Federal prosecutors last month added eight additional bankruptcy fraud charges to what now totals a 25-count indictment comprising money laundering and bank, wire and bankruptcy schemes for the former director and shareholder of Southwest Community Bank in Springfield.
Gregg’s latest indictment replaces a 17-count indictment returned in February 2013. In all, Gregg faces four counts of bank fraud, 10 counts of money laundering, two counts of wire fraud and nine counts of bankruptcy fraud, according to the office of Tammy Dickinson, U.S. attorney for the Western District of Missouri. Public Affairs Officer Don Ledford said Gregg could face up to 265 years in prison and fines up to $7.25 million if convicted on all counts.
Ken Reynolds, a bankruptcy attorney with Reynolds, Gold & Grosser PC in Springfield, said in his 27-year career he’s never seen a case where an individual faced nine bankruptcy fraud charges.
“I’ve not seen anything like this myself. It is very unusual,” Reynolds said.
Gregg worked locally as principal shareholder and director of Southwest Community Bank in Springfield, which was shut down by regulators in May 2010. He also was shareholder, along with his wife, in Glasgow Savings Bank, which failed in 2012. Gregg had an ownership interest in several businesses, and worked as a real estate developer, investor and licensed insurance agent for Shelter Mutual Insurance Co.
The 2013 indictment originally charged Gregg with a single count of bankruptcy fraud stemming from statements he made that debtor 1717 Marketplace LLC owed him $868,000 for a personal loan and owed another person $801,000 for the same purpose.
Four of the counts added last month were related to 1717 Marketplace, a corporation Gregg controlled. The business filed for bankruptcy in July 2012, but the court dismissed the case in March 2013, according to the U.S. attorney’s office. Reynolds, who reviewed indictment details for Springfield Business Journal, said a majority of Chapter 11 cases are dismissed for various reasons.
The four additional counts are related to Gregg’s personal bankruptcy case, which he filed in 2013 following his original indictment.
Branson attorney Diana Brazeale of Brazeale Law Firm LLC, who represents Gregg in his personal bankruptcy case, declined an interview request on behalf of herself and Gregg.
The indictments allege while contemplating his personal bankruptcy case, Gregg transferred his interest in two parcels of Nixa real estate, a 97.2-acre tract and 6.4-acre tract. Gregg also allegedly committed fraud when he transferred property of the bankruptcy estate by filing with the Christian County Record of Deeds a document attempting to place $250 million in liens on property he and his businesses owned.
“Basically, he tried to act as if he had liens on his property that weren’t really liens,” Reynolds said.
After his personal Chapter 11 bankruptcy was converted to Chapter 7 in May of last year, Gregg accepted a $40 million offer from FRS LLC and 1717 Marketplace in the form of property tax abatement based on liens recorded against the property, the U.S. attorney’s office claims. However, according to the indictment, Gregg’s interests in those companies and in his personal property became the property of the bankruptcy estate when he initiated his personal case in March 2013.
In all, the eight counts of fraud are connected to two separate areas, according to Reynolds: false declarations in his bankruptcy cases and real estate transfers intended to deceive the court.
“The U.S. attorney’s office is saying he fraudulently transferred property and that he also committed fraud within the bankruptcy,” Reynolds said.
According to the indictment, Gregg’s personal bankruptcy case showed he held assets valued at $145 million against debts of $325.5 million. In all, creditors have charged off $14.6 million of his $180.5 million in debt.
Bankruptcy attorneys routinely ask clients to spell out in writing what their assets and liabilities are, Reynolds said, as a way to protect themselves from clients who might misrepresent their situation.
“They require a client fill out a questionnaire as to what their debts are, what their assets are and any transfers that have occurred,” he said. “The attorney then takes that information and puts it in the form of the petition schedules and statement of financial affairs, which goes to the bankruptcy court. If the debtor then says, ‘I never said that to my attorney,’ the attorney can say, ‘That’s not true.’”
He said attorneys depend on debtors to sign off on the representations they make.
“We depend on the debtor or client to provide us with the basic information that is truthful and accurate to allow us to file the paperwork with the bankruptcy court,” Reynolds said. “The vast majority of clients filing bankruptcy are honest and truthful about their paperwork. It’s the one bad apple that the bankruptcy court gets once in a great while that causes this kind of situation.”
The other 17 counts remain unchanged from the original indictment and represent creditor losses of more than $3.3 million.
In 2008, Gregg allegedly engaged in a scheme to defraud Southwest Community Bank by selling a piece of commercial real estate at 2814 S. Fremont Ave. at an inflated price of $1.55 million. He did not disclose he had purchased the property a few months earlier for $775,000, according to the indictment.
The indictment also alleges Gregg was engaged in schemes to use collectible automobiles as collateral to obtain loans and defraud Great Southern Bank, Metropolitan National Bank and Peoples Bank of the Ozarks. As part of the schemes, he allegedly sold seven cars to an auto auction in Scottsdale, Ariz., five of which were encumbered.
In February 2009, Gregg borrowed $2 million from Great Southern using 160,000 shares of stock in First Bancshares Inc., the holding company for First Homes Savings Bank, as collateral, according to the indictment. With $1.5 million remaining on the loan, he withdrew the stock certificate, signing a trust receipt promising to return the stock within 30 days. Instead, Gregg is alleged to have deposited the stock into his Scottrade account, borrowed $440,000 from the Scottrade margin account with the stock as collateral, and never returned the stock to Great Southern.
The banker and businessman also allegedly bounced checks at two Oklahoma casinos: Buffalo Run Casino & Hotel in Miami, Okla., and Downstream Casino Resort in Quapaw, Okla. He also is charged with writing five bad checks worth $10,000 each to Buffalo Run and five checks to Downstream totaling $60,000.[[In-content Ad]]
