David B. Fein, United States Attorney for the District of Connecticut, announced that Michael J. Daly, 55, of West Simsbury, was sentenced today by Chief United States District Judge Alvin W. Thompson in Hartford to 18 months of imprisonment, followed by three years of supervised release, for stealing from several bankruptcy estates that he oversaw as a trustee. Daly also was fined $15,000.
“The bankruptcy system depends on the integrity of its trustees and practitioners,” stated U.S. Attorney Fein. “This prosecution and today’s sentence show that misconduct by those entrusted to act honestly and honorably will not be tolerated. I thank the Office of the United States Trustee for bringing this criminal activity to our attention and the FBI for its comprehensive investigation.”
On July 12, 2011, Daly pleaded guilty to one count of embezzlement by a court officer, a charge that stemmed from his embezzlement of $11,100 from the bankruptcy estate of Lehman Brothers Inc., a Connecticut-based print shop. According to court documents and statements made in court, on May 13, 2004, a voluntary Chapter 11 bankruptcy petition was filed on behalf of Lehman Brothers. On December 5, 2008, the Lehman Brothers bankruptcy was converted from a Chapter 11 to a Chapter 7 case, and the U.S. Bankruptcy Court for the District of Connecticut appointed Daly trustee of the estate. As trustee, Daly was responsible for closing the company’s “Debtor-in-Possession” account, or “DIP,” as soon as possible.
Daly left Lehman Brothers’ DIP account open for more than six months, until June 29, 2009. During that period, the account received $11,584.31 in customer deposits for previously completed print jobs. Daly made a series of withdrawals from the account, totaling $11,100, which he deposited into his business account or converted to cash. Daly then transferred the stolen money to his private bank account and spent it on personal expenses.
The FBI’s investigation of this matter further revealed that, while serving as a bankruptcy trustee, Daly embezzled $16,500 from two other estates, stole approximately $22,100 in jewelry from another estate, and attempted to submit approximately $73,650 in false time records in association with his work on behalf of another estate.
Daly has surrendered his license to practice law and resigned as a panel trustee in the bankruptcy court.
U.S. Attorney Fein acknowledged the substantial efforts of the Federal Bureau of Investigation in investigating this matter and the great assistance from several members of the Office of the United States Trustee.
This matter was prosecuted by Assistant United States Attorneys Michael J. Gustafson and David E. Novick.
Members of the public can report suspected bankruptcy fraud via e-mail to USTP.Bankruptcy.Fraud@usdoj.gov.