The Office of the Special Inspector General for the Troubled Asset Relief Program announced that a California man was charged with eight counts of bankruptcy fraud and two counts of making false statements in bankruptcy proceedings.
Walter Harrell was indicted for allegedly devising and executing a scheme to defraud creditors who were attempting to lawfully foreclose on several properties by delaying foreclosure sales from happening through the improper use of the federal bankruptcy process.
According to the indictment, Harrell supposedly arranged for property owners to grant fractional interests between 2% and 20% of their properties to individuals who he had paid to file bankruptcy cases in the U.S. Bankruptcy Court for the Northern District of California. Subsequently, these actions invoked the “automatic stay” provision of the U.S. Bankruptcy Code, which stops a foreclosure sale until the creditor seeks relief from the stay or until the bankruptcy case is dismissed.
The indictment identified at least six properties involved in this scheme, one of which was occupied by Harrell. Furthermore, many of the creditors affected by this scam were recipients of funds under the U.S. Treasury’s Troubled Asset Relief Program.
“Harrell is charged with exploiting TARP banks and preying on vulnerable homeowners by promising to delay their foreclosures for a monthly fee,” said Christy Romero, special inspector general for TARP. “To obstruct creditors, including TARP banks, from foreclosing on the homes, Harrell allegedly manipulated bankruptcy laws, making false statements and transferring interests in the properties to third parties who he paid to file papers in court to hinder the foreclosure process. The exploitation of TARP is unacceptable, and SIGTARP and our law enforcement partners will continue to pursue justice for such fraud.”
Additionally, Harrell was charged with making false statements in bankruptcy proceedings for two cases where he paid an individual as “T.W.” to file, the indictment claims.
The maximum statutory penalty for each count of bankruptcy fraud and each count of making false statements in bankruptcy proceedings is five years in prison and a fine of $250,000, plus restitution if appropriate.
Harrell’s prosecution is the result of a one-year investigation by SIGTARP and the Federal Bureau of Investigation, as well as investigators from the Alameda County District Attorney’s Office.