Contributed By The 411 News
Feds charge Mary Cossey with scheme to defraud her creditors and the Chapter 13 bankruptcy trustee
Years of hiding assets from bankruptcy proceedings have resulted in fraud charges against Mary Cossey, a former Gary public official, federal prosecutors announced.
Cossey posted a $20,000 bond and surrendered her passport at a hearing Wednesday in the Hammond federal court. She appeared with Attorney Scott King.
The 27-page probable cause document lays out an investigation into the history of Cossey’s financial transactions that brought prosecutors to file wire fraud charges as violations of her discharged bankruptcy petition.
What drew federal scrutiny to this personal bankruptcy is a mystery. Cossey worked as a public official in the Freeman-Wilson administration and is a former executive director of the Gary Housing Authority. Federal prosecutors have been keen on sniffing out public corruption, but that isn’t alleged here.
Claiming over $450,000 in debts, facing foreclosures on her home in Munster and a rental property in Gary, and only $50 in her BMO Harris checking account, Cossey received permission to file a Chapter 13 bankruptcy petition in December 2013.
Chapter 13 required Cossey to follow a payment plan worked out by a bankruptcy trustee to satisfy creditors, required the reporting of all income, and not incur more debt.
Cossey exited Chapter 13 in January 2019 keeping her home and rental property, and paying only pennies on the dollar for unsecured debts totaling $125,000.
But investigators found Cossey had hidden from the bankruptcy court cash, income, and assets valued in the hundreds of thousands of dollars. Their claim is Cossey “devised a scheme to defraud her creditors and the Chapter 13 bankruptcy trustee by misusing and abusing the federal bankruptcy system.”
The hidden assets, investigators say, were derived from hats she wore as an employee, a real estate agent, a political campaign advisor, and business consultant.
The probable cause affidavit describes Cossey paying over $200,000 to one individual during the span of the bankruptcy and finding several bank accounts she failed to disclose to the bankruptcy trustee.
In December 2019, investigators interviewed a person identified as Individual A who received $231,000 from Cossey during the term of the bankruptcy. “When she filed her Petition in December 2013, Cossey did not have a direct line of credit with any credit institution,” according to the charging affidavit.
Asked about the transactions, Individual A told investigators Cossey had been an authorized user of the individual’s American Express Card for over 10 years and Cossey was responsible for all charges she incurred. “Cossey consistently and timely paid what she owed ‘down to the penny’,” Individual A told agents.
Investigators said the $231,000 paid to Individual A is near the $240,000 total Cossey charged to American Express during the bankruptcy term.
Cossey paid Individual A three times the amount she paid to the bankruptcy trustee.
Court supervised bankruptcy seeks to treat all creditors fairly, the affidavit states, and prohibits debtors from favoring some creditors over others.
Bankruptcy rules require the debtor to identify all creditors and whether the debtor made any payments to a creditor – including friends and family, referred to as “insiders” – within the 90 days prior to the bankruptcy filing. “If the creditor is an insider, the Chapter 13 trustee may recover all payments made within the year preceding the bankruptcy filing.”
In the months prior to her bankruptcy petition, Cossey had incurred over $47,000 in charges to Individual A’s credit card account. Cossey’s annual charges to Individual A’s American Express card ranged from $41,000 to $54,000 during the 5-year bankruptcy period.
The probable cause affidavit states Cossey initially defrauded the bankruptcy trustee by not reporting Individual A as a creditor on her 2013 bankruptcy petition. Cossey’s payments to Individual A during the 5-year bankruptcy term should have been under the control of the bankruptcy estate, but instead were part of the scheme to continue to defraud the bankruptcy trustee and Cossey’s other creditors.
Cossey did not report additional income to the trustee that she derived from employer raises or promotions, severance pay from an employer, and transfers of cash from retirement and investment accounts.
The affidavit charges Cossey with underreporting income as a political campaign advisor and as a consultant for the Gary Indiana New Day Foundation. The organization’s registered agent is identified as Individual B with an address the same as Cossey’s rental property in Gary.
Investigators found a commingling of funds between the political campaign and Gary New Day. They traced $17,500 in payments to Cossey from Gary New Day that in fact came from the political campaign. Checks from the foundation to Cossey were signed by Individual A.