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 Business News | August 2006 
Bankruptcy Fraud Charge Admitted
 Onell R. Soto - SD Union-Tribune
| | While they fought extradition, the Wind Song was moved to a Mexican navy pier, where it was battered by several tropical storms and a hurricane. |
A former San Diego couple who authorities said stashed more than $1 million in an offshore bank account, filed for bankruptcy and sailed off to Puerto Vallarta, pleaded guilty to bankruptcy fraud in San Diego federal court yesterday.
Terry and Susan Brunning agreed to forfeit the million-dollar bank account, as well as their 57-foot sailboat, Wind Song.
They were living on the boat when Mexican officials arrested them in Puerto Vallarta in July 2003 on a San Diego federal grand jury indictment.
They fought extradition for 2½ years while jailed in Mexico City, and their case eventually made it to the Mexican supreme court, which ordered them returned to the United States in December.
They also fought to keep the Isle of Man, in Great Britain, from turning over the bank account to U.S. creditors, also taking that case to the island's highest court, prosecutor Faith Devine said.
If a judge follows the recommendations of prosecutors and defense lawyers, the couple will be released after a sentencing hearing scheduled for Nov. 13, having served most of the time in Mexico that they would have faced in San Diego.
In addition to the money in the bank, investigators discovered that the couple owned a 1981 Rolls-Royce, a 1990 Jaguar, the $350,000 yacht and a promissory note worth $155,000.
Terry Brunning, 45, pleaded guilty to bankruptcy fraud and money laundering, admitting that he falsely claimed to have less than $50,000 in assets. He also admitted he wrote a fake letter making a claim on the promissory note.
Susan Brunning, 55, pleaded guilty to bankruptcy fraud and admitted she signed a bankruptcy petition that didn't note that the couple owned the Jaguar.
A Briton, she could be deported after her sentencing, a government spokeswoman said.
As a result of the plea bargain, prosecutors agreed to drop charges that could have resulted in sentences of about seven years in prison, Devine said.
The Brunnings ran two Postal Express franchises in Point Loma before declaring bankruptcy in August 2002.
In the initial bankruptcy petition, they claimed assets of $1,041 and debts of $228,002, although the Internal Revenue Service later determined that they also owed $1.7 million in back taxes.
The IRS will seek at least some of the money from the offshore bank account.
In February 2003, investigators on the Isle of Man who were looking into possible money laundering became suspicious when Terry Brunning tried to transfer $1 million to an account in Mexico. They notified agents with U.S. Immigration and Customs Enforcement.
Further investigation by IRS criminal investigators and a trustee appointed by a San Diego bankruptcy judge discovered the additional unreported assets.
The Brunnings were arrested aboard the yacht July 10, 2003. While they fought extradition, the Wind Song was moved to a Mexican navy pier, where it was battered by several tropical storms and a hurricane.
By the time it was brought back to San Diego earlier this year, it had taken on water, the decks leaked and the smell, mildew and rot made it almost impossible to board, the president of a local shipyard said in a court filing.
The boat requires extensive repairs and is now worth $120,000, he said.
It's impossible to say how many other people have stashed ill-gotten money in offshore accounts, prosecutor Devine said.
People probably get away with a lot, because how do you know? she said. We were tipped off by the Isle of Man authorities.
Onell Soto: (619) 293-1280; onell.soto@uniontrib.com |
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