Defrauders are excellent salesmen and generally possess dynamic interpersonal skills. A defrauder identifies individuals with assets and attempts to nurture a relationship of trust with that person. He then waits for the appropriate opportunity and attempts to score a meaningful transfer of assets.
For the defrauder’s Country Club targets, the setup may include regular conversations about his masterful deals, the incredible returns he is making for his investors and tall tales of exotic trips. These conversations are designed for the defrauder to gain information about the potential victim’s assets and investment weaknesses. He will then accordingly tailor his scheme.
For elderly and religious targets, the setup is more low-key. The defrauder will play to the fixed-income needs of the elderly and to their need for someone to manage their assets should they become unable. To this end, he may attempt to become a signer on the victim’s bank account, become the executor of the victim’s will or become the trustee of the victim’s trust. In addition, the defrauder may attempt to create an information wedge between elderly victims and their adult children. He may also claim to possess financial advisory skills in order to learn the victim’s financial condition. The defrauder will use this information to determine how best to take advantage of the victim’s assets.
The defrauder’s goal is always the same: separate valuable assets from the control of the owner. The separation may include the transfer of title to real or personal property, the exchange of cash or bonds for an unsecured promissory note or the investment of capital into difficult-to-understand deals promising high returns.
Once in control of the victim’s assets, the defrauder will liquidate, encumber and/or spend the assets. Typically, the defrauder will use part of the assets to pay “a return” on the obligations owing to earlier victims. This keeps the earlier victims quiet and gives the defrauder time to identify his next victim.
Eventually, the defrauder’s house of cards collapses and the defrauder seeks to eliminate both his debts to his victims and any pending litigation. On many occasions, the defrauder files for bankruptcy. A bankruptcy filing stays pending litigation and, in certain circumstances, may discharge debts.
The defrauder’s bankruptcy goal is a complete discharge of all the obligations owing to his victims. A bankruptcy filing, however, requires full and complete disclosure of assets, liabilities and the transfer of assets. The defrauder must make these disclosures under penalty of perjury. Full and complete disclosure does not come easily to a defrauder. He may conclude that his financially distressed victims are too embarrassed and impoverished to actively participate in the bankruptcy proceedings. As such, the defrauder tends to discount the risk of the court, denying his bankruptcy discharge and of facing a criminal prosecution for bankruptcy crimes.
The bankruptcy code was not designed to benefit defrauders. To prevent them from benefiting, however, the victims of a fraud must participate in the bankruptcy. The bankruptcy code contains many provisions to prevent the defrauder from benefiting from their bad acts. Such provisions include the denial of the bankruptcy discharge and the denial of the discharge for a particular debt. The defrauder’s actions may also result in a referral to the Department of Justice for bankruptcy crimes.
No matter when the defrauded individual discovers the crime, the victim should feel neither embarrassed nor ashamed, but instead should seek immediate assistance to end the fraud and to take the necessary actions to recover the wrongfully obtained assets.