Former President and CEO of Montgomery-Based Steel Company Sentenced to Six Years in Prison for Bankruptcy Fraud
Monday, August 8, 2016
Montgomery, Alabama – Kennon W. Whaley, 51, from Auburn, was sentenced to 72 months in federal prison on August 3, 2016. In May, Whaley was convicted by a federal jury of two counts of concealment of bankruptcy assets while his company, Southeastern Stud & Components, was in Chapter 11 bankruptcy proceedings.
The evidence at trial showed that during the bankruptcy process Whaley redirected a $260,000 insurance payment intended for the company in 2010 to pay off a personal gambling debt. In January of 2010, Mr. Whaley traveled to the Wynn Las Vegas Casino where he incurred a $100,000 gambling debt during a trip of just four days. The evidence also showed that Wynn Las Vegas began to put pressure on Whaley to pay the debt beginning in February of 2010. Casino records from Wynn Las Vegas, and the bank records of the account where the insurance proceeds were deposited, showed that Whaley used the company’s insurance money pay off his gambling debt and to pay himself over $30,000 in cash. None of these transactions were ever disclosed by Whaley to the Bankruptcy Court as required.
The casino records also showed that once his debt was paid off in October of 2010, Whaley made a return trip to Wynn Las Vegas during which he spent over $20,000 at the casino and sent a limousine to pick up his wife at the airport. At that time, Southeastern Stud was still in bankruptcy and approximately 70% of its employees had lost their jobs.
Evidence presented by the U.S. Attorney’s Office at sentencing demonstrated that during the investigation of Whaley’s crimes by the FBI, he obstructed justice by asking his former Chief Financial Officer (CFO) to falsify an affidavit to be submitted to the FBI. The sentencing judge also found that Whaley had directed this same employee to falsify documents that were submitted to the bankruptcy court in order to conceal the diverted insurance proceeds used for his gambling debts.
The case was investigated by the FBI and was prosecuted by Assistant United States Attorneys Brandon Essig and John Geer.