A Bankruptcy-Funding Scam Leads To Prison (U.S. v. Fenner)

Every now and then, I say something like, “I’ve seen it all.” Then something happens, and I’m forced to admit, “Nope. I haven’t.”

Here is one of those somethings—a bankruptcy-funding scam:

United States v. Fenner, Case Nos. 23-2177 & 24-1089 at U.S. Court of Appeals for the Seventh Circuit (decided July 1, 2025).

Facts

Tower runs a car towing business and uses that business to conduct a bankruptcy scam. Financer pays Tower’s costs.

Here’s how the scam works:

Tower markets car towing services to attorneys that represent bankruptcy debtors;
Tower proposes paying court costs and attorney fees for debtor’s bankruptcy filing in exchange for debtor allowing Tower to tow debtor’s car to Tower’s lot;
Tower charges debtor for towing, storage, maintenance and other administrative expenses and obtains a mechanic’s lien on the car to secure payment of those charges; and
if neither debtor nor another lienholder pays those charges, Tower sells the car to satisfy the mechanic’s lien.

Debtors, who expect to lose their cars in bankruptcy anyway, view Tower’s proposal as a good deal—as a way to fund their upcoming bankruptcies.

Three-Part Deception

The scam involves a three-part deception, as described in the opinion by the U.S. Seventh Circuit Court of Appeals.

–First Part

Tower and Financer conspire to prevent other lienholders from paying off the mechanic’s lien. Here are examples of how they do that:

they inflate the amount of their mechanic’s lien beyond what’s reasonable under the mechanic’s lien statutes:
- in one email exchange, for example, Tower asks, “How are we going to make money?”; and
- Financer replies with, (i) multiplying the towing cost of $500 by 2.95—but gives no rationale for doing so, and (ii) then ponders, “What else can we charge for?”; and
they tow cars to one of Tower’s lots in a far location, to make it harder for debtors and other lienholders to recover the cars.

–Second Part

If the debtor or other lienholders don’t pay the inflated mechanic’s lien amounts, Tower and Financer sell the cars at sham auctions.

The mechanic’s lien statutes require a publicly advertised and open auction. Instead of actually complying, Tower would feign compliance—but the sales never actually occur. For example:

Tower sets the auctions for preposterous hours, like 1:30 am on Christmas Eve, Christmas Day, and New Year’s Eve, to ensure that nobody shows up;
people who try to attend an auction testify to finding a padlocked parking lot with no sign of activity or attendees;
on one occasion, Tower ships cars to Financer’s business location in another state four days before the scheduled auction—suggesting an intent to avoid that auction; and
unsurprisingly, Financer “won” every auction sale—but “this too was a lie”:
- at every auction, Financer buys the car for the amount of the mechanic’s lien, ensuring that other creditors receive zero proceeds; and
- Financer never pays Tower a dime for any of the auction sales—no money ever changes hands.

–Third Part

As the final stage of the scheme, Financer files for a clean title with the Bureau of Motor Vehicles.

To obtain the title, Financer has to lie in the applications: falsely claiming to have received the vehicle through a legitimate auction and to have paid the auction prices in cash.

Financer also lies about the auction in an effort to create the appearance of an arms-length transaction.

Scheme’s Success . . . then Downfall

All-in, Financer “bought” 100 vehicles through the scheme, which Financer and Tower then flip for just over a million dollars.

But the scheme catches up with them when one of the other lienholders, a Ford subsidiary, sues them in state court.

In that suit, the court enjoins Tower and Financer from continuing their scheme—because they violated the state’s mechanic’s lien statutes by failing to follow notice and timing procedures.

The Bureau of Motor Vehicles then tips off law enforcement, who eventually indicts Tower and Financer for seventeen federal offenses.

After trial in federal district court, the jury convicts Tower and Financer on all counts.

Then, the district court (i) imposes a prison sentence of 70 months for Tower and 60 months for Financer, and (ii) orders $49,045.84 in restitution jointly and severally.

On appeal, the Seventh Circuit Court of Appeals affirms, in the opinion cited and linked above.

Conclusion

Yep. I hadn’t seen this one before—and would never have guessed that such a thing could happen.

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