BV Man Pleads Guilty to Bankruptcy Fraud

A press release from the U.S. Attorney’s Office:


ROCKFORD — A former Bull Valley, Ill. man pleaded guilty today before U.S. District Judge Frederick J. Kapala to the concealment of assets from a Bankruptcy Trustee.

JOSEPH MICHAEL PHELAN, 51, now of Augusta, Ga, the former President of Phezer Enterprises, Incorporated, located in Crystal Lake, Ill., caused to be filed a Chapter 7 Bankruptcy Petition for Phezer Enterprises on August 18, 2008.

According to the written plea agreement, after Phelan closed Phezer Enterprises on August 13, 2008, Phelan had three Phezer employees start cutting up and scrapping unused and used Phezer assets, including stainless steel sheets and various metals. On August 18, 2008, the day Phezer filed for bankruptcy, Phelan sold 21,182 pounds of stainless steel to Company C. Phelan personally received $15,251.04 for the steel.

Between August 18, 2008 and August 29, 2008, two Phezer employees sold $13,399.24 worth of Phezer metals to Company B. The two employees received cash for the sales and provided the cash to Phelan.

On September 17, 2008, Phelan received a check for $47,552.59 issued to him from Company A for Phezer metals sold to Company A. On October 15, 2008, Phelan received a check for $4,415.91 issued to him from Company A for Phezer metals sold to Company A.

Phelan deposited both checks in his personal bank account. Phelan did not advise the trustee or secured creditor of the sale of the assets to Companies A, B, or C, or account and deliver to the trustee or the secured creditor the proceeds from the sale of Phezer assets to Companies A, B, and C.

Zachary Fardon

Zachary Fardon

Phelan faces a maximum penalty of 5 years’ imprisonment, and a fine of up to $250,000, or twice the gross gain or gross loss resulting from that offense, whichever is greater. The judge may also impose a sentence of probation of one to five years, and a term of supervised release of up to three years. The actual sentence will be determined by the United States District Court, guided by the Sentencing Guidelines. Sentencing for Phelan is set for January 5, 2016, at 2:30 p.m.

The guilty plea was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and John A. Brown, Acting Special Agent-In-Charge of the Chicago Office of Federal Bureau of Investigation.

The government is being represented by Assistant U.S. Attorney Scott R. Paccagnini.

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