Bankruptcy fraud isn’t typically considered a crime worthy of sensational media coverage, but every so often a case breaks through and proves that even the rich and famous can’t get away with illegally protecting their assets from the bankruptcy chopping block (or avoiding prison).
(Not familiar with this topic? Start with the basics by reading What Is Bankruptcy?)
Teresa Giudice, a star of Bravo’s hit reality show “The Real Housewives of New Jersey,” and Joe Giudice, her husband, pleaded guilty to 41 counts of fraud, including bankruptcy fraud, for failing to file tax returns for five years, failure to report Teresa’s “Real Housewives” earnings, and other charges.
The court ordered the Giudices to do the following:
Teresa served 11 months of a 15-month sentence. As of the time of this writing (October 2017), Joe is serving a sentence of 41 months, and, because he isn’t a U.S. citizen, he could face deportation after his release. Reportedly, Joe gave Teresa a welcome home gift after her release from federal prison: a $90,000 SUV.
(Find out what can happen as result of bankruptcy fraud in Bankruptcy Fraud Consequences.)
Consider the case of another reality TV star, Abby Lee Miller, whose clumsy attempts to hide assets ran afoul of her bankruptcy judge. Ms. Miller owed a dance studio featured in the Lifetime show “Dance Moms.” She filed a Chapter 11 case in 2010, but the charges against her stemmed from her failure to report her television income and the money she made from merchandise and apparel sales during her bankruptcy case. In fact, it was her bankruptcy judge who suspected deception when he saw an episode of the show shortly before the hearing date that would have all but resolved her Chapter 11 case.
Ms. Miller was charged with bankruptcy fraud, concealment of assets, and making false declarations (committing perjury in documents she had to file with the court). Even after suspicions came to light, Ms. Miller continued to find new ways to secret away income by having checks made out to other people and by funneling her income through corporations she set up to avoid depositing into known accounts.
Ms. Miller received a sentence of one year and one day in federal prison, two years of supervised release after the prison stay, a $40,000 fine, and $120,000 in restitution for a charge of illegally bringing Australian money into the US.
Reality TV stars don’t have a monopoly on celebrity bankruptcy fraud cases—financial misdeeds apparently rum rampant in professional sports. A noteworthy entry is baseball great Lenny Dykstra, who spent 12 years with the New York Mets and the Philadelphia Phillies.
Things apparently didn’t go well for Mr. Dykstra after his retirement from baseball. His businesses failed, his mansion went into foreclosure, he was accused of grand theft auto, sexual assault, drug offenses, and indecent exposure. It’s believed that he even lived in his car at one point.
When Dykstra filed his bankruptcy case, he listed debts of $10,000,000 to $20,000,000 but only $50,000 in assets. Later he was accused of hiding and then selling $400,000 worth of sports memorabilia, appliances, sconces, and plumbing fixtures from his mansion, disclosing none of this to the bankruptcy court in the official bankruptcy forms.
Prosecutors charged him with obstruction of justice, bankruptcy fraud, concealing assets and making false statements. After entering into a plea deal, he spent six and one-half months in federal prison. He also received 500 hours of community service and an order to pay restitution of $200,000.
Sadly, sudden money and fame haven't done a lot of favors for other sports figures. A 2015 study by National Bureau of Economic Research (NBER) found that 16% of former NFL players filed bankruptcy within 12 months of leaving the league. NBER found no correlation with either the length of time the player had played or the amount of money made. The issue became so acute that the NFL Player’s Association developed a financial wellness program for former football players.