Marijuana manager hid $1 million then filed bankruptcy.
John Endres of Cave Creek was the operations manager of a synthetic marijuana manufacturing and distributing company when he filed for personal bankruptcy in 2012.
He told a federal judge he earned $5,000 a month working for Revolution Distribution in Phoenix and no longer could pay his bills.
Even before his Chapter 7 was discharged, Endres put down $25,000 in earnest money for a 6,700-square-foot house with a six-car garage and a purchase price of $1.5 million. Once his bankruptcy was complete and his debts were erased, Endres wired another $288,630 down payment from an account he had set up in Nevada.
Turns out, Endres failed to mention to his creditors and the bankruptcy judge that in addition to his $5,000 monthly income he had stashed more than $1 million in a secret account.
Endres admitted to authorities that he and his son had created a shell company where every two weeks he directed portions of his income, in amounts ranging from $2,500 to $54,000.
Bankruptcy is like a financial reset button. Consumers ask the court’s permission to stop paying creditors. Based on a review of assets and income, the court usually will agree to write off their debts. That means most creditors will be prohibited from taking legal action, including filing suits, garnishing wages or hiring collection agencies.
There are two types of personal bankruptcies. Chapter 7 typically wipes away most debts and does not require consumers to repay creditors. Chapter 13 is akin to financial restructuring and usually involves an installment plan to repay creditors.
It is illegal to hide assets and income during bankruptcy.
Endres was sentenced last week to a year in prison and three years’ probation as part of a plea agreement with authorities. He was also ordered to pay $323,000 in restitution to about 10 creditors he defrauded.
His list of creditors and amounts include: $89,504.42 to the National Bank of Arizona; $82,145.00, Green Tree Servicing; $62,246.78, Shannon and Fleming PC; $23,128.16, Resurgent Capital Services; $22,814.37, Citibank; $19,097.30, Desert Schools Federal Credit Union; $7,559.84, U.S. Department of Education; $6,822.86, Discover Financial Services; $5,100.14, VW Credit Inc.; $3,382.67, American Express; and $1,500, Diana Kim.
The case was investigated by the Internal Revenue Service and the Drug Enforcement Administration. They laid out the case against Endres in a criminal indictment in 2012
Court records show Endres’ son, who was not named in the indictment, set up a company called iMedia 1 in 2009. According to corporation documents, the business address was a UPS mail box drop on Tatum Boulevard.
Although Endres is not named in the corporation documents, he opened a mailbox at the UPS store on the same day the corporation documents were filed. He was the only one authorized to pick up mail.
Endres and his son opened an iMedia 1 business account at JP Chase Morgan Bank. Beginning in 2011, the account began receiving payments from Revolution Distribution. The day before Endres filed for bankruptcy, his name was removed from the account. Authorities said the payments continued rolling in.
Authorities said Endres lied about his finances on federal forms and during a meeting with creditors, when debtors are required to disclose financial information. Authorities said Endres moved at least some of the money through a Nevada corporation that he used to pay for his new home.
Endres was charged with one count of bankruptcy fraud, one count of concealing assets and 10 counts of making false declarations on a bankruptcy petition. As part of his deal, Endres pleaded guilty to one count of bankruptcy fraud.
He could have gotten five years in prison.
Endres could not be reached for comment.