Valentin Valdés-Ayala Guilty of Bankruptcy Fraud
Yesterday evening after eight days of jury trial, Valentín Valdés-Ayala was found guilty of 31 counts of bankruptcy fraud, falsification of bankruptcy records, wire fraud, aggravated identity theft and contempt of court, announced U.S. Attorney Rosa Emilia Rodríguez-Vélez for the District of Puerto Rico. The Federal Bureau of Investigations, in collaboration with the U.S. Trustee, was in charge of the investigation.
During the course of the trial the evidence proved that the purpose of the fraudulent scheme was to obtain financial gain and to hinder, delay and obstruct collection efforts by the Commonwealth of Puerto Rico, through ASUME, and/or by child support pension beneficiaries against child support debtors who had failed to comply with their child support obligations.
Valdés-Ayala incorporated a non-profit organization, Fundacion Lucha Pro-Padres Convictos por Pencion Corp. [sic], with the alleged purpose of defending the principles and dignity of every father convicted for failure to make child support payments and obtaining and promoting the release of all inmates as well as defending father-child relationships. He also created Tears in Prison, Inc., a for-profit corporation that was incorporated with the stated purpose of preparing bankruptcy petitions.
The defendant, through Fundacion Lucha Pro-Padres Convictos por Pencion Corp. [sic], solicited individuals who were incarcerated or facing incarceration for failure to comply with their child support payments, promising those individuals that—in exchange for fees paid to him and/or his entity—they would be released from prison and/or avoid imprisonment without first having to make any payments towards their child support debt. Valdés-Ayala at times also promised that he would obtain the elimination and/or reduction of the underlying child support debt.
The defendant would then file or cause to be filed Chapter 13 bankruptcy petitions which allowed the debtors to be released from prison without first having to pay overdue child support to ASUME due to the operation of bankruptcy’s automatic stay against collection actions.
With respect to his fees, Valdés-Ayala indicated to his prospective clients that his fee included legal representation (even though he is not a lawyer), filing fees and a term membership in his entity, which would guarantee them legal representation in their child support case throughout the duration of their term membership. Upon receipt of payment the defendant would provide a receipt stating that the payment was a donation.
The defendant prepared and filed and/or caused to be filed Chapter 13 bankruptcy petitions in the clients’ names. The Chapter 13 petitions were not filed for the purpose of having the clients engage Chapter 13 reorganization of their debts, but for the improper purpose of using the U.S. bankruptcy laws to collect fees by promising relief from incarceration.
As part of the scheme to defraud devised by Valdés-Ayala, he assisted hundreds of debtors with the filing of false and fraudulent Chapter 13 bankruptcy petitions. From August 2010 to November 2013, 412 applications for credit counseling certificates were processed through Valdés-Ayala’s account with the Credit Advisors Foundation. These certificates were then included along with the bankruptcy petition.
“The defendant defrauded not only his clients, but also child support beneficiaries and the government Puerto Rico, and he did so by using the U.S. Bankruptcy courts,” said U.S. Attorney Rodríguez-Vélez. “Valdés-Ayala sought to obtain as much money as possible, for as long as possible, from his clients. When the fraudulent bankruptcy petitions ultimately were dismissed by the bankruptcy courts, the defendant ceased contact with his clients, who again faced imminent incarceration for past due child support payments.”
“The FBI will continue to work with the U.S. Attorney’s Office and Bankruptcy Trustee to ensure the public’s continued trust in the bankruptcy process,” said Special Agent in Charge Carlos Cases of the FBI’s Puerto Rico office.
The case was prosecuted by Assistant U.S. Attorneys Mariana Bauzá and John MathewsaII. The sentencing hearing was scheduled for Aug. 6, 2015. The defendant is facing a maximum of 30 years in prison and a mandatory consecutive sentence of two years for each of the two aggravated identity theft charges. The government requested a money judgment in the amount of $648,900.