Saturday, March 9, 2002

Lindsey loses bid to have
fraud charge dismissed

By Leila Fujimori

Federal Judge David Ezra has denied former Kamehameha Schools trustee Lokelani Lindsey's motion to have the bankruptcy fraud case against her dismissed because the statute of limitations had run out.

"In effect, defendant suggests that Congress had created a 'safe harbor' for bankruptcy fraud to be committed," Ezra wrote in an order issued yesterday.

Lindsey and her sister Marlene Lindsey were indicted in December 2000 on charges of bankruptcy fraud, conspiracy and money laundering, stemming from business dealings and a bankruptcy case filed by Marlene.

Marlene Lindsey pleaded guilty Feb. 25 to a charge of filing a false income tax return.

Lokelani Lindsey's attorney David Chesnoff had argued Tuesday that the bankruptcy fraud charge should be dismissed because it was not filed until December 2000, more than five years after Lindsey's bankruptcy was discharged on Aug. 25, 1995.

Assistant U.S. Attorney Les Osborne said the August 1995 discharge was erroneous, and the bankruptcy case was reopened and did not close until Nov. 12, 1996, within the five-year statute of limitations.

Ezra ruled that the Lindseys' alleged illegal actions after the reopening of the bankruptcy case were new cases, and the statute of limitations did not begin to run until the last of those crimes were allegedly committed on Dec. 27, 1995.

Ezra stated that under the defense's theory, a debtor could hide substantial assets from the bankruptcy court and cause an early and inappropriate discharge.

Then even if the case were reopened, the debtor could continue to perpetrate fraud, and the statute of limitations would have run after the final decree was first entered.

Chesnoff said yesterday he will file a motion for reconsideration.

Trial is set for the week of March 25 in Las Vegas.

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