Bankruptcy trustee: Ex-parole board member must turn over inheritance to creditors

Former state parole board member Adam Monreal must turn over a $330,000 inheritance from his mother — an asset he should have disclosed in federal court more than four years ago, according to a motion filed by the court trustee in his recently reopened bankruptcy case.

Monreal, 49, the former chairman of the Illinois Prisoner Review Board and former Cook County assistant prosecutor, was forced to resign last year following Belleville News-Democrat reports that he made misstatements on a Chapter 7 bankruptcy he filed in 2011 in Chicago. The statements gave him a clean financial slate without paying back any creditors.

The BND articles led to an investigation by Gov. Bruce Rauner’s office that targeted Monreal and fellow board member Eric E. Gregg of Harrisburg for entries each made in their bankruptcies that were called into question, and for their alleged failure to file proper economic interest statements.

As members of the parole board, both were prohibited from having any pay outside their state salaries. And, both were required to report certain outside income on their economic interest statements. It was a failure to meet these requirements that led to the state’s investigation.

Gregg, the former mayor of Harrisburg, was fired from the board and is now fighting his dismissal in federal court in East St. Louis. Monreal resigned from the board. Neither could be reached.

The BND reported that what was listed on Monreal’s 2011 bankruptcy understated his income by more than 100 percent when he and his wife, Nora Monreal, signed statements under penalty of perjury attesting that the personal financial data they listed for the court was accurate and truthful. That statement was accepted by the same bankruptcy trustee, Chicago attorney Eugene Crane, who has now been assigned to hear the amended Chapter 7 bankruptcy filed by Monreal’s attorney in late December.

In a motion filed in federal court last week, Crane contended that a one-sixth share in the late Theresa Monreal Trust worth $334,455 must be turned over to the bankruptcy court to be distributed among 16 creditors, mostly credit card companies and banks that received nothing in the original bankruptcy. A bankruptcy judge has yet to rule on the motion.

A comparison of data the Monreals filed in their reopened bankruptcy to what they orginally filed in 2011 included:

☆ As chairman of the parole board, Adam Monreal actually made $7,908 per month, or $94,896 per year, but instead listed his monthly pay as $3,223, or $38,676 per year.

☆ Nora Monreal now reports an income of $1,524 per month, or $18,288 per year but reported no income in the initial filing.

☆ The new total assets figure is $808,698. Previously, they were listed at $361,262. It is not clear how much of the total assets are still exempt from being collected to repay debt. Total liabilities remained the same at $438,000.

☆ Monreal initially listed his job title as “Illinois state penitentiary” and then in the amended case as “chairman of the Illinois Prisoner Review Board.”

In their new case, the Monreals stated they were “unaware” of what their lawyer termed in a court document were “errors,” even though the typical Chapter 7 bankruptcy case requires applicants to sign more than a dozen financial documents under penalty of perjury and then to state to the bankruptcy trustee in court that all of the information is truthful and accurate.

Bruce Markell, a professor of bankruptcy law and practice at Northwestern University School of Law in Chicago, and a former bankruptcy judge in Nevada for nine years, said bankruptcy cases where financial information is not accurate can be prosecuted but often are not

“If someone fudges and gets caught and comes back and fully discloses and no one was hurt, it’s probably not going to result in prosecution.” he said.

“If someone makes a clean breast of it, and after disclosing further assets creditors are paid, then what harm is it to creditors except a few years of interest? (But) there is clearly a harm to the system when people don’t tell the truth until they are caught.”

Markell said that based on data that is 10-15 years old, 92 percent of Chapter 7 cases do not result in a distribution or payments to creditors.

With the amended disclosures of assets and income in the Monreals new filing, it is unclear whether the couple could still qualify for a Chapter 7 bankruptcy. If a judge rules that they don’t, they would be forced to file under Chapter 13, which usually requires that a monthly repayment plan be set up for creditors. The inheritance could also be seized in total if the judge rules that it is not exempt.

Robert Benjamin, the Chicago attorney for the Monreals, has argued that under state law the $334,455, which is in a trust account, remains exempt from payment to creditors.

However, Crane, the trustee, or case overseer, contended that the law cited by Benjamin is “inapplicable to the facts of this case. The interest of the debtors in the subject trust is not exempt and constitutes property of this estate.”

This story was originally published February 13, 2016 at 5:49 AM with the headline "Bankruptcy trustee: Ex-parole board member must turn over inheritance to creditors."