Court-appointed receiver and bankruptcy trustee Marika Tolz has been charged with felony fraud after allegedly misappropriating millions of dollars from bankruptcy cases since 2003.
Tolz stands accused of misappropriating at least $16 million in several court cases, resulting in about $2.4 million in losses to parties in the cases. The alleged fraud and missing funds had been disclosed in mid-2010 in civil investigations; Tolz had been removed from a federal panel of bankruptcy trustees. As a receiver, Tolz was required to oversee assets that were sometimes turned over to the courts in other fraud cases. One case she handled included $1 million from the criminal case of Ponzi schemer Scott Rothstein. She was also a Chapter 7 bankruptcy trustee, which includes assembling and protecting assets for liquidation, for 20 years. Trustees are required to keep accurate financial records and make reports to the court. Tolz allegedly used some of the money from unrelated fiduciary accounts under her control to repay shortfalls in fiduciary accounts she had depleted by prior misappropriations. The news release said she “moved funds, in a Ponzi-like fashion.”
Misappropriating of funds by a bankruptcy trustee is a rare and egregious act which violates the trust which debtors and creditors alike have in the bankruptcy system and those charged with administering cases. The bankruptcy trustee in this case has already been removed from her position as a trustee; but she also faces imprisonment if found guilty of the charges. Also, if the funds can be located, those who received any assets illegally from Tolz could be forced to return them to the respective bankruptcy estates.