U.S. v. Key
| Decision Date | 15 September 1988 |
| Docket Number | No. 87-2765,87-2765 |
| Citation | 859 F.2d 1257 |
| Parties | , Bankr. L. Rep. P 72,489 UNITED STATES of America, Plaintiff-Appellee, v. Jeraldine J. KEY, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Dennis L. Thomas, Jr., Bookwalter & Thomas, Indianapolis, Ind., for defendant-appellant.
Jeffrey L. Hunter, Asst. U.S. Atty., Bradley L. Williams, Acting U.S. Atty., Indianapolis, Ind., for plaintiff-appellee.
Before WOOD, Jr., COFFEY and EASTERBROOK, Circuit Judges.
The defendant-appellant, Jeraldine J. Key, appeals her conviction on charges of conspiracy to defraud the bankruptcy court and concealment of assets in violation of 18 U.S.C. Sec. 152. Count 1 of a 10-count indictment returned against the defendant and her husband, Bobby Key, named Jeraldine Key as a coconspirator with her husband to defraud bankruptcy court proceedings. Count 2 alleged that Jeraldine Key and her husband concealed assets from creditors, and Counts 3 through 7 alleged that the defendants made "false oaths or accounts" in connection with the bankruptcy proceedings. We affirm the defendant's conviction.
The defendant-appellant Jeraldine Key and her husband have owned and operated a number of fast food restaurants and other retail businesses in the Southern District of Indiana and elsewhere for the past 15 years. In the third quarter of 1980, the defendant's husband and others organized three small corporations under Indiana law: Key & Koss, Inc.; D K & K, Inc. (later ABC Liquors, Inc.); and Kwik Mart Convenient Foods, Inc. The attorney who performed the legal services required to incorporate the three corporations, Seymour Bagal, testified that upon their formation, Bobby Key became the majority shareholder by purchasing 51 percent of each corporation, while other shareholders purchased the remaining 49 percent. At this time, Jeraldine Key did not own shares in any of the three aforementioned corporations. Barbara Koss, the corporations' Secretary, testified that she and Bobby Key, Jeraldine's husband, signed all of the stock certificates as corporate secretary and president, respectively. She also confirmed Bagal's testimony that Jeraldine Key held no ownership interest in the corporations, and that Bobby Key individually owned 51 percent of the stock in each of the three corporations. Further proof of ownership is reflected in the companies' income tax returns (from 1980 through 1982) for the three corporations, which listed Bobby Key as the owner of 51 percent of the shares in each of the three corporations.
Barbara Koss and Kathy Atkinson, an employee of the corporations, testified that during the summer of 1983 (three years after the formation of these three businesses), Bobby Key directed Koss and Atkinson to alter the records of the three corporations to make it appear that Jeraldine Key, rather than Bobby Key, had been the original purchaser of a majority of the stock in each of the three corporations. According to their testimony, Bobby Key also instructed the two aforementioned employees to obtain new stock certificates, as close to the originals as possible in appearance, and to inscribe thereon the information necessary to reflect Jeraldine Key as the owner of the majority of stock in the corporations ab initio (from the date of incorporation). Bobby Key told his two employees that the alterations and new certificates would vest ownership of the stock in his wife, and thereby avoid the attachment of his assets (including his majority interest in the corporations) resulting from a civil judgment against him.
At trial, both Koss and Atkinson testified that Jeraldine Key had participated actively in the typing of the substitute corporation record book entries. Jeraldine Key's signature and handwriting appear on many of the back-dated records. Seymour Bagal, the incorporating attorney, testified that he neither authored nor assisted in the preparation of the false records or documents.
Over a year following the alteration of these documents, the IRS imposed jeopardy assessments against the Keys for unpaid taxes on October 29, 1984, in the amount of $1,597,517.07. After the IRS filed the tax liens on the Keys' property, the Keys voluntarily filed petitions in the bankruptcy court pursuant to Chapter 11 of the Bankruptcy Code. Along with their bankruptcy petitions, the Keys filed schedules of liabilities and property. Jeraldine Key's schedule of assets listed her as 51 percent owner of the shares in Kwik Mart Convenient Foods, Inc. Her schedules failed to list her ownership of a majority of the stock in ABC Liquors, Inc., or Key & Koss, Inc., although her schedules did list debts which these two corporations owed her. Bobby Key's fraudulent schedules did not list his ownership of the stock in any of the aforementioned corporations.
During the bankruptcy proceedings Jeraldine Key testified under oath that as of the date of incorporation, she owned a majority of the stock in the three corporations and that Bobby Key did not own any of the stock in any of the three corporations. Subsequently, the government successfully sought an indictment charging the Keys with bankruptcy fraud under 18 U.S.C. Sec. 152. The indictment against Jeraldine Key charged that Mrs. Key knowingly made materially false statements to the court (in both her written schedules and oral testimony) as to the true ownership of the stock in the three corporations.
Following a four-day jury trial, the jury returned verdicts of guilty on charges of conspiring to defraud the bankruptcy court, concealing of assets, and providing false oaths or accounts in connection with their bankruptcy proceeding. The defendant's appeal raises three issues: (1) the sufficiency of the evidence; (2) the propriety of instructing the jury on the definition of forgery under Indiana law; and (3) the prejudicial effect of two jurors obtaining knowledge from outside sources that the defendant's husband had previously been convicted for tax evasion.
In support of her claim that the government failed to prove its case beyond a reasonable doubt, the defendant submits a disjointed series of arguments, most of which have no bearing on the elements of the crime charged in the indictment. Before analyzing these arguments (briefly), we set forth the elements of criminal bankruptcy fraud under 18 U.S.C. Sec. 152. That section provides in relevant part that:
"Whoever knowingly and fraudulently makes a false oath or account in or in relation to any bankruptcy proceedings; or
Whoever knowingly and fraudulently presents any false claim for proof against the estate of a bankrupt, or ...
Whoever, after the filing of a bankruptcy proceeding or in contemplation thereof, knowingly and fraudulently conceals, destroys, mutilates, falsifies, or makes a false entry in any document affecting or relating to the property or affairs of a bankrupt; ...
Shall be fined not more than $5,000 or imprisoned not more than 5 years, or both."
Curiously, most of the defendant's arguments are not even tangentially related to these elements. For instance, the defendant maintains that the government failed to prove: (1) that it was a "major creditor" of the Keys; or (2) that the defendant "received any income from any of the alleged activities of her husband." Moreover, the defendant contends that an improperly imposed IRS jeopardy tax assessment against her caused the Keys to file for bankruptcy relief. But even if true, these contentions would lead the defendant nowhere, for a violation of Sec. 152 does not depend upon proof of any of these three "elements." To the contrary, the essence of the offense under Sec. 152 is the making of a materially false statement or oath with the intent to defraud the bankruptcy court, see United States v. Phillips, 606 F.2d 884, 886 (9th Cir.1979); it is thus not a defense to allege that an injustice led to the bankruptcy filing (for which other avenues of relief are available), or that the defendant did not realize the fruits of her fraudulent acts. Section 152 prohibits false statements and concealment of assets; no more and no less.
Judged in these terms, the evidence is most sufficient to uphold the jury's verdict. Our standard of review is "whether after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." United States v. Shriver, 842 F.2d 968, 975 (7th Cir.1988) (quoting Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979) (emphasis in original)). In this case, at least two witnesses (Koss and Atkinson) affirmatively testified that the defendant had participated actively in the preparation of substitute corporate records, a fraudulent alteration which made it appear that she owned a 51 percent share of the three corporations as of the date of their incorporation. Later, during bankruptcy proceedings, the defendant filed and signed schedules listing her as the owner of 51 shares of Kwik Mart Convenient Foods, Inc. Further, during a hearing on a motion for appointment of a trustee, the defendant testified under oath that she has been the majority shareholder in each of the three corporations from the date of their incorporation. A combination of the direct eyewitness testimony of Koss and Atkinson and the documentary evidence introduced at trial provides overwhelming support for the jury's finding that the defendant's statements (given under oath) regarding her stock ownership were made with actual knowledge of their falsity and with the intent to defraud and to deceive the bankruptcy court.
Having thus disposed of the arguments that make up the lion's share of the defendant's brief, we turn to the defendant's best argument. She maintains, inter alia, that the three corporations at issue were essentially worthless at the...
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