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Fraud Scheme Taps into 401(k) Account for $40,000

A 401(k) account was involved in an elaborate bankruptcy/wire fraud scheme by the participant’s spouse.

Patricia Bippus-Allen, 58, has been sentenced to 60 months of imprisonment by U.S. District Judge Richard L. Young after pleading guilty to conspiracy to commit bankruptcy fraud, subornation of perjury, wire fraud and aggravated identity theft. According to a press release from the U.S. Attorney’s Office of the Southern District of Indiana, Bippus-Allen was convicted of wire fraud stemming from her transferring money from her husband’s 401(k) account into her own personal bank accounts without his consent, knowledge or authorization.

Bippus-Allen made multiple calls to the 401(k) service center purporting to be her husband while also faxing supporting documentation to the service center for a 401(k) hardship withdrawal. In sum, the attorney general said that Bippus-Allen made multiple unauthorized withdrawals from her husband’s 401(k) account for a total of over $24,000 – and also took out more than $16,000 in loans on his 401(k) account without his consent, knowledge or authorization.

While those actions certainly strike close to home for those who work with retirement plans, they pale in comparison to some of the other actions taken by Bippus-Allen. In September 2010, she filed a joint Chapter 13 bankruptcy petition in both her and her husband’s name in the U.S. Bankruptcy Court for the Southern District of Indiana – done without her husband’s consent, knowledge or authorization. Moreover, during the course of the bankruptcy proceedings, Bippus-Allen created several documents bearing the forged signature of her husband of over 25 years.

She provided her bankruptcy attorney with a letter from a doctor stating that her husband was under his care and would be hospitalized for at least 30 days, during which he could not see visitors or take phone calls. (The doctor who purportedly signed the letter stated it was a forgery and that he had never provided services for Bippus-Allen’s husband.)

In March 2011, she attended a meeting of creditors which her husband was required to attend as well. David Bippus, her brother, attended the meeting with Bippus-Allen and posed as her husband – with both stating under oath that he was the husband and that all schedules and documents filed in the bankruptcy proceedings were true and correct.

Based on their representations, a bankruptcy plan was confirmed requiring monthly payments to Bippus-Allen for 60 months. Pursuant to this plan, approximately $74,000 was deducted from the direct deposit paychecks of her husband – again, without his consent or knowledge.

The investigation was conducted by the FBI with assistance from the Southern District of Indiana Bankruptcy Fraud Working Group, which includes the U.S. Trustee Program.

According to Assistant U.S. Attorneys Kyle M. Sawa and Todd Shellenbarger, who prosecuted this case for the government, Bippus-Allen must pay $112,354 in restitution and serve three years of supervised release following her sentence. Her co-defendant brother, David Bippus, was sentenced in May to two years of probation and $10,000 in restitution for conspiracy to commit bankruptcy fraud and making false statements in bankruptcy court.