Bankruptcy lawyer pleads guilty to embezzling $350,000 over 12 years

February 05, 1993|By Norris P. West | Norris P. West,Staff Writer

A bankruptcy lawyer pleaded guilty in U.S. District Court in Baltimore yesterday to embezzling $350,000 from the estate of a company over a 12-year period.

Melvin C. Paul, 62, admitted that he stole the money from the account of the former Atlantic International Marketing Corp. of Baltimore, which leased and sold construction trailers and office complexes before it declared bankruptcy under Chapter 7 in December 1980.

U.S. Attorney Richard D. Bennett said this was the second major federal bankruptcy fraud case prosecuted in Maryland this year. Two former operators of a Rockville car dealership were indicted by a federal grand jury last month.

Judge J. Frederick Motz, who accepted the guilty plea, set Paul's sentencing for April 20. A maximum penalty would be five years in prison, three years' probation, a $250,000 fine and restitution.

Under a plea agreement, federal guidelines would place Paul's sentence at 27 to 33 months, provided that he does not have a criminal history. Prosecutors said they would recommend sentencing at the low end of the guidelines.

Mr. Bennett said Paul violated his responsibility to collect and liquidate Atlantic property and to manage the bankruptcy account until its affairs were settled.

Instead, Mr. Bennett said, Paul used money from Atlantic's savings, checking and money market accounts, and certificates of deposit.

"This is a very, very sad situation in which we find a member of the bankruptcy bar held in high regard" being prosecuted for bankruptcy fraud, Mr. Bennett said, adding that the action was "a disgrace to bankruptcy attorneys and the entire bar."

Judge Motz asked Paul if he had taken any medication within the previous 24 hours that affected his decision to plead guilty.

"Only a couple of anxiety pills," Paul replied, adding that the medication did not influence his guilty plea.

Paul was appointed trustee of the account on Dec. 11, 1980. During the next 12 years, the U.S. Bankruptcy Court repeatedly asked him when he would submit his final report, according to a statement of facts prepared by federal prosecutors.

He made a number of false and misleading statements concerning the financial status of the estate, prosecutors said. In February 1991, he said he was waiting for a wire transfer of money related to a settlement. In September 1991, he promised to submit a rough draft of his report within two weeks, but no report was sent.

On March 19, 1992, the Bankruptcy Court entered an order requiring him to show why he should not be removed as trustee. A month later, he told the court that he was working on the case and was trying to account for a $41,500 bookkeeping error.

Under oath last Aug. 5, he told the court that he had $600,000 in Atlantic estate funds in bank accounts. Nine days later, he admitted that his statement was false, and that only $251,623 was in the Atlantic bankruptcy estate. The plea would include penalties for perjury.

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