Janet Brown Gets Year In Federal Prison For Bankruptcy Fraud; Attorney Says It Was Her Late Husband Who Masterminded Ponzi Scheme

Thursday, June 19, 2014

Janet Brown was sentenced Thursday morning to serve a year in federal prison for bankruptcy fraud.

Her attorney, Mike Little, said it was her late husband, Jack Brown, who was the mastermind of a Ponzi scheme that authorities said bilked "investors" out of some $12 million.

He said, "Ms. Brown thought her husband was successful. Ms. Brown was fooled."

Prosecutor Perry Piper said Ms. Brown was active at Brown's Tax Service in Soddy Daisy, where "many people were bilked out of millions of dollars. They lost their life savings."

Judge Curtis Collier said he was not considering the Ponzi scheme, but he said the bankruptcy fraud was a serious offense. He said, "Our bankruptcy system cannot work if people are not truthful."

Prosecutor Piper said Ms. Brown stated under oath at a bankruptcy hearing that she had turned over all her jewelry. He said three days later she turned in a bag of jewelry worth about $25,000.

Attorney Little said Ms. Brown voluntarily gave up the jewelry. He said, "At the time her world was falling apart."

He said Ms. Brown was having to give 24-hour care to her husband, whose leg had been amputated. He said the couple lost everything after they were forced into bankruptcy and had to move to her sister's house.

Attorney Little said Ms. Brown has been working for a physician group while out on bond.

Ms. Brown said she wants to get out and help provide for her family, saying that is all she has left.

A large number of Brown tax clients said Jack Brown began offering to invest their money for them at an extremely high rate of interest. Then the tax office suddenly closed and the investors found they would not be paid. A group of them forced the Browns into the bankruptcy.

The plea agreement says, "In 2013, the defendant was the subject of an involuntary bankruptcy petition filed under Chapter 7 (which is under Title 11 of the bankruptcy code), in the Chattanooga Division of the United States Bankruptcy Court for the Eastern District of Tennessee, No. 13-10281.

"The defendant testified at a meeting of creditors, under oath, that she did not have any additional jewelry (assets) hidden. That testimony occurred on April 16, 2013. The exact questioning was as follows: Jerry Farinash, the Chapter Seven Trustee, asked the defendant, "Have you turned over to me all of the jewelry that you own on the date that this involuntary bankruptcy was filed against you except for the three pieces that you just told me about?" Brown's answer was "yes." The three excepted pieces consisted of a golden wedding band, a high school ring and Janet Brown's mother's ring.

"Three days later, on or about April 19, 2013, the defendant turned over to her lawyer, Tom Ray, a bag containing a large amount of jewelry. Ray in turn relinquished the bag of jewelry to the trustee, Jerry Farinash. During the meeting of creditors, the defendant affirmatively stated that she had disclosed and relinquished all of her jewelry, when in fact she had not turned over the jewelry, and she had knowingly failed to do so. The jewelry was subsequently appraised and it has an approximate value of $25,000.

"As part of this plea agreement, the defendant admits that she knowingly concealed the aforementioned bag of jewelry in an attempt to hide the jewelry from the bankruptcy trustee and the bankruptcy court."

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