United States v. Julie M. Waldron ( 2004 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 03-4049
___________
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
__________
United States of America, *
*
Appellee, *
*
v. *
*
Julie M. Waldron, *
*
Appellant. *
___________
Submitted: June 17, 2004
Filed: June 25, 2004
___________
Before MORRIS SHEPPARD ARNOLD, FAGG, and RILEY, Circuit Judges.
___________
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.
-2-
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
-3-
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.
______________________________
-4-