Phillip E. Southwood Jr. Sentenced in $171K Bankruptcy Fraud Scheme

Phillip E. Southwood, Jr., a 50-year-old former small business owner from Poway, California, was sentenced to 12 months and one day in federal prison for orchestrating a years-long bankruptcy fraud scheme that concealed $171,000 in assets from creditors. The judgment, handed down in San Diego federal court, marks the end of a years-long federal investigation into Southwood’s deliberate manipulation of the bankruptcy system.

Southwood, former owner of Southwood Industries, Inc.—a holding company for Jefferson Liquor in Poway—was convicted on six counts including bankruptcy fraud, making false oaths, and submitting false statements under penalty of perjury. The charges stem from his personal Chapter 7 bankruptcy filing on March 5, 2008, during which he systematically hid the proceeds from the sale of his liquor store and lied under oath about his financial affairs.

According to trial evidence, Southwood forged his father’s signature on a Fictitious Business Name Statement and directed his parents to open a bank account in their names only—unlisted on his bankruptcy filings. He then deposited approximately $171,000 in cash from the sale of the liquor store into that account and used the funds to cover personal expenses and withdraw cash on demand, all while claiming financial destitution.

From December 2007 through March 2009, Southwood executed a calculated deception: hiding assets, falsifying financial disclosures, and giving false testimony during bankruptcy proceedings. He misrepresented the amount of cash he held, lied about preferential payments to family and insiders, and failed to disclose the existence of the secret account used to stash the proceeds.

“The bankruptcy system is intended to provide eligible individuals an opportunity to obtain a fresh financial start,” said U.S. Attorney Laura Duffy. “Unfortunately, in this case, the defendant used the bankruptcy system as a means to defraud his creditors by concealing a substantial amount of money that could have been used to pay off most of his debts.”

Southwood was ordered to pay $119,000 in restitution. The case was investigated by the FBI and referred by the U.S. Trustee’s Office, Region 15, which oversees bankruptcy integrity in Southern California, Hawaii, and Guam. “Criminal bankruptcy fraud threatens the integrity of the bankruptcy system,” said Tiffany Carroll, Acting U.S. Trustee. “Today’s sentencing sends a clear message: abuse the system, and you will be prosecuted.”