FORMER OWNERS OF SAN
FRANCISCO CLOTHING FACTORIES CONVICTED OF CONCEALING
MILLIONS OF DOLLARS FROM BANKRUPTCY COURT AND CREDITORS IN THREE SEPARATE
BANKRUPTCIES
Four
month trial results in convictions
SAN FRANCISCO - United
States Attorney Scott N. Schools announced that Jimmy Quan was convicted
late yesterday afternoon by a federal jury on eleven felony counts, including
conspiracy to conceal assets, the concealment of assets, bankruptcy fraud,
the making of false statements, and money laundering regarding three separate
bankruptcies. His wife, Anna Wong was also convicted of three felony counts,
including conspiracy to conceal assets, the concealment of assets, and
the making of false declarations in a bankruptcy proceeding. The jury
acquitted Jimmy Quan on four counts of making false entries and one count
of concealing assets. The jury also acquitted Anna Wong on one count of
concealing assets. The guilty verdicts followed a four month jury trial
before U.S. District Court Judge William B. Shubb. These convictions are
the result of an investigation by the Federal Bureau of Investigation
and the Internal Revenue Service.
Evidence at trial
showed that Mr. Quan, 47, and Ms. Wong, 45, of San Francisco, owned numerous
companies, including several clothing manufacturing businesses in San
Francisco in the 1990s through 2001. Mr. Quan also controlled a property
management business in San Francisco. Over a period of time, from 1997
through 2003, Mr. Quan and Ms. Wong placed three of their businesses into
Chapter 11 reorganization bankruptcy and then proceeded to defraud creditors
of those companies by concealing and diverting assets and making false
statements to the Bankruptcy Court under penalty of perjury. The total
loss to the creditors was over $5 million.
The fraud started
in 1997, when Mr. Quan, having failed to pay millions of dollars in taxes,
filed for Chapter 11 protection for his clothing company Win Fashion Inc.
Over the course of the next four years, while the company received bankruptcy
protection from its creditors, Mr. Quan proceeded to divert millions of
dollars of Win Fashion revenue to other companies that he and his wife
controlled. The Bankruptcy Court eventually converted Win Fashion to a
Chapter 7 bankruptcy in July 2001, forcing the liquidation of the company.
One month later,
in August 2001, Mr. Quan and Ms. Wong continued the fraud by placing their
second clothing manufacturing company, Wins of California Inc., into Chapter
11 reorganization bankruptcy. In connection with that bankruptcy, Ms.
Wong made false statements under penalty of perjury on documents filed
with the Bankruptcy Court regarding the true assets of the company. Ms.
Wong also diverted Wins of California revenue to another company controlled
by a family member, and then concealed that revenue from the Bankruptcy
Court and Wins of California creditors. Creditors of Wins of California
included hundreds of low-wage employees, who, by the time Wins of California
filed bankruptcy, were owed at least one-half million dollars for work
they had performed, but for which they had never been paid.
Mr. Quan was also
convicted of bankruptcy fraud, concealing assets, making false statements,
and money laundering in a third bankruptcy. This third bankruptcy involved
a property management company, controlled by Mr. Quan, called Tomi LLC.
Tomi LLC filed for Chapter 11 bankruptcy protection in July 2003. Mr.
Quan again diverted and concealed over one-half million dollars of Tomi
LLC assets from the Bankruptcy Court and Tomi LLC creditors. The evidence
further showed that Mr. Quan concealed $270,000 of these assets by depositing
them into his minor children's personal bank accounts. These transfers
formed the basis of the money laundering convictions.
Two other family
members, who were charged with playing less significant roles in the alleged
fraud, were acquitted on all charges.
"The monumental
effort that the prosecution team contributed to this trial and this jury's
verdicts confirm the importance of transparency in the bankruptcy procedures
that are available to honest people who need to use the bankruptcy system
to resolve insurmountable debt," said United States Attorney Scott
N. Schools. "When people, such as the defendants here, obtain the
benefits of bankruptcy protection, they have a duty to be completely forthright
and transparent about their assets and finances. When debtors conceal
and lie about their assets, they deprive creditors of the money due to
them and abuse a process created for their benefit. The United States
Attorney's Office considers abuse of the bankruptcy process to constitute
a serious criminal offense, and this case demonstrates our commitment
to assuring that those who cheat the system be held accountable for those
crimes."
The sentencing of
Mr. Quan and Ms. Wong is scheduled for September 12, 2007 before Judge
Shubb in San Francisco. The maximum statutory penalty for each count of
conspiracy, 18 U.S.C. § 371; bankruptcy fraud, 18 U.S.C. § 157;
concealment of assets, 18 U.S.C. § 152(7); and making false declarations,
18 U.S.C. § 152(3) is five years. The maximum statutory penalty for
each count of money laundering, 18 U.S.C. § 1956(a)(1)(B)(i), is
twenty years. The maximum fine for each of the counts charged is $250,000,
plus restitution where appropriate. However, any sentence following conviction
would be imposed by the court after consideration of the U.S. Sentencing
Guidelines and the federal statute governing the imposition of a sentence,
18 U.S.C. § 3553.
Susan Badger and
Stacey Geis are the Assistant U.S. Attorneys who are prosecuting the case
with the assistance of Robin Barber, Ana Guerra, and Miche Sharpe. The
prosecution is the result of a four year investigation by the Federal
Bureau of Investigation and the Internal Revenue Service.
Further Information:
Case #: CR 04-0323
WBS
A copy of this press
release may be found on the U.S. Attorney's Office's website at www.usdoj.gov/usao/can.
Electronic court
filings and further procedural and docket information are available at
https://ecf.cand.uscourts.gov/cgi-bin/login.pl.
Judges' calendars
with schedules for upcoming court hearings can be viewed on the court's
website at www.cand.uscourts.gov.
All press inquiries
to the U.S. Attorney's Office should be directed to Natalya LaBauve at
(415) 436-7055 or by email at Natalya.LaBauve@usdoj.gov.
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