Q: If I discover possible criminal wrongdoing, am I, as receiver,
required to report it to authorities?
A: The answer depends on whether you are a federal receiver or state
court receiver. 18 U.S.C. § 3057(a) provides: “Any judge, receiver, or
trustee having reasonable grounds for believing that any violation under
chapter 9 of this title or other laws of the United States relating to
insolvent debtors, receiverships or reorganization plans has been
committed, or that an investigation should be had in connection therewith,
shall report to the appropriate United States attorney all the facts and
circumstances of the case, the names of the witnesses and offense believed
to have been committed. Where one such officer has made such report, the
others need not do so.” One of the few cases interpreting the statute,
In Re Barkal, 397 B.R. 905, 906 (Bankr. N.D. Ind. 2008), held “the
term ‘receiver’ in the statute clearly delineates a receiver appointed
under federal law, not a state court appointed receiver as is the case
here. Therefore, if you are a state court receiver you do not have to
comply with 18 U.S.C. § 3057 but, if you are a federal receiver, you are
required to report any criminal activity discovered to the United States
attorney because the statute provides that the receiver, judge or trustee
“shall report” any such possible criminal violations. The reference to
Chapter 9 in the statute is to bankruptcy crimes. That would likely not be
something a receiver would have to concern himself or herself with.
However, the statute requires the reporting of not only bankruptcy crimes
but any “other laws of the United States relating to solvent debtors,
receiverships or reorganization plans.”
Irrespective, of whether a receiver is required by statute to report
possible criminal activity that is discovered, because a receiver is an
officer of the court, the discovery of criminal activity by a receiver
should be reported to the court, and the receiver should seek instructions
from the court as to whether the receiver or the court should make a
criminal referral to the appropriate authorities.
*Peter A. Davidson is a Partner of Ervin
Cohen & Jessup LLP a Beverly Hills Law Firm. His practice includes
representing Receivers and acting as a Receiver in State and Federal
Court.
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