as well. Of the 95 indictments and 110 defendants unveiled nationally, one third of the cases--31 indictments naming 35 people--were filed in Los Angeles.
Those indicted in California run the gamut from rich to poor, and their alleged schemes range from the inspired to the merely brazen. The charges include making false statements in connection with a bankruptcy filing, concealing assets, using a false Social Security number, filing under a false name and using bankruptcy filings to dodge foreclosure.
One accused of simply making a bold move is Gary M. Sander of Corona. Sander was indicted on charges that he used a false social security number, failed to reveal a previous bankruptcy and concealed ownership of two Jet Skis.
On the more complex side, Jimmie W. “Pat” Patterson of Victorville was indicted on charges that he helped clients illegally stall foreclosures on real estate. He moved sham ownership stakes in properties through different bankrupt individuals, including a Laguna Beach man, so he could repeatedly invoke the Bankruptcy Code’s automatic stay on foreclosures.
Federal authorities suspect that as many as one in 10 bankruptcy filings may involve fraud, Manella said in a Thursday morning news conference.
With 81,677 bankruptcies filed in U.S. Bankruptcy Court in Los Angeles last year--about 10% of all filings nationally--there are far too many cases for investigators to handle with limited staff, she said.
However, she hopes that the publicity surrounding the crackdown will make people think twice before committing fraud. The felony charges carry five-year prison terms and up to $250,000 in fines. The defendants are to be arraigned over the next three weeks in Los Angeles, Santa Ana and Riverside.
Maureen A. Tighe, who heads the U.S. attorney’s bankruptcy fraud task force in Los Angeles, said it is important to target motel deadbeats along with millionaires so that the public gets the message that lower-level crooks aren’t exempt from prosecution.
In California the accused include “doctors, lawyers and Indian chiefs,” said the FBI’s Parsons, quickly correcting himself to note that defendant Clive “Sonny” Miller of Palm Springs is not quite a chief but is a member of the Morongo Tribal Council.
Miller, 55, is charged with concealing from the bankruptcy court a new Mercedes Benz 500S plus some $700,000 he received from the company operating the tribe’s casino on Interstate 10. Miller could not be reached.
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The case that involved the largest amount of money is that of Gary and Divine Grace Lazar of Anaheim Hills, who ran a string of more than 200 service stations and are now serving an eight-year state prison sentence for selling adulterated gasoline and violating pollution and tax laws.
The Lazars, in the federal indictment, are accused of secretly transferring several million dollars from the gas station company into secret corporations and accounts they controlled but did not disclose when they filed for Chapter 11 bankruptcy protection.
The indictment against Patterson accuses him of funneling interests in four properties into the bankruptcy of James S. Davis of Laguna Beach. But Davis admitted in a Bankruptcy Court hearing Jan. 11 that he didn’t own any interest in those properties or in 13 others listed in his bankruptcy case.
The indictment represents the first concerted attack on what the U.S. trustee’s office calls the use of “fractionalized interests” to delay foreclosures and frustrate creditors.
The indictment charges that Patterson required clients to deed to one of his three companies a 25% interest in troubled properties, promising to return that interest whenever the clients asked for it.
He then paid nonlawyer bankruptcy petition preparers to dole out phony 1% stakes in those properties to individuals filing petitions, thus invoking the automatic stay against foreclosures.
