Criminal Defense Lawyers

New Jersey Section 2C:21-13 – Fraud in insolvency

New Jersey Section 2C:21-13 – Fraud in insolvency

New Jersey statute 2C:21-13 deals with the crime of fraud in insolvency. This law makes it illegal to commit certain fraudulent acts when a person or company is insolvent or contemplating insolvency. The purpose of the law is to prevent people from improperly hiding assets or making preferential payments when bankruptcy is imminent.

Let’s break down the key elements of this statute:

Elements of the Crime

There are a few things that need to be proven for a person to be found guilty under this law:

• The defendant must have committed an “unlawful act” as defined by the statute
• The defendant must have been insolvent at the time or contemplated insolvency
• The defendant intended to cheat, hinder, delay or defraud creditors

The “unlawful acts” include things like concealing or transferring property without adequate consideration. So if a person transfers assets to a family member for free while insolvent, they could be charged under this statute. Some other examples of unlawful acts include:

• Concealing or removing property
• Falsifying records or documents
• Making fraudulent entries in books or records
• Making false statements or claims

The state has to prove the person committed one of these acts intentionally to hinder creditors and that insolvency existed or was imminent.

Defenses

There are some potential defenses that can be raised against a 2C:21-13 charge:

• The defendant was not actually insolvent – They may have had enough assets to pay debts.
• There was no intent to defraud – The transactions were done in good faith.
• The defendant received adequate consideration – Transfers were not gratuitous.
• The defendant relied on the advice of counsel – An attorney approved the transactions.

An experienced white collar criminal defense attorney can analyze the facts and determine if any of these defenses apply. Things like solvency, intent, and value received are very fact-specific.

Penalties

Fraud in insolvency is a second degree crime in New Jersey. This means it is punishable by:

• 5-10 years in state prison
• Up to $150,000 in fines
• Restitution to creditors

The potential consequences are therefore quite severe. The stigma of a criminal fraud conviction can also be damaging professionally and to one’s reputation.

Recent Cases

There have been some notable recent fraud in insolvency cases in New Jersey:

• In State v. Thompson, the owner of a struggling company was charged and convicted under 2C:21-13 for transferring assets to relatives leading up to bankruptcy. The court upheld the conviction, finding ample evidence of intent to defraud.
• In U.S. v. Parise, a construction company executive pled guilty to concealing accounts receivable from creditors in bankruptcy. He admitted emailing employees to collect receivables without recording them.
• In State v. Brown, the owner of a charter bus company facing insolvency was convicted of multiple counts under 2C:21-13. The court found he improperly transferred buses to relatives and made other fraudulent transfers.

These cases illustrate how seriously law enforcement takes these charges when there is evidence of intentional fraudulent conduct in the context of insolvency.

Takeaways

Here are some key takeaways about New Jersey’s law against fraud in insolvency:

• It prohibits concealing assets, falsifying records, and making improper transfers when insolvent.
• Violations are 2nd degree crimes with severe penalties.
• Defenses focus on solvency, intent, consideration, and advice of counsel.
• Recent cases show prosecutors pursue these charges aggressively.
• Anyone facing allegations should retain an experienced criminal defense lawyer.

The bottom line is that 2C:21-13 is an important statute meant to preserve assets for creditors in bankruptcy. While violations can lead to prosecution, those accused may have defenses worth exploring with competent legal counsel.