Chapter 7 Trustee Sentenced for Fraud
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Chapter 7 Trustee Sentenced for Fraud

August 4, 2011


Chapter 7 bankruptcy trustee Marika Tolz has reportedly been convicted for wire fraud conspiracy in Florida for abusing the powers of her role. Tolz was sentenced to 81 months in jail followed by three years of probation, the first half of which is to be served under house arrest, according to the Miami Herald.

Tolz served as a trustee for Chapter 7 bankruptcy cases in Hollywood, Florida, for more than two decades prior to her arrest.

The role of the Chapter 7 trustee is to oversee any liquidation sales of a bankruptcy filer's assets and distribute the proceeds from that sale among creditors. Trustees must also keep meticulous financial records, make sure a filer's assets are safe and report regularly on the status of the assets and funds.

Tolz allegedly mis-handled money from a number of Chapter 7 estates. She pleaded guilty to conspiracy to commit wire fraud. The charges against her asserted that:

  • She improperly handled at least $16 million in various Chapter 7 cases;
  • She and a number of accomplices wrote unauthorized checks from Chapter 7 accounts; and
  • Her actions caused losses of at least $2.4 million for involved parties.

It seems that Tolz’s illegal money maneuvering took the form of an elaborate Ponzi scheme: sources note that she used money from some accounts for her own purposes, then moved funds from other accounts to hide the shortfalls.

Further, her manipulations reportedly included presenting falsely inflated balance statements to the court to cover up missing funds. The manipulation was unsustainable and, in Tolz's case, has led to a criminal conviction and serious penalties.

Essentially, Tolz's crimes amount to misappropriating funds in Chapter 7 bankruptcy cases. Rather than distributing money among those creditors who Chapter 7 filers couldn't pay, she used some of the money for her own benefit, according to authorities.

The court has scheduled a restitution hearing in the case for September 15, shortly before Tolz is scheduled to begin her jail sentence. At that point, Tolz may be charged with fines and/or repayments of some of the funds she handled improperly.

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