“MckMama“, some mommy blogger that filed for bankruptcy, supposedly lied about her situation to both readers and the court. People have asked me several times to post about the situation, but I could never figure out what exactly was going on. Luckily forensic accountant Tracy Coenen has been following the story and gave us some background on why people are so angry at mckmama:
For months, Jennifer Howe Sauls McKinney was telling her readers that she and her husband were paying their debts. She claimed the many thousands of dollars of unpaid income taxes had been paid off. None of those claims were true, as their December 2011 bankruptcy filing showed more than $725,000 of debt. This debt includes over $446,000 for the McKinneys’ third foreclosed/lost house, more than $110,000 owed to the IRS, over $55,000 owed to an employee of Israel McKinney’s contracting business, more than $29,000 owed to credit card companies and consumer lenders, more than $31,000 owed on repossessed vehicles, and a host of medical bills largely unrelated to the illness of their son Stellan. (For the uninitiated, this illness is what propelled MckMama into the public eye and made her so popular.)
Helpfully included was a bulleted breakdown of the claimed deceptions:
- Jennifer McKinney reported to the court that her income from blogging and photography in 2011 was $55,000, when her real income exceeded $148,000.
- MckMama reported to the court that her income was going to be $1,500 per month following the filing of the bankruptcy. Yet in the one month period around the time of the bankruptcy filing, she deposited more than $10,000 into her known bank account.
- Although required to disclose all assets in the bankruptcy filing, Jennifer Sauls McKinney and Israel McKinney failed to disclose several thousand dollars of assets, including at least one PayPal account, accounts receivable from Google and other affiliate programs, her websites, a Jayco camper, and a travel trailer.
- The McKinneys transferred at least a few thousand dollars to charities and family in the months leading up to their bankruptcy filing, but did not disclose these transfers as required under the bankruptcy laws.
- Jennifer received cash payments for photography services and did not keep records of the payments or report the income to the bankruptcy court.
Ms. Coenen adds that this “isn’t a case of simple errors made in a bankruptcy filing. The McKinneys appear to be intentionally untruthful, pretending to be poor to get out of paying their debts”, since the MckMamas are ”accused of intentionally manipulating their income (by adjusting the advertising on the My Charming Kids blog) so that it would be lower at the time they filed their bankruptcy. After the bankruptcy was filed, the advertising was changed to increase the income.” It seems the court has caught on to the lack of full disclosure:
On Friday, Gene Doeling, the trustee in the bankruptcy case of Jennifer and Israel McKinney filed a complaint for a money judgment and denial of bankruptcy discharge. He is asking the court to allow him to take certain assets – - including money in a Paypal account, advertising money from Google, and a travel trailer, plus any other assets that he may still find – - and disallow the McKinney bankruptcy, forcing them to repay all of their debts.
That could certainly put a kink in their 6 figure income lifestyle, but I personally doubt there would be any major repercussions for this mess. It’s not likely she will lose readers or advertisers, and it doesn’t sound like she is being charged with any kind of attempted fraud. It sounds like she will just be forced to pay off her debts, and I’m sorry but if the woman is making $148k a year by taking pics of people and sitting on her ass posting pics of her kids, you’ll forgive my lack of empathy for her situation.