“Here, the trustee seeks turnover of the diamonds.” —Catliota, Bankruptcy Judge 

Facts: Minh Vu Hoang (Hoang) owned businesses and purchased and sold real estate. When she filed for bankruptcy she listed ownership interests in ten business entities and five parcels of real estate. A bankruptcy trustee was appointed, who in turn hired a forensic accountant to determine if Hoang had interests in any other properties. It was discovered that Hoang owned interests in dozens of businesses and real estate properties that were not disclosed in her bankruptcy schedules. These properties were owned in fictitious names, alter ego entities, slush funds, and agents’ names. Hoang concealed her control over these properties and the income generated therefrom from the Internal Revenue Service (IRS) and the bankruptcy trustee. In more than sixty adversarial proceedings, many of these properties were acquired for the bankruptcy estate. In a criminal proceeding, Hoang pled guilty to tax fraud and bankruptcy fraud and at the time of this hearing was in jail. The forensic accountant identified that Hoang had used cash proceeds from the sale of a piece of real property that should have been an asset of the bankruptcy estate to purchase 48 carats of diamonds worth $171,000. These diamonds had not been disclosed or turned over to the bankruptcy trustee. The bankruptcy trustee made a motion to the bankruptcy court to recover the diamonds as assets of the bankruptcy estate. 

Issue: Are the diamonds considered property of the bankruptcy estate? 

Language of the Court: The Bankruptcy Code provides a trustee with powers to obtain property of the estate. Here, the trustee seeks turnover of the diamonds. Hoang does not admit she acquired the diamonds, but she asserted her Fifth Amendment right and did not testify. The cash used by Hoang to purchase the diamonds was proceeds of property of the estate and thus the diamonds are proceeds from property of the estate and therefore property of the estate. 

Decision: The bankruptcy court entered an order that required Hoang to turn over the diamonds to the bankruptcy trustee. 

Ethics Questions: Why did Hoang conceal her ownership interests in the undisclosed businesses, real property, and diamonds? Did Hoang’s activities warrant the criminal proceeding?