Montgomery County Couple Sentenced in Bankruptcy Fraud Conspiracy

HOUSTON, September 18, 2017 - A Conroe, Texas couple has been sentenced for bankruptcy fraud conspiracy in the Southern District of Texas, announced Eastern District of Texas Acting U.S. Attorney Brit Featherston.

Richard Kent Harris, 74, and Darlene Ann Riley, 59, pleaded guilty on Mar. 8, 2017, to conspiracy to commit bankruptcy fraud. Harris was sentenced to 10 months in federal prison today by U.S. District Judge Kenneth M. Hoyt. Riley was sentenced to 12 months of home confinement.

According to information presented in court, on June 22, 2012, Richard Harris entered into a contract with a home builder to construct a custom home for Harris and his wife, Darlene Riley. In August 2012, Harris and Riley became embroiled in a dispute with the home builder over the design of their house and a lawsuit ensued. The lawsuit went to arbitration, where Harris and Riley were ordered to pay the home builder $54,686.55 in damages. Approximately two weeks later Harris and Riley consulted with a bankruptcy attorney.

Harris and Riley filed for divorce on Apr. 1, 2013, but continued to reside at the same address. In the months leading up to the divorce filing, Harris and Riley made substantial charges on their credit card, which was used for their mutual benefit. On Feb. 26, 2013, Riley withdrew $67,000 from the joint checking account she shared with Harris and deposited it into her own sole checking account.

Following Riley’s filing for divorce, a property settlement was entered into between Riley and Harris. All material assets of the marriage were awarded to Riley, which included a 2004 Jaguar XK8, a 2007 beachcomber boat, a utility trailer, all of their furnishings, 43 paintings, jewelry, 2012 federal income tax refund, and half of his net federal pension. On June 12, 2013, Harris also transferred his interest in their homestead by special warranty deed to Riley. The divorce was finalized on June 3, 2013.

On Oct. 15, 2013, Harris filed for Chapter 7 bankruptcy in the Southern District of Texas. Harris claimed debts totaling $173,305.19 to various banks, credit cards, the home builder and other unsecured creditors. Harris failed to disclose on his bankruptcy petition the transfer of his homestead interest to Riley, the vehicle transfers, the sale of a truck for $5,500, and the $67,000 withdrawal from his joint account with Riley. A review of Riley’s bank records found that the $67,000 she transfered into her solely owned bank account was spent on mortgage payments and other joint household expenses. Riley’s transfer of the $67,000 from the joint account with Harris was done to hide those assets from being used to repay Harris’s creditors in the Chapter 7 bankruptcy. Further, Harris filed the bankruptcy petition with knowledge that the transfer was not disclosed to his creditors in the bankruptcy petition, as is required by law.

The case was investigated by the Federal Bureau of Investigation and prosecuted by Eastern District of Texas Assistant U.S. Attorneys Christopher T. Tortorice and Paul Hable.
 

 
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