Charleston Developer Sentenced to Prison for Bankruptcy Fraud

CHARLESTON, W.Va. - John H. Wellford III, 73, of Charleston, was sentenced today to one year and one day in prison, to be followed by three years of supervised release, and ordered to pay $730,326.43 in restitution for falsification of bankruptcy records.

According to court documents and statements made in court, on March 29, 2019, Wellford filed for bankruptcy on behalf of Corotoman Inc., a real estate development company he owned and operated. As part of the bankruptcy, Corotoman's Statement of Financial Affairs required Wellford to disclose all monetary transfers from Corotoman outside the ordinary course of business that had occurred in the two years prior to filing for bankruptcy. Wellford admitted that, despite this requirement, he did not disclose that he had transferred $925,326.43 from Corotoman on or around May 2, 2018 to another of Wellford's businesses, Marsh Fork Development.

Approximately 10 months prior to the bankruptcy filing, Corotoman received a large influx of cash while it was struggling financially and while one of its creditors was actively trying to collect on an outstanding debt. Wellford deposited a $1,978,101.40 check from American Electric Power in Corotoman's bank account on or around April 30, 2018. Wellford then transferred $925,326.43 of the funds to Marsh Fork Development on or around May 2, 2018. From that money, Wellford transferred $680,000 to his lawyer's client trust account. Over the next five months, Wellford caused his lawyer to transfer the entire $680,000 back to various businesses that Wellford owned, primarily Marsh Fork Development.

Wellford admitted that all of these transactions were to ensure that he maintained possession and control over the money so that he could use the money for his businesses. Additionally, when Wellford attended a May 28, 2019 meeting of creditors, he testified that Corotoman had not made any payments to creditors outside the ordinary course of business in the year prior. When Wellford twice amended Corotoman's bankruptcy filings to account for other undisclosed transactions that took place at the same time as the transfer, he failed to disclose the transfer.

"Today's sentence is at the upper range of the advisory guideline range and reflects the nature and seriousness of Mr. Wellford's offense. It is also appropriate given his background. Simply put, he should have known better and he should have done better," said United States Attorney Will Thompson. "Mr. Wellford went to great lengths to carry out this crime of deception. Each transfer was a deliberate act of duplicity, and there are more than thirty of them. Each failure to disclose was an act of dishonesty."

Thompson made the announcement and commended the investigative work of the Federal Bureau of Investigation (FBI), the West Virginia State Police, the West Virginia State Auditor's Office (WVSAO) Public Integrity and Fraud Unit (PIFU) and the West Virginia Offices of the Insurance Commissioner-Special Investigations Division. The United States Trustee's Charleston field office, which serves West Virginia, made the criminal referral of this case to the U.S. Attorney's Office. The United States Trustee Program is a component of the Department of Justice whose mission is to promote the integrity and efficiency of the bankruptcy system for the benefit of all stakeholders - debtors, creditors and the public.

"This sentencing sends a clear message: the FBI and our partners will continue to go to great lengths to root out those who think fraud and deception mean more money in their own pocket," said FBI Pittsburgh Special Agent in Charge Kevin Rojek. "Bankruptcy fraud not only impacts financial institutions and creditors, but it also impacts the everyday person with higher fees and higher taxes. We stand committed to ensuring financial fairness at all levels."

"Debtors' responsibility to provide truthful, accurate, and complete information is essential to the proper function of the bankruptcy system," said Acting United States Trustee Gerard Vetter of Region 4, which includes West Virginia. "This case demonstrates the dedication of the United States Trustee Program and the Justice Department to enforce the statutes imposing that responsibility and to ensure a fair process for debtors, creditors and other stakeholders. We thank U.S. Attorney Thompson and our law enforcement partners for their commitment to protecting the integrity of the bankruptcy system."

Senior United States District Judge John T. Copenhaver, Jr. imposed the sentence. Assistant United States Attorney Holly Wilson prosecuted the case.

A copy of this press release is located on the website of the U.S. Attorney's Office for the Southern District of West Virginia. Related court documents and information can be found on PACER by searching for Case No. 2:24-cr-63.

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