Trustee recommends denial of discharge in Myrtle Beach area developer's bankruptcy - Local - TheSunNews.com

Trustee recommends denial of discharge in Myrtle Beach area developer's bankruptcy - Local - TheSunNews.com
Trustee recommends denial of discharge in Myrtle Beach area developer's bankruptcy
Trustee cites illegal deductions, false statements

By David Wren - dwren@thesunnews.com
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Stonegate Properties Inc. developer Kenneth Holmes - one of the key figures in a Myrtle Beach area mortgage fraud investigation - improperly claimed illegal cash kickbacks he made to co-conspirators as income tax deductions, according to a bankruptcy trustee who wants a judge to deny Holmes' petition to have all of his debts discharged.
Robert Anderson, the trustee in Holmes's bankruptcy case, said in court documents that Holmes claimed the kickbacks as business expenses in 2008 and 2009. That resulted in Holmes's income being under-reported on state and federal tax forms as well as on bankruptcy documents, Anderson said.
Holmes also allegedly made false statements on his bankruptcy filings and failed to tell bankruptcy court officials about his guilty plea last year to a felony charge of conspiracy to commit bank fraud. That charge resulted from the FBI's ongoing mortgage fraud investigation.

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Holmes, a Chapin resident, is scheduled to be sentenced next month on the criminal matter.
Holmes has until June 17 to file an answer to Anderson's request in the bankruptcy case. A hearing on the matter could be held this summer.
Reid Smith, a lawyer representing Holmes, could not be reached for comment. Holmes did not respond to a request for comments.
Anderson told The Sun News he learned about Holmes's criminal charges through federal court documents.
RBC Bank, which filed a civil lawsuit against Holmes and others related to the alleged fraud, also filed a nearly $1.9 million claim against Holmes in the bankruptcy case. That claim, filed on April 1, is the amount RBC says it lost on four fraudulent real estate transactions in the Myrtle Beach area involving Holmes and unindicted co-conspirators.
Holmes has admitted in federal court that in 2008 he sold his Stonegate Properties homes at inflated values to straw buyers, then provided kickbacks to co-conspirators including area real estate agents and mortgage brokers from loan funds illegally obtained from RBC.
The straw buyers made payments on the loans for less than a year and all of the homes - located in Surfside Beach and Murrells Inlet - went into foreclosure.
Court documents filed in the criminal case show Holmes and others also defrauded JP Morgan Chase Bank, Plantation Federal Bank and Suntrust Bank on real estate transactions that year.
In the four RBC transactions, Holmes overvalued the properties by a total of $833,000 and paid $290,505 in kickbacks, according to court documents.
In his bankruptcy filing, however, Holmes said he and his wife made a combined income of $28,071 in 2008 - the year the RBC transactions took place.
Anderson said in court filings that Holmes's actual income was much higher in 2008 based on the fraudulent real estate transactions and the fact that the kickbacks Holmes paid should have been listed as income, not expenses. Individuals cannot deduct expenses incurred in the pursuit of illegal activities, such as mortgage fraud, according to the Internal Revenue Service.
Holmes "has a substantial tax liability owed to both the United States of America and the state of South Carolina," Anderson said in court documents.
Holmes, in his bankruptcy filing, is claiming nearly $3.3 million in debts --most of them liens against real estate valued at less than the loan amount.
Holmes - who once authored an Internet blog touting his ability to flip real estate for a profit - now has at least 13 properties in foreclosure, court records show. He is asking a judge to let him wipe out most of his debts but keep his primary residence, furnishings and automobiles.
If a discharge is not granted, the banks and other creditors would be able to pursue Holmes's assets to pay off the debts.
Holmes pleaded guilty in April 2010 to one felony charge of conspiracy to commit bank fraud. He has been free on a $25,000 unsecured bond while awaiting sentencing. Holmes was supposed to be sentenced on May 3, but a judge granted a 60-day continuance. He faces a maximum of 30 years in prison and a $1 million fine.
Contact DAVID WREN at 626-0281