A Hot Shot Banker Jailed For Stealing $43 Million From Merrill Lynch Is Now Accused Of Lying In Bankruptcy Court

merrill lynch

Photo: AP Images

A former hot-shot banker who served 18 months in federal prison for stealing $43 million from Merrill Lynch could be in legal trouble again. This time he’s accused of lying about his assets in bankruptcy court.Daniel Gordon seemed bound for greatness before his role in Enron’s collapse helped send him to the penitentiary. At age 23, he already had a master’s degree from Yale and a prominent job as president of Merrill Lynch’s energy-trading division in 2000. But in 2003, Gordon pleaded guilty to wire fraud, money laundering and conspiracy, according to the Associated Press.

When he got out of prison, Gordon got back into the world of business, making loans to pro athletes and running a real estate investment business. With those ventures struggling and the Internal Revenue Service seeking to collect $44 million in back taxes and interest, Gordon filed for Chapter 7 bankruptcy three years ago.

The fact that his case is still winding its way through the courts is not surprising – complex bankruptcies often take years to resolve. But the latest accusations against Gordon are unusual. The bankruptcy trustee, charged with liquidating Gordon’s assets to recover as much as possible for his creditors, has accused Gordon of hiding more than $7 million in assets by using fraudulent wire transfers.

What happens if you lie in bankruptcy court?
Though people often forget to disclose all of their assets, lying to the bankruptcy court is rare and can have serious consequences, said Adrian Lapas, a North Carolina attorney.

In a typical Chapter 7 bankruptcy, the trustee will stand up during what Lapas dubbed a “Come to Jesus” meeting.

“He may say, ‘Now is the time, if you left something out, to disclose it. If you parked your bass boat before your brother-in-law’s shed, I’m going to find that bass boat … If I find it after today and you don’t tell me about it, we have a problem,'” Lapas said.

Hiding assets – even much less valuable ones than the $7 million Gordon is accused of shielding, and even if it’s unintentional – is likely to backfire.

Lapas recounts the case of a filer who forgot to disclose $2,600 in assets. “The trustee picked up on it and he was livid,” Lapas said. The bankruptcy trustee denied the discharge, leaving this person still saddled with debt, out roughly $2,200 in legal fees, and with nothing to show for it.

Get the free newsletter Your Money & The Law.  Click here to subscribe

For most people who file bankruptcy, that should be warning enough not to lie to the court, Lapas said. You can end up buried even deeper in debt, and with no other options for digging out.

When large financial sums are involved, the consequences can be more severe. Bankruptcy fraud is a felony that carries a sentence of up to five years in prison and as much as $250,000 in fines.

It’s not clear yet if Gordon could face charges or other consequences for the alleged fraud he’s been accused of. The AP reports that a settlement has been proposed that would involve selling real estate assets and dividing most of the assets between the bankruptcy trustee and Gordon’s ex-wife.

Are you considering bankruptcy? Read up on the basics here, then find a lawyer who specialises in bankruptcy within your state.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.