Penal Code 531 - Participating in a Fraudulent Conveyance

California Penal Code 531 PC is the California statute that makes it a crime for a person to participate, or otherwise be a party in, a fraudulent conveyance.

A fraudulent conveyance is a type of white-collar crime where a person transfers, or gives away property, in order to avoid having to use that property to either:

  • pay back a debt to another person; or,
  • pay damages owed as a result of a lawsuit.

Examples of illegal acts under PC 531 include:

  • Knowing that her husband is going to lose in a lawsuit involving trade libel, Lisa signs paperwork that helps him sell two of their cars so they don't have to pay damages.
  • Chantel accepts her sister's jewelry collection, knowing that her sister is giving it away in order to avoid paying a debt.
  • Alecia helps her daughter transfer funds out of her bank account so that she can delay in paying back property damages caused in her DUI case.

Luckily, there are several legal defenses that a person can raise if accused of taking part in a fraudulent conveyance. These include showing that the accused:

  • had no intent to defraud;
  • had no intent to delay or defeat creditors; and/or,
  • was arrested after an unlawful search and seizure.

Penalties

A violation of PC 531 is charged as a misdemeanor (as opposed to a California felony or infraction ). The crime is punishable by:

  • imprisonment in the county jail for not more than six months; and/or,
  • a maximum fine of $1,000.

Our California criminal defense attorneys will highlight the following in this article:

white collar crime
A fraudulent conveyance is a type of white-collar crime where a person transfers, or gives away property, in order to avoid having to use that property to either: pay back a debt to another person; or, pay damages owed as a result of a lawsuit.

1. What is the legal definition of participating in a fraudulent conveyance?

California Penal Code 531 PC makes it a crime for persons to participate in fraudulent conveyances.

Under California law, a fraudulent conveyance is where a person transfers, or gives away property, in order to avoid having to use that property to either:

  • pay back a debt to another person; or,
  • pay damages owed as a result of a lawsuit.

Under PC 531, a person participates in a fraudulent conveyance if he:

  • is a party to the conveyance (this typically means the person to whom the property is transferred or given to);
  • willingly and knowingly defends the conveyance as not being fraudulent; and/or,
  • gives away or sells the property that had already been fraudulently conveyed.1

In order for a defendant to be found guilty under Penal Code 531, a prosecutor typically has to prove intent. This means he has to show that the defendant either:

  1. intended to defraud others while helping in the fraudulent conveyance; or,
  2. intended to defeat or delay creditors in receiving their debts or damages.2

Defraud” is the act of using lies or trickery to obtain something of value from another person (usually money).3

2. What are the legal defenses to accusations under Penal Code 531?

A person accused under PC 531 can challenge the accusation by raising a legal defense. A good defense can often get a charge reduced or even dismissed. Please note, though, that it is critical for an accused to hire an attorney to get the most effective defense.

Three common defenses to PC 531 accusations are:

  1. no intent to defraud;
  2. no intent to delay or defeat; and/or,
  3. unlawful search and seizure.

2.1. No intent to defraud

Recall that, in most cases, a defendant is only guilty under Penal Code 531 if he helps in a fraudulent conveyance with the intent to defraud others. Therefore, it is a solid defense for an accused to fight a Penal Code 531 charge by showing that he did not have this requisite intent. For example, it is quite possible that a defendant helped in a transfer of property to help a person in need, as opposed to hiding it from someone's creditor.

2.2. No intent to delay or defeat

This is similar to the defense in 2.1 above. Remember that in most cases, a defendant is only guilty under PC 531 if the prosecutor shows that he acted with the intent to delay or defeat a payment to a creditor. This means it is a valid defense for an accused to prove that he did not act with this intent. For example, a defendant may have assisted in transferring property, but did so with no idea or knowledge that the transfer was made to delay a payment.

2.3. Unlawful search and seizure

The Fourth Amendment to the U.S. Constitution declares that we have the right to be free from unreasonable “searches and seizures” by law enforcement. If authorities obtain evidence from an unreasonable, or unlawful search and seizure, then that evidence can get excluded from a criminal case. This means that any charges in the case could get reduced or even dismissed.

The Fourth Amendment's rule against unreasonable search and seizures means that police may not search a person or his property unless one of the following is true:

  1. they have obtained a valid search warrant from a judge, OR
  2. the search falls within one of a number of exceptions to the warrant requirement recognized by federal and California courts.4
depressed man in jail
A violation of PC 531 can result in jail time and/or a fine.

3. Penalties, Punishment, and Sentencing

A violation of PC 531 is charged as a misdemeanor.5 The crime is punishable by:

  • imprisonment in the county jail for not more than six months; and/or,
  • a maximum fine of $1,000.6

Please note that in lieu of jail time a judge may order a defendant to misdemeanor probation. This is also called “summary” or “informal” probation.

4. Related Offenses

There are three crimes related to helping in a fraudulent conveyance. These are:

  1. fraudulent conveyance by a debtor – PC 154;
  2. fraudulent conveyance by a judgment debtor – PC 155; and,
  3. wire fraud.

4.1. Fraudulent conveyance by a debtor – PC 154

Under California Penal Code 154 PC, a fraudulent conveyance is what happens when someone sells, gives away, or otherwise transfers any kind of property. And, the party does so with the goal of preventing his creditors from getting at that property and using it to pay off the debt.7

Please note that a creditor is a person to whom a party owes money to. A debtor, in contrast, is the party that owes money to the creditor.

In a fraudulent conveyance, a defendant can only get convicted of the crime if he gives away property with the intent to either:

  • prevent a creditor from getting paid;
  • make it more difficult for the creditor to get paid; or,
  • delay the creditor from getting paid.8

A violation of Penal Code 154 PC is charged as a misdemeanor. The crime is punishable by:

  • imprisonment in the county jail for not more than one year; and/or,
  • a maximum fine of $1,000.9

If the fraudulent conveyance involves stock in trade, valued at more than $250, the crime will be charged as a felony. As such, it is punishable by imprisonment in the California state prison for:

  • 16 months,
  • two years, or
  • three years.10

4.2. Fraudulent conveyance by a judgment debtor – PC 155

California Penal Code 155 PC applies to people who are defendants or losing parties in a court case.

The code section makes it illegal for a person to conceal or transfer property, or to move property to a different county, in order to avoid paying damages owed as a result of a lawsuit.11

A person can violate Penal Code 155 by transferring property after he has already been ordered to pay money in a court case. In addition, a party can violate the code section by transferring property while a lawsuit is still pending, before the party has even been ordered to pay anything.12

The penalties for violating PC 155 are the same as those for violating PC 154.

A violation of Penal Code 155 PC is charged as a misdemeanor. The crime is punishable by:

  • imprisonment in the county jail for not more than one year; and/or,
  • a maximum fine of $1,000.13

If the fraudulent conveyance involves stock in trade, valued at more than $250, the crime will be charged as a felony. As such, it is punishable by imprisonment in the California state prison for:

  • 16 months,
  • two years, or
  • three years.14

4.3. Wire fraud

Wire fraud is a federal crime. It is fraud that is carried out through any form of wire, radio, or television communication.15

A prosecutor must prove three elements in order to show that a defendant is guilty of wire fraud. These are that the defendant:

  1. created a scheme to defraud;
  2. used wire, radio, or television communication to further that scheme; and,
  3. had the specific intent to commit fraud.16

Fraud consists of knowingly or recklessly telling someone in order to deprive the victim of something valuable (typically money).17

Wire fraud is punishable with up to twenty years in federal prison, a fine, or both.18 If the fraud involves a federal disaster or a financial institution (like a national bank), then the maximum sentence increases to thirty years in prison.19

Were you accused of participating or helping in a fraudulent conveyance in California? Call us for help…

california criminal defense attorneys
Call us for help at (855) LAW-FIRM

If you or someone you know has been accused of a crime, under California Penal Code 531, we invite you to contact us for a free consultation. We can be reached 24/7 at 855-LAWFIRM.

(For accusations or charges involving fraudulent conveyances in Nevada, please see our article on Nevada "Fraudulent Conveyance" Laws (NRS 205.330, NRS 205.355, NRS 205.360)).


Legal References:

  1. California Penal Code 531 PC. This section provides: “Every person who is a party to any fraudulent conveyance of any lands, tenements, or hereditaments, goods or chattels, or any right or interest issuing out of the same, or to any bond, suit, judgment, or execution, contract or conveyance, had, made, or contrived with intent to deceive and defraud others, or to defeat, hinder, or delay creditors or others of their just debts, damages, or demands; or who, being a party as aforesaid, at any time wittingly and willingly puts in, uses, avows, maintains, justifies, or defends the same, or any of them, as true, and done, had, or made in good faith, or upon good consideration, or aliens, assigns, or sells any of the lands, tenements, hereditaments, goods, chattels, or other things before mentioned, to him or them conveyed as aforesaid, or any part thereof, is guilty of a misdemeanor.”

  2. See same.

  3. Black's Law Dictionary (9th ed. 2009).

  4. E.g., Riley v. California (2014) 134 S.Ct. 2473, 2482. (“In the absence of a warrant, a search is reasonable only if it falls within a specific exception to the warrant requirement.”).

  5. California Penal Code 531 PC.

  6. See same.

  7. California Penal Code 154(a) PC.

  8. See same.

  9. See same.

  10. California Penal Code 155(b) PC.

  11. California Penal Code 155(a) PC.

  12. See same.

  13. See same.

  14. California Penal Code 155(b) PC.

  15. 18 United States Code ("U.S.C.") § 1343.

  16. United States v. Garlick, (9th Cir. 2001) 240 F.3d 789, 792.

  17. Black's Law Dictionary (9th ed. 2009).

  18. 18 U.S.C. § 1343.

  19. See same.

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