Acting Dolton police Chief Lewis Lacey, an ally of embattled Mayor Tiffany Henyard, pleaded not guilty Thursday on federal bankruptcy fraud charges alleging he lied under oath in a scheme to hide assets and income from creditors to avoid paying more than $40,000 in a lawsuit settlement.
The nine-count indictment returned against Lacey in U.S. District Court earlier this week charged Lacey, 61, of Matteson, with bankruptcy fraud, making false statements and declarations in a bankruptcy case and perjury. Each count carries a maximum sentence of five years in prison.
Lacey appeared in court dressed in a blue suit and answered only a few questions from the judge about his understanding of the charges before his attorney, Gal Pissetzky, entered a not guilty plea on his behalf.
Over Pissetzky’s objections, U.S. Magistrate Judge Beth Jantz ordered Lacey, who has the rank of commander but has been serving as the acting police chief, to turn over his work firearm as well as two other guns he has in his home. He also must surrender his Firearm Owners Identification Card.
Jantz said she was willing to revisit the issue if Pissetzky provides more information about how the firearms restrictions would affect his employment with Dolton.
A status hearing was set for Oct. 1 before U.S. District Judge Thomas Durkin.
Though unrelated to his duties in Dolton, Lacey’s indictment is the latest shoe to drop in a burgeoning federal investigation into alleged corruption by Henyard, the longtime mayor who has been named in a slew of federal subpoenas served earlier this year on the Village Hall.
In a statement to the Tribune on Monday, Lacey’s attorney, Pissetzky said the charges were the result of a “witch hunt” aimed at Henyard.
“Mr. Lacey has been serving the community of Dolton for years,” Pissetzky said. “He is an excellent police officer and has been an upstanding chief of police. … This is a witch hunt where they are taking down Mr. Lacey to try to get to the mayor.”
Village trustees last week voted to place Lacey on administrative leave for an undefined period.
Pissetzky told the Tribune that the trustees lacked the authority to place Lacey on leave and that his client should be paid.
“They’re operating in a way that in my opinion is not legal,” said Pissetzky. “The mayor is the one who signs the checks.”
According to the indictment, Lacey has filed numerous personal bankruptcy cases in Chicago beginning in the 1980s.
Two recent petitions filed in 2019 and 2020 automatically stayed enforcement of a settlement agreement Lacey had reached in 2017 with the plaintiff in a lawsuit in state court, the indictment alleged.
The lawsuit involved a woman whose husband was killed in Dolton in 2012. According to the suit, Lacey visited the woman and convinced her to give him tens of thousands of dollars from her husband’s life insurance payout.
Lacey acknowledged in court papers that he “expressed sympathy” for the woman and visited her from time to time to “inquire about her safety and well-being,” but he denied taking any money.
After the lawsuit settled for $55,000, Lacey made initial payments in the amount of $12,000, but according to the fraud charges, he twice filed for bankruptcy to avoid paying the additional $43,000.
In filings and statements made under oath to the bankruptcy court, Lewis underreported his monthly income and concealed bank accounts that he controlled, according to the charges.
Among the lies was that he was separated from his wife and that she did not reside with him or contribute to his monthly income and mortgage, the indictment stated. Those lies allowed Lacey to substantially understate his monthly income and avoid creditors, according to the charges.
The charges were similar to those brought in April against Keith Freeman, a longtime aide to Henyard, who was accused of making false statements in his bankruptcy petition filed earlier this year to conceal from creditors his assets and sources of income and a significant claim against him.
Freeman, 45, of Orland Park, has pleaded not guilty.
At a status hearing in his case Wednesday, prosecutors said they intend to supersede the indictment with further charges within the next two months, although they did not mention whether new defendants would be added.
jmeisner@chicagotribune.com