Bankruptcy Fraud Serious Business in Louisiana Case

Bankruptcy proceedings form a vital part of America’s economic safety net, and the case of B. Scott Spurlin and Debra Fogleman-Spurlin of Baton Rouge, Louisana, shows that any suspected abuses of that safety net are taken very seriously by the government.

The Alexandria Town Talk newspaper is reporting that the Spurlins have been indicted on charges that they concealed assets after filing for bankruptcy and gave false statements in bankruptcy proceedings. Scott Spurlin has also been charged with bankruptcy fraud. Both pleaded not guilty to the charges, brought in federal court.

According to the indictment, the Spurlins filed for Chapter 7 bankruptcy in federal court in September, 2005. As is the normal procedure in such cases, the Spurlins were required to file numerous bankruptcy schedules and prepare a complete statement of their financial affairs, a statement that they swore was correct under the penalty of perjury.

Prosecutors for the government say that the Spurlins failed to identify some of their property during the bankruptcy proceedings and did not list other property they had interest in, including several businesses: Golden Choice Financial, Golden Athletics, J&S Management and Marketing and International Oil, Gas and Mineral Management.

In fact, the cars the couple used and the home they lived in were not owned directly by the Spurlins, but were owned by the companies they allegedly failed to report. During a bankruptcy proceeding, a person’s financial affairs are subject to scrutiny and approval by the courts, but according to the indictment, Scott Spurlin sold Golden Choice Financial to his wife for $125,000, and both Spurlins sold a home for $330,000 shortly thereafter. Prosecutors say that the pair “knowingly and fraudulently” concealed some of their property inside these transactions.

The second count of the indictment accuses Debra Spurlin of making false declarations during the couple’s bankruptcy filing. Specifically, Spurlin was an heir to the estate of her deceased father, who had died prior to the bankruptcy filing. Even though that case was pending, the Spurlins allegedly concealed it from the bankruptcy court.

In the final count, Scott Spurlin is charged with accepting $705,000 from a company in Chicago, not named in the indictment, as part of a real estate financing agreement with another party in 2002. The project fell apart, and though Spurlin promised to return the money, he did not, and the company filed a lawsuit in 2004 to recover it. Spurlin filed for Chapter 7 bankruptcy the following year, and also placed his company, Spurlin and Associates, into bankruptcy. The indictment says that he listed the $705,000 debt as an unsecured debt in both petitions, “knowingly and fraudulently devised and intending to devise a scheme and artifice to defraud and for the purpose of executing and concealing such a scheme and artifice.”

In other words, bankruptcy is meant to help debtors, and persons suspected of using the process as a shell game for questionable financial dealings will be held responsible. The Spurlins are currently free on supervised release and await their day in court.