A Treatise on the Bankruptcy Law of the United States

of bankruptcy law, the Bankruptcy Act declares certain acts to be offenses
and prescribes punishment for the committing of them. Perhaps in these
offenses will be found what is left of the original criminal nature of bank-

ruptcy law as it was in the time of King Henry VIII and his successors.a The statute in §29 declares the following offenses and their punishment: "Offenses: (a) [Trustee's misappropriation of property, etc., or secreting or destruction of. document] A person shall be punished, by imprisonment for a period not to exceed five years, upon conviction of the offense of having knowingly.and fraudulently appropriated to his own use, embezzled, spent, or unlawfully transferred any property or secreted or destroyed any document belonging to a bankrupt estate which came into his charge as trustee.

(b) A person shall be punished, by imprisonment for a period not to exceed two years, upon conviction of the offense of having knowingly and fraudulently (1) [Bankrupt's concealment of property] concealed while a bankrupt, or after his discharge, from his trustee any of the property belonging to his estate in bankruptcy; or (2) [false oath] made a false oath or account in, or in relation to any proceeding in bankruptcy; (3) [presenting false claim] presented under oath any false claim for proof against the estate of a bankrupt, or used any such claim in composition personally or by agent, proxy, or attorney, or as agent, proxy, or attorney; or (4) [receiving property to defeat act] received any material amount of property from a bankrupt after the filing of the petition, with intent to defeat this act;1 or (5) [extortion] extorted or attempted to extort any money or property from any person as a consideration for acting or forbearing to act in bankruptcy proceedings.

(c) A person shall be punished by fine, not to exceed five hundred dollars, and forfeit his office, and the same shall thereupon become vacant, upon conviction of the offense of having knowingly (1) [acting as referee when interested] acted as a referee in a case in which he is directly or indirectly inter-. ested; or (2) [purchasing assets while referee] purchased, while a referee, directly or indirectly, any property of the estate in bankruptcy of which he is referee; or (3) [refusing inspection of records] refused, while a referee or trustee, to permit a reasonable opportunity for the inspection of the accounts relating to the affairs of, and the papers and records of, estates in his charge by parties in interest when directed by the court so to do.

[Prosecution to be within one year] (d) A person shall not be prosecuted for any offense arising under this act unless the indictment is found or the information is filed in court within one year after the commission of the offense." Thus, the perpetration of a fraudulent concealment is a punishable offense; 2 also the commission of a false oath.3

§ 2317. Section 29 Penal and to Be Strictly Construed. Section 29 is a penal statute and must be strictly construed.

a. See ante, Introduction.

1. Obiter, B'd of Com'rs Kans. V. Hurley, 22 A. B. R. 209, 169 Fed. 92 (C. C. A. Kans.).

2. U. S. v. Levinson & Kornblut, 13 A. B. R. 32 (D. C. S. C.); U. S. v. Cohn, 15 A. B. R. 357 (D. C. N. Y.): Indictment for conspiracy to conceal; U. S. v. Lake, 12 A. B. R. 270, 129 Fed. 499 (D. C. Ark.); U. S. v. Marsh Chambers, 13 A. B. R. 708, 135 Fed. 1023 (D. C. N. Y.); Field v. U. S., 14 A. B. R. 507, 137 Fed. 6 (C. C. A. Ark.).

United States v. Lowenstein, 11 A. B. R. 134 (D. C. Pa.): Bankrupt col

lecting money after bankruptcy and paying some creditors having honest debts; held not fraudulent concealment. McNeil v. U. S., 18 A. B. R. 18, 150 Fed. 82 (C. C. A. Tex.).

3. Bartlett v. U. S., 5 A. B. R. 678, 106 Fed. 884 (D. C. Mont.); U. S. v. Lake, 12 A. B. R. 270, 129 Fed. 499 (D. C. Ark.).

As to duty to report offenses arising in the course of the proceedings to the district attorney, see In re Simon & Sternburg, 18 A. B. R. 204, 151 Fed. 507 (D. C. Ga.).

Field. U. S., 14 A. B. R. 507, 137 Fed. 6 (C. C. A. Ark.): “A penal statute Where which creates and denounces a new offense must be strictly construed.

it is plain and unambiguous, the courts may not lawfully extend it by interpretation to a class of persons who are excluded from its effect by its terms for the reason that their act may be as mischievous as those of the class whose deeds it denounces."

§ 2318. Acts Committed before Bankruptcy Not within Statute. -The provisions of the act do not make any act of the bankrupt before. the bankruptcy criminal.1

In re Stead & Curtis, 6 A. B. R. 75, 107 Fed. 682 (D. C. N. Car.): The acts made criminal under the Act are acts after the adjudication."

* *

§ 2319. Continuing Concealment.-But concealment from the trustee. is perpetrated-continuing concealment-by the bankrupt's failure to reveal recoverable property, when the duty exists for him to reveal it, after bankruptcy, although the initial acts of fraud or secreting occurred before the bankruptcy.5

United States v. Stern, 26 A. B. R. 110, 186 Fed. 854 (D. C. Pa.): "The government proceeded upon the theory that the conspiracy and concealment continued, and that after the election of the trustee, a refusal to produce the property upon demand was a continuance of the concealment as of the date charged, and an overt act in the continuance of the conspiracy, which warranted the * * * Suffigovernment in charging the conspiracy as of the same date. cient to say, that the government's contention that the conspiracy was an offense which was continued and properly charged in the indictment as of the date mentioned is, in the judgment of the court, correct and supported by numerous authorities, the most recent of which is United States v. Kessel, 218 U. S. 601. * * * A failure to deliver over to him [trustee] upon demand any property or cash which the bankrupt may have in his possession, is an offer.se as of any date the concealment continues."

Stern v. United States, 28 A. B. R. 101, 193 Fed. 888 (C. C. A. Pa.): "That this money unaccounted for was concealed from the trustee after the bankruptcy, depends upon the evidence that the said defendants, upon their examination and demand made by the trustee therefor, denied that it was in their possession and failed to give any account of the same. Taken with all the other evidence in the case, we think that this evidence was competent and sufficient to justify the jury in finding the fact of concealment after the bankrupcy."

4. U. S. 7. Cohn, 15 A. B. R. 357, 142 Fed. 983 (D. C. N. Y.).

Thus, it has been held that an indictment for conspiracy to conceal assets of a bankrupt estate, which shows that the conspiracy was entered into and the assets removed and concealed prior to the bankruptcy, but which does not allege that said acts were done in contemplation of bankruptcy nor that any overt act was committed after the bankruptcy, does not state an offense under U. S. Rev. Stat. 5440, though a further conspiracy to con

tinue to conceal the concealed property is alleged. United States v. Grodson, 21 A. B. R. 68, 164 Fed. 157 (D. C. Ills.). But compare post, § 23202; also, Alkon v. United States, 22 A. B. R. 489, 163 Fed. 810 (C. C. A. Mass.). Also, compare, United States v. Young & Holland Co., 22 A. B. R. 484, 170 Fed. 110 (D. C. R I.).

5. Alkon v. United States, 22 A. B. R. 489, 163 Fed. 810 (C. C. A. Mass.), quoted post at § 23202; United States v. Young & Holland Co., 22 A. B. R. 484, 170 Fed. 110 (D. C. R. I.).

United States v. Cohn, 15 A. B. R. 357, 142 Fed. 983 (D. C. N. Y.): "This provision of the Bankrupt Act does not make any act of the bankrupt before the bankruptcy criminal. But if a bankrupt, before the bankruptcy, has concealed his property, and, after his trustee is appointed continues to conceal it from the trustee, he is criminally liable under this section, and, if indicted for such crime, evidence of his acts of concealment before the bankruptcy, as well as those subsequent thereto, would undoubtedly be admissible as part of the res gestæ. A conspiracy to commit a crime always, in the nature of the case, precedes the commission of the crime; and, in my opinion, it does not follow, because, at the time that a conspiracy is entered into to conceal property from a trustee, no trustee has been appointed and no proceedings in bankruptcy begun, that, therefore, the crime of conspiracy under § 5440 cannot have occurred." And evidence of acts of concealment before the bankruptcy, as well as those subsequent thereto, are admissible as part of the res gestæ.

A continuing concealment from the trustee is properly charged as of any date when the trustee demands the property and it is not forthcoming.7 The fact that a concealment continues to be such in so far as the result of it is concerned, does not, however, make it a continuous one so as to preclude a defense based on the statute of limitations.

United States v. Phillips, 27 A. B. R. 625, 196 Fed. 574 (D. C. N. Y.): "The government, by proving that a bankrupt many years ago secreted some articles of property from his trustee, which fact the trustee knew or had good cause to believe, and for which property demand has duly been made, thereby raises the presumption (apparently irrebuttable) that the crime had continued and would continue as long as the criminal lived and did not surrender. This is exactly the situation painted with disapproval in the Irvine case (page 452), and to look upon the facts otherwise is to overrule and disregard statutes of limitation generally. If Phillips can be successfully prosecuted under this indictment, every living bankrupt who has been suspected of concealing property can at any time be indicted therefor. I do not so read the act."

And the limitation of time within which the offender must be prosecuted begins to run from the time the overt act of the offense was committed.s Warren v. United States, 29 A. B. R. 555, 199 Fed. 753 (C. C. A. La.): "The contention of the defendant is that the record, without dispute, shows that the date of the indictment-December 18, 1909-was more than twelve months 'after the commission of the offense,' if any offense was committed, because all of the acts of the defendant in reference to the property were performed more than twelve months before the indictment. The United States attorneys, in the forcible argument presented for the government, contend that the offense charged is a continuing offense, and that the statute of limitations does not begin to run until the termination of the concealment or until the bankrupt has abandoned his effort to conceal the property;' that as long as he 'fails to notify the trustee of the whereabouts of the property, the concealment continues, and there is no statute of limitations to prevent the prosecutions.' The correctness of this contention must be judged in connection with the facts disclosed by the record.

6. United States v. Cohn, 15 A. B. R. 357, 142 Fed. 983 (D. C. N. Y.).

7. United States v. Stern, 26 A. B.

R. 110, 186 Fed. 854 (D. C. Pa.), quoted at § 2319.

8. See post, § 23291⁄2, "Statute of Limitations."

The defendant made no 'efforts'-that is, did nothing-to conceal the property within twelve months before the indictment. The acts proved, relied on as concealment, were all of date more than twelve months before the indictment. The government's contention, therefore, must fall, unless the mere silence and passivity of the defendant after the alleged concealment makes the crime a continuing one, so that, to quote the brief, 'there is no statute of limitations to prevent the prosecution.' We cannot concede that such is the case. The government, to avoid the statute, should have begun the prosecution within twelve months after the commission of the acts constituting the offense.

"If the contention of the government were correct, the statute of one year, while in terms it is made to apply to cases of concealing assets, would in practice seldom have any application. Twenty years after the appointment of the trustee the bankrupt could be prosecuted for concealing assets, and the government could prove that he had purchased certain goods shortly before the bankruptcy, that such goods were not surrendered, and then, by proof of some circumstances from which the jury might determine that there had been concealment, have a case sufficient to go to the jury. Twenty years having elapsed, the defendant's witnesses might be gone or dead, and even his own memory might fail him in making a satisfactory explanation. When the trustee is appointed, he has title to the assets and should take possession. The creditors are interested that he should do so. The schedules show what property is surrendered by the bankrupt. If it is to be claimed that he has fraudulently and knowingly concealed a part of his estate, in fairness to the bankrupt the charge should be brought within twelve months after the unlawful act. The statute plainly so reads. Ordinarily, and in his case, there is no reason why the prosecution could not have been begun within the year.

"It is true that there may in some cases be difficulty in showing when the act or series of acts occurred which made the crime complete; but when the property is knowingly and fraudulently concealed from the trustee-a fact that may be proved like any other fact-the bankrupt is liable to prosecution and the statute of limitations begins to run. In other words, it runs from the time of the commission of the offense."

§ 2320. Concealment before Appointment of Trustee.-It has been held, in an obiter, that the offense of concealment of assets from a trustee may be committed before the appointment of a trustee, if after adjudication.

Obiter, United States v. Goldstein, 12 A. B. R. 755, 132 Fed. 789 (D. C. Va.): "It is true that clause 1 applies to concealing property from the trustee, and that in the case at bar the alleged concealment was prior to the appointment of the trustee. But when a person files his voluntary petition in bankruptcy, he knows that a trustee will be appointed, and that such trustee takes title as of the date of the adjudication. It follows that a concealment of property after the adjudication, even if before the appointment of the trustee, is a concealment from the trustee."

But this is doubtful law; for the concealment must be concealment from the trustee.9

Nevertheless, if concealment before the appointment of a trustee continues after his appointment, it constitutes concealment from him.

9. In re Adams, 22 A. B. R. 613, 171 Fed. 599 (D. C. N. Y.).

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