Marion Man Sentenced to 46 Months in Prison on Tax and Bankruptcy Fraud Charges

The former president of Chapman Lumber who committed bankruptcy fraud and filed false tax returns was sentenced today to more than three-and-one-half years in federal prison.

Keith Chapman, age 41, from Marion, Iowa, received the prison term after a July 17, 2009, guilty plea to two counts of bankruptcy fraud and one count of filing a false tax return.

In a plea agreement, Chapman admitted he made false statements in bankruptcy pleadings he filed on behalf of Chapman Lumber of Hopkinton when he denied making payments and transferring money from Chapman Lumber to his own use. Chapman admitted that, between 1999 and 2005, he diverted more than $450,000 from Chapman Lumber to a bank account he held in Cedar Rapids. Those funds had been pledged as collateral for a bank loan to Chapman Lumber. Chapman used the money himself, including for a membership in a country club, jewelry, golf equipment, clothing, and prostitutes. Chapman also admitted he did not report any of these funds as income when he filed false tax returns.

Chapman was sentenced in Cedar Rapids by United States District Court Chief Judge Linda R. Reade. Chapman was sentenced to 46 months’ imprisonment. A special assessment of $300 was imposed, and he was ordered to make $286,492.79 in restitution; $144,897.30 to the Trustee and $141,595.49 to the IRS. In addition, Chapman was ordered to pay $2,104.63 to the United States government for costs of prosecution. He must also serve a three-year term of supervised release after the prison term. There is no parole in the federal system.

This case arose out of the work of a bankruptcy fraud task force for the Northern District of Iowa made up of personnel from the United States Attorney’s Office, the United States Trustee’s Office, and law enforcement agencies including the Federal Bureau of Investigation and the Internal Revenue Service.

Chapman was released on the bond previously set and is to surrender to the Bureau of Prisons on a date yet to be set.

The case was prosecuted by Assistant United States Attorney C.J. Williams and was investigated by the Internal Revenue Service, Criminal Investigation Division; Federal Bureau of Investigation; and Office of United States Trustee.

Court file information is available at https://ecf.iand.uscourts.gov/cgi-bin/login.pl. The case file number is CR 09-37 LRR.