Former CEO of Montgomery Company Convicted of Bankruptcy Fraud

by San Antonio Attorney

Former CEO and president of Southeastern Stud & Components in Montgomery was found guilty of falsifying statements to a bankruptcy court on how was able to pay off his gambling debt, which was $100,000.

Kennon Whaley is facing six years imprisonment for lying to the court.  His company’s sales in 2005 were over $34 million and he hired about 125 full-time employees.  However, the business had slowed down significantly in 2009, so the former CEO sought for Chapter 11 bankruptcy protection and only exited bankruptcy in 2011.

At the trial, Assistant U.S.  Attorney Brandon Essig stated that the bankruptcy laws are a vital facet of the nation’s economic system.  He said that the laws are one of the greatest financial protections worldwide.

Essig clarified to the jury that debtors who seek bankruptcy protection are legally bound to provide current financial information to the court.

Whaley incurred $100,000 debt in a Las Vegas casino just one year after he filed for bankruptcy.

He also allegedly received insurance money amounting to $260,000, which he used to clear up his gambling debt and squandered the rest on another gambling spree.  But he did not notify the court about those transactions.

Essig said that Whaley definitely committed bankruptcy fraud.

Court papers show that after he paid off his obligations to a casino, Whaley travelled to Las Vegas where he gambled $20,000 at the casino and hired a limousine to get his spouse at the airport.

During that trip, the company was still in bankruptcy and about 70 percent of its workers had lost been laid off, according to court documents.

Whaley’s attorney, Susan James, asserted that at the time of the trial Whaley involved in the business as an “absentee owner”, who entrusted the company’s regular operations to a small group of employees.

She said the person who handled the accounting and filed the bankruptcy papers was Nancy Thornton.

But the judge found that the former CEO instructed employees to forge documents they filed to the bankruptcy court so that his insurance claims will not be found out.

In May, Whaley was convicted by a federal jury of hiding bankruptcy assets.

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