Bethesda Woman Sentenced for Bankruptcy Fraud

A Bethesda woman was sentenced to prison on Tuesday in federal court for concealing assets when filing for bankruptcy.

Diana J. Stout, 56, was sentenced to 27 months in prison by U.S. District Judge J. Frederick Motz for making a false statement and concealing assets in a bankruptcy case. Her prison sentence will be followed by three years of supervised release, and she will have to pay $155,747.83 in restitution, according to a news release from the U.S. Attorney's Office for the District of Maryland.

Stout pleaded guilty to making a false statement in bankruptcy and to concealing assets, according to the U.S. Department of Justice's website.

Stout filed for Chapter 7 bankruptcy—designed to liquidate all of a debtor’s assets and distribute the proceeds to creditors—in April 2010, the statement reported.

But, when she filed, she failed to disclose that she recently had transferred to her daughter (for $1) a property that she had purchased with her daughter (in February 2008) in South Carolina, according to the statement.

The bankruptcy trustee assigned to liquidate her assets and distribute the proceedings to her creditors started court proceedings in February 2011 to recover Stout’s interest in the South Carolina property, alleging that the property transfer had been done to "defraud Stout’s creditors and that Stout did not receive reasonably equivalent value for the transfer," the statement reported.

After that, Stout falsely claimed that her daughter had paid her $75,000 for her interest in the property, the statement reported.

"Stout knew that the statements were false and she admitted that she made them with the intent to defeat [the bankruptcy] trustee’s legal action and to defraud her creditors," the justice department’s statement reported.

In a related matter, Stout's bankruptcy filing prevented her former boyfriend—who says that she misappropriated more than $1 million from him to buy the South Carolina house, among other things—from filing a civil complaint against her, according to federal prosecutors.

Stout also failed to disclose, when she filed for bankruptcy, that she owned a diamond bracelet with more than six dozen individually set diamonds in 18-karat white gold, that she owned 797 shares of common stock in Eagle Bancorp Inc., and that she owned a 1993 Toyota Supra and a 2005 Chevrolet Avalanche SUV, in addition to the two vehicles that she did list, sccording to the news release.

"Between October 2010 and May 2011, Stout sold the Toyota Supra for $14,000, the stock for a total of $10,125.91 and the diamond bracelet for $85,000, none of which she reported to the bankruptcy trustee," the release reported.

Additionally, Stout converted to her own use insurance checks jointly made out to her and to contractors hired to repair water damage to a house belonging to her in Hagerstown, the news release continued.

She didn't notify the bankruptcy trustee that she was seeking insurance money to repair her Hagerstown property, and—after receiving the insurance checks—she forged the signatures of the contractors so that she could keep all of the money. None of the insurance proceeds were used to repair the house, and "the bankruptcy trustee was forced to use other assets of the bankruptcy estate to perform the needed repairs" to the property, the news release stated.

Stout also filed several false pleadings in March 2011, forging the signatures of her creditors to make it look as if her creditors were withdrawing their claims for payment, the release added.