Westport Man To Serve 30 Months for Nearly $1 Million in Bankruptcy Fraud

According to public information officer Tom Carson, "David B. Fein, United States Attorney for the District of Connecticut, announced that Daniel Steinberg, 43, of Westport, was sentenced yesterday by United States District Judge Janet C. Hall in Bridgeport to 30 months of imprisonment, followed by three years of supervised release, for embezzling from an LLC that was involved in bankruptcy proceedings.  

According to court documents and statements made in court, Steinberg was the agent and manager of Reservoir Corporate Group, LLC, a limited liability company that owns a commercial office building in Shelton, and which is involved in chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court in the District of Connecticut.  As a chapter 11 bankruptcy debtor, the LLC was required to file monthly operating reports with the Bankruptcy Court to disclose, among other things, the amount of cash held each month in debtor-in-possession bank accounts belonging to the bankruptcy debtor.  The LLC also was required to provide periodic financial information to the Office of the United States Trustee.       

Between approximately August 2009 and August 2010, Steinberg transferred approximately $700,000 from the LLC without authorization from the Bankruptcy Court and used the money for personal expenses and the expenses of other businesses that he owned or controlled.  Steinberg also falsified the books and records of the LLC during the bankruptcy proceedings, and provided false financial information to the Office of the U.S. Trustee, to conceal the ongoing fraud.        Steinberg’s fraud was discovered in August 2010, at which time a chapter 11 bankruptcy trustee was appointed by the Bankruptcy Court to operate the company.  The investigation revealed that, prior to the bankruptcy filing, Steinberg embezzled additional funds without authority from the LLC’s owners.        

The amount of funds Steinberg embezzled from the LLC during the months leading up to and after the bankruptcy filing totaled $968,973.  Today, Judge Hall ordered Steinberg to pay full restitution.       

On August 9, 2011, Steinberg pleaded guilty to one count of bankruptcy fraud.       

Reservoir Corporate Group, LLC, remains in bankruptcy and, according to Bankruptcy Court records, has creditors claiming they are owed approximately $47 million.       

This matter was investigated by the Federal Bureau of Investigation with the assistance of the U.S. Trustee Program.  The case was prosecuted by Assistant United States Attorney Ann M. Nevins.       

The U.S. Trustee Program is the Department of Justice component that promotes and protects the integrity of the bankruptcy system by overseeing case administration and litigating to enforce the civil bankruptcy laws.       

In the District of Connecticut, the U.S. Attorney’s Office coordinates a Bankruptcy Fraud Working Group that includes representatives from the U.S. Attorney’s Office, the Office of the United States Trustee, the United States Postal Inspection Service, the Internal Revenue Service – Criminal Investigation, the Federal Bureau of Investigation, the United States Secret Service, and the Social Security Administration Office of the Inspector General.       

Members of the public can report suspected bankruptcy fraud via email to USTP.Bankruptcy.Fraud@usdoj.gov.