Another Ponzi Schemer's Wife Charged With Hiding Assets
The wife of a Tennessee tax preparer that confessed to operating a $10 million Ponzi schemer shortly before his death now faces charges of lying under oath and hiding assets when she failed to disclose the existence of $25,000 in jewelry to a Bankruptcy Court. Janet Brown, husband of now-deceased Soddy Daisy, Tennessee businessman Jack Brown, has agreed to plead guilty to a single count of bankruptcy fraud in connection with the ensuing investigation of her husband's massive Ponzi scheme. Under her plea agreement with prosecutors, Ms. Brown faces up to five years in federal prison as well as a fine of up to $250,000.
Brown's Tax Service and the Resulting Investigation
Jack Brown was a former Sunday school teacher who operated Brown's Tax Service ("BTS"). Using his relationship with BTS clients, as well as his connections through his Sunday School teaching position, Brown began promising annual returns of up to 15% that were purportedly attainable as a result of his God-given gift as a successful stock day trader. The scheme quickened pace in 2003, and by 2012 Brown and BTS had raised more than $10 million from investors.
In late 2012, concerns began to mount over the solvency of BTS, and these concerns came to a head when a local attorney alleged that Brown had been operating a Ponzi scheme and filed a petition to have BTS placed in bankruptcy. Brown was accused of misappropriating millions of dollars in investor funds for his own personal use, including the purchase of a lavish lakefront property, several vintage automobiles, and even the authentic floor from the Boston Garden sports arena. In bankruptcy filings, Brown claimed only $1.4 million in assets while representing a yearly income of less than $30,000.
After the appointment of a bankruptcy trustee, Jerry Farinash, Brown initially refused to cooperate. According to the trustee, Brown "refused to answer questions which would not be protected under the Fifth Amendment" while also claiming that his health has deteriorated to the point where he is movable only by ambulance. This lack of cooperation soon changed in March 2013, when Brown, appearing at a creditor's meeting telephonically from his hospital bed, confessed to operating the scheme. Brown maintained through his attorney that there was no money to return, and hinted that some victims had profited handsomely. Brown later passed away.
Questions Arise Over Asset Turnover
During subsequent proceedings initiated by the trustee, Brown's wife faced repeated questioning about whether she had turned over all of her assets. This included certain pieces of jewelry that Trustee Farinash indicated had not been turned over, even showing her pictures where she was wearing a diamond-encrusted earring and a necklace. Shortly after the questioning, Brown's wife turned over a large bag of jewelry to her lawyer - who subsequently turned the stash over to the trustee.
As part of the agreement, Brown's wife agreed to turn over all remaining assets to the trustee, as well as allow access to her finances to confirm that all proceeds of her husband's scheme had been relinquished. In return, prosecutors agreed not to prosecute Brown's wife for other non-tax criminal offenses that may later be discovered. Of course, the deal is off if either party violates the agreement.
A Familiar Scenario?
Ironically, this is not the first instance of a Ponzi schemer's wife facing criminal charges over the failure to turn over assets. In a much more well-known case, Florida Ponzi schemer Scott Rothstein's wife, Kim Rothstein, was charged and subsequently pleaded guilty to following instructions from her husband to conceal jewelry from authorities following the discovery of her husband's $1.3 billion Ponzi scheme. Kim Rothstein was later sentenced to an 18-month prison term.