Sweatshop operator Jimmy Quan was convicted in May by a federal jury on eleven felony counts, including conspiracy to conceal assets, the concealment of assets, bankruptcy fraud, the making of false statements, and money laundering regarding three separate bankruptcies. His wife, Anna Wong was also convicted of three felony counts, including conspiracy to conceal assets, the concealment of assets, and the making of false declarations in a bankruptcy proceeding. The jury acquitted Quan on four counts of making false entries and one count of concealing assets, and acquitted Wong on one count of concealing assets. The guilty verdicts followed a four month jury trial before U.S. District Court Judge William B. Shubb.
Evidence at trial showed that Mr. Quan, 47, and Ms. Wong, 45, of San Francisco, owned numerous companies, including several clothing manufacturing businesses in San Francisco in the 1990s through 2001. Mr. Quan also controlled a property management business in San Francisco. Over a period of time, from 1997 through 2003, Mr. Quan and Ms. Wong placed three of their businesses into Chapter 11 reorganization bankruptcy and then proceeded to defraud creditors of those companies by concealing and diverting assets and making false statements to the Bankruptcy Court under penalty of perjury. The total loss to the creditors was over $5 million.
The fraud started in 1997, when Mr. Quan, having failed to pay millions of dollars in taxes, filed for Chapter 11 protection for his clothing company Win Fashion Inc. Over the course of the next four years, while the company received bankruptcy protection from its creditors, Mr. Quan proceeded to divert millions of dollars of Win Fashion revenue to other companies that he and his wife controlled. The Bankruptcy Court eventually converted Win Fashion to a Chapter 7 bankruptcy in July 2001, forcing the liquidation of the company.
One month later, in August 2001, Mr. Quan and Ms. Wong continued the fraud by placing their second clothing manufacturing company, Wins of California Inc., into Chapter 11 reorganization bankruptcy. In connection with that bankruptcy, Ms. Wong made false statements under penalty of perjury on documents filed with the Bankruptcy Court regarding the true assets of the company. Ms. Wong also diverted Wins of California revenue to another company controlled by a family member, and then concealed that revenue from the Bankruptcy Court and Wins of California creditors. Creditors of Wins of California included hundreds of low-wage employees, who, by the time Wins of California filed bankruptcy, were owed at least one-half million dollars for work they had performed, but for which they had never been paid.
Mr. Quan was also convicted of bankruptcy fraud, concealing assets, making false statements, and money laundering in a third bankruptcy. This third bankruptcy involved a property management company, controlled by Mr. Quan, called Tomi LLC. Tomi LLC filed for Chapter 11 bankruptcy protection in July 2003. Mr. Quan again diverted and concealed over one-half million dollars of Tomi LLC assets from the Bankruptcy Court and Tomi LLC creditors. The evidence further showed that Mr. Quan concealed $270,000 of these assets by depositing them into his minor children’s personal bank accounts. These transfers formed the basis of the money laundering convictions.
The sentencing of Mr. Quan and Ms. Wong is scheduled for September 12, 2007 before Judge Shubb in San Francisco. The maximum statutory penalty for each count of conspiracy, 18 U.S.C. § 371; bankruptcy fraud, 18 U.S.C. § 157; concealment of assets, 18 U.S.C. § 152(7); and making false declarations, 18 U.S.C. § 152(3) is five years. The maximum statutory penalty for each count of money laundering, 18 U.S.C. § 1956(a)(1)(B)(i), is twenty years. The maximum fine for each of the counts charged is $250,000, plus restitution where appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.