This week a federal jury convicted an Alabama businessman on two counts of bankruptcy fraud after he was found to conceal assets from the firm to gamble.
Kennon Whaley of Auburn was convicted on Tuesday of the charges, wherein he was alleged to have hidden bankruptcy assets while he was President and CEO of Southeastern Stud & Components. The company at one point raked in $34 million and had more than 100 employees on its ledgers, but that went sideways, and Whaley was found to have diverted $260,000 in cash from an insurance payout to settle gambling debts.
Whaley had run up a tab of more than $100,000 at Wynn Las Vegas in 2010, and that the debt came due a month later. Whaley used the insurance payment to pay off the debt while pocketing $30,000 himself. The company ended up going bankrupt a year prior, remaining in Chapter 11 protection until 2011, requiring Whaley to disclose the payment and transactions to the court.
The defendant has not yet been sentenced, but he could face five years in prison for each fraud conviction.
Commenting on the case US Attorney for the Middle District of Alabama George Beck Jr. said, "Our bankruptcy laws are designed to provide financial protection for both creditors and debtors alike. When debtors attempt to illegally thwart the very laws that provide them protection and take advantage of this fraud in bankruptcy court, they will be punished."