St. Peters Woman Sentenced to Prison for Fraudulent Preparation of Bankruptcy Petitions
On May 10, 2018, Phebe Ibrahim, formerly known as "Phebe Khan," age 50, of St. Peters, Missouri, was sentenced to 18 months in federal prison for bankruptcy fraud and related charges, announced Donald S. Boyce, U. S. Attorney for the Southern District of Illinois. Ibrahim was previously charged in a 21-count indictment filed on October 3, 2017, as part of the U.S. Attorney’s Office’s continuing effort to crack down on those who commit fraud in the U.S. Bankruptcy Court for the Southern District of Illinois. She pled guilty to all charges on February 8, 2018.
As part of her guilty plea, Ibrahim, a non-lawyer, admitted that she worked as a bankruptcy petition preparer, preparing bankruptcy petitions and other documents for debtors who wished to file bankruptcy in the Southern District of Illinois. The Bankruptcy Code imposes certain restrictions on bankruptcy petition preparers, including requiring them to disclose their names on any documents they prepare, and allowing the Bankruptcy Courts to set maximum fees that they can charge their customers. The practice in the U.S. Bankruptcy Court for the Southern District of Illinois is that bankruptcy petition preparers are not allowed to charge fees of more than $150.
Ibrahim admitted that she defrauded the debtors for whom she prepared bankruptcy petitions by routinely charging fees that exceeded the maximum allowable amount. Ibrahim also acknowledged that she attempted to conceal her fraud by not disclosing her name on the documents she prepared, and by instructing her customers not to mention her name during their bankruptcy cases.
The Bankruptcy Code also requires that debtors attend a credit counselling briefing prior to filing a bankruptcy case. Ibrahim admitted that she circumvented and defeated this provision of the Bankruptcy Code by causing false "Certificates of Counselling" to be filed on behalf of her customers. These Certificates represented that Ibrahim’s customers had attended the required credit counselling briefing.
In rejecting the defendant’s request for a probationary sentence, United States District Judge Staci M. Yandle noted that Ibrahim "took advantage of individuals when they were in a vulnerable financial situation," calling Ibrahim’s fraud and repeated false statements to the Bankruptcy Court "repugnant." Judge Yandle also found it "unbelievable" that after the
Bankruptcy Court for the Southern District of Illinois specifically ordered Ibrahim to stop acting as a bankruptcy petition preparer, she then engaged in the same conduct in the Bankruptcy Court for the Eastern District of Missouri.
In addition to the 18 month prison sentence, Judge Yandle imposed a three-year term of supervised release and ordered Ibrahim to pay a $2,100 special assessment and total restitution in the amount of $13,200 to the bankruptcy clients she defrauded.
"Today’s sentence sends a strong message to those who abuse the bankruptcy system," stated Nancy J. Gargula, United States Trustee for Southern and Central Illinois and Indiana (Region 10). "Providing false documents to the United States Bankruptcy Court, such as false bankruptcy credit counseling certificates, bankruptcy petitions that concealed this bankruptcy petition preparer’s involvement in the cases and charging fees that exceeded the maximum allowable amount, undermines the integrity of the system and will not be tolerated. We appreciate the commitment of U.S. Attorney Boyce and our law enforcement partners to holding those who abuse the bankruptcy system accountable. We welcome information that will help detect unscrupulous bankruptcy petition preparers and we encourage citizens to report suspected bankruptcy fraud through our Internet hotline at USTP.Bankruptcy.Fraud@usdoj.gov." The United States Trustee Program is the component of the Justice Department that protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the bankruptcy laws.
The case against Ibrahim resulted from a referral by the United States Trustee for Indiana and Southern and Central Illinois (Region 10) to the U.S. Attorney for the Southern District of Illinois. The investigation was conducted by agents from the Federal Bureau of Investigation’s Springfield Division, Fairview Heights Resident Agency, in collaboration with the Southern Illinois Bankruptcy Fraud Working Group, which is coordinated by the United States Trustee. The case was prosecuted by Assistant U. S. Attorney Scott A. Verseman.