The Divorce Asset Hunter

The Divorce Asset Hunter

Envelopes Stuffed with Cash and Secret Offshore Companies: how $20 million goes missing

Posted in Banking and Investments, Common, Finances

In a dramatic divorce case unfolding in Southern California this week, Hydee Feldstein, a retired partner at a large law firm, accused her ex-husband Peter Gregora of stealing $20 million of the couple’s money over the course of their marriage.  Feldstein claims Gregora hid the money in secret offshore companies, investment funds, and, in by far the most straightforward method, stuffing cash into envelopes and leaving the money off of the couple’s tax returns.

hidden money divorceBefore she retired, Feldstein’s practice focused on finance and bankruptcy law.  She was the primary breadwinner in the family, and she stated in divorce documents that she entrusted her husband to handle their financial affairs.  She claimed that Gregora used this as an opportunity to drain the couple’s joint accounts.

Commentators have been incredulous that a partner who specialized in finance law at a major law firm could be so out of touch with her own finances that she lost track of $20 million of her own money.  As it turns out, research shows that Feldstein is not so unusual.

As we wrote about here, a study by Prudential explained that most women, including primary breadwinners, lack confidence in investing and tend to shy away from managing the family finances.  No matter how successful women are, they still often leave the big financial decisions up to their husbands.  In fact, 73% of men report being the primary financial decision-makers in their families.  A dishonest husband combined with a lack of oversight can open the door to mismanagement and, as is alleged in this case, fraud.

We have seen this first-hand in countless cases.  Smart, accomplished women come to us looking for money they earned, but which their husbands have magically made disappear.  These women often admit to us that they left all of their financial decisions to their husbands, and have never so much as glanced at a bank statement or tax return.

Even in these cases, all hope is not lost.  Our clients often have far more valuable information than they realize when it comes to tracking down hidden assets, even if they did not control the family finances.  For example, a client may tell us that her husband loves skiing in Colorado, which would lead us to look for a vacation property in that state.  Or she may know the name and address of one of her husband’s companies, which could lead us to a dozen other LLC’s that he kept hidden from her.  We are often able to find hidden companies, real property, stock holdings, and other assets through in-depth client interviews and our meticulous investigation process.

Two Bites at the Apple to Catch the Worm: reopening divorces in cases of fraud

Posted in Common, Finances, Legal issues

This week, the U.K. Supreme Court is reviewing the cases of Alison Sharland and Varsha Gohil to determine whether a spouse can reopen a divorce case in instances of fraud or misrepresentation after the parties have reached a settlement agreement.

Reopening divorce cases in instances of fraudSharland contends that her husband misled her into believing that his software company was worth a fraction of its actual value.  Gohil accepted a modest settlement from her husband in 2004, only to find out years later that her husband had been hiding tens of millions of dollars from her.  This all came to light as part of a criminal trial against Gohil’s ex-husband in which he was convicted of fraud and money laundering to the tune of £37 million.

Here in the U.S., it can be extremely difficult to reopen a divorce action once the parties have reached a settlement agreement.  The degree of difficulty varies from state to state, but in general, most state courts will only set aside a divorce settlement in a few limited circumstances.  Some states will allow a party a second bite at the apple if he or she can show deceit or fraud by their spouse, as in Sharland and Gohil’s cases.

This is where we come in.  Our clients or their lawyers hire us to help find assets that their spouses either under-valued or omitted from their statement of net worth altogether.  For example, a client might accidentally receive a bank statement for an account with her ex-husband’s name on it that he did not disclose during their divorce.  If he hid that account from her, what else did he keep secret?  We have found millions of dollars’ worth of undisclosed assets in divorce cases, assets like real estate, stock options, and ownership interests in companies or partnerships.  This information may help form the basis of an argument to reopen a divorce case on the grounds of fraud.

While it is certainly best to start looking for assets while a divorce is ongoing, all is not necessarily lost if you have already signed a settlement agreement when you find out about hidden assets.  Your lawyer can advise you on your chances of success, and can help you decide when the right time might be to stop relying on that net worth statement and start digging for what he didn’t tell you.

The Divorce Asset Questionnaire

Posted in Finances

People often ask when it comes to searching for assets, “Where do you even begin to look?” This sometimes comes after we give them the grown-up news that there is no magic computer terminal that will accept a Social Security Number and churn out bank account information.

Looking for assets is like solving a puzzle, and when you solve a puzzle you usually look at as much of the picture as you can before plunging in. People icons head

Our picture is a questionnaire that we ask every spouse for whom we work to fill out. We don’t like their lawyers to do it. It’s best done by the person who knows the subject best, and that is nearly always the spouse.

Asset searching is not usually a deductive process, by which we take two facts and logically deduce that the assets are in Location X. Instead, it is an abductive process that uses some known facts that guide us to make a series of educated guesses.

We know from Wife’s questionnaire that Husband grew up in Texas and goes there from California every year to hunt in the same place he grew up hunting with his grandfather. That does not logically prove that he secretly bought his own house in that part of Texas, but our hunch is strong enough that we would certainly check the public records in the relevant county to see if Husband (or a limited liability company set up by Husband) may have bought something there.

The only way we have to know we should be looking in Texas is the Wife’s questionnaire. Databases will usually fail to link land owned by an LLC controlled by the husband with the husband’s home address in California. Making that link is what alert professionals are paid to do.

If databases are not good at making such links, how would we even find the LLC that owns the secret property? One way is to guess what name the husband may have used for his company. People often use the same name on a new company in a new state as they’ve used on an old company in their home state. It’s not the sneakiest way to operate but not everyone is good at being sneaky.

People also name companies after pets, the name of the street they grew up on, and other intensely personal criteria their spouses would know about – but about which databases are clueless.

That is why we ask on our questionnaire about all addresses a person has ever had, where they went to school, where they vacation, names of pets, and anything else that could give us an edge.

To be in the business of educated guesswork, you have to be educated. When we get our questionnaire, that’s when we go to school on the person who may be concealing assets.

To see a free copy of our questionnaire, please use the contact form on our website. For more of our writing about asset searching, see here.

Three Men, One Wife: husband’s business partners sued in “dirty soap opera” divorce

Posted in Business, Finances, Legal issues, Small Business

In an unusual move for a divorce case, a Queens judge added Benny Tal’s business partners as defendants in Benny’s divorce action because the three men had colluded to hide Benny’s assets from his wife Michal.  As Michal told the New York Post, “It’s like a dirty soap opera. There’s so much fraud going on, we now have a divorce proceeding involving a husband, wife and his two business partners.”

Hidden Assets DivorceBenny, along with his two business partners, owned a lucrative parking garage in Manhattan through a company called Kura River Management, Ltd.  As part of the Tals’ divorce proceeding, the judge ordered a valuation of Kura River.  Benny’s business partners obstructed the valuation after the appraiser discovered that Kura River had hidden at least $100,000 in cash from Michal and from the tax authorities.

In the meantime, Benny and his partners met with an attorney whose license had been suspended to discuss ways to hide Benny’s money.  They decided that the partners would buy Benny’s $1.6 million stake in the company for $250,000, in violation of the court’s restraining order.  Benny then promptly took the cash and ran.  When the judge had him arrested and dragged back into court, Benny claimed that he had squandered all of the money on bad investments.

We have seen countless cases in which the non-moneyed spouse (in our experience, this is often the wife) thinks that her husband runs a fairly straightforward, lucrative business.  Come divorce time, the husband says he’s destitute and the business is hemorrhaging money.  With some digging, you can often find out whether the husband may have taken steps to make his company look less profitable on paper.

In this case, we would have started by investigating whether Benny had any other companies he could have used to hide income from his parking garage business.  We would also have interviewed former employees, litigation opponents, or others who had done business with Benny and Kura River to ascertain how much cash business the company did, how diligently they managed the company’s books, and whether they had side companies or accounts that they used to hide cash.  Then, we would have taken a close look at the finances and lifestyles of his business partners.  We would also look for any real property, vehicles, aircraft, or other purchases Benny might have made so that he could plausibly claim that he spent all of his money on bad investments.   A good divorce lawyer can then use that information to send targeted subpoenas and recover Benny’s and Kura River’s hidden assets.

Ne-Yo to Testify in Sports Drink Fraud Trial

Posted in Banking and Investments, Business, Celebrity, Common, Finances, Small Business
© Sbukley | Ne-Yo Photo

© Sbukley | Ne-Yo Photo

Grammy award winner Ne-Yo and several professional athletes are among those set to testify in federal court against the principals of Ohio-based sports drink company Imperial Integrative Health Research & Development. Preston Harrison and Thomas Jackson are charged with defrauding investors out of $9.5 million. Harrison’s wife, Lovena Harrison, was hit with related tax fraud charges.

Imperial Integrative Health Research & Development made OXYwater, a drink they claimed was highly-oxygenated and would improve energy and mental clarity. Jackson and Harrison allegedly misled investors about the expertise of the company’s staff, as well as the company’s sales and profits. Federal prosecutors claim that, all the while, Jackson and Harrison were diverting company funds into their own accounts, and Lovena Harrison was hiding their ill-gotten income from the IRS.

Due diligence is always an essential first step before investing in a company. Just because the company is private does not mean that you need accept the information they give you at face value. While independently verifying information about sales and profits is difficult, it is not impossible. Former employees, investors, or people who had disputes with the company are often willing to share information. A few well-crafted interview questions posed to a disgruntled ex-employee or former litigation opponent might supply you with all the information you need.

You can also find out crucial information about the company’s principals and employees by searching the public record. In this case, had investors done even a cursory public record search, they would have seen that both of the Harrisons and Jackson all had multiple lawsuits (many involving nonpayment of debts), judgments, and tax liens against them in the past. This information may or may not have influenced the investors’ decision to put money into the company, but I, for one, would think twice about handing over my savings to someone whose financial choices had repeatedly landed them in hot water.

Husband Sends Wife’s Home Into Foreclosure Behind Her Back

Posted in Banking and Investments, Property, Real Estate

We usually blog here about how to find hidden assets in the context of a divorce, however, we recently came across a story that serves to caution those entering a marriage not to relinquish all control over the family finances.

Housing market collapseAccording to media reports, accused fraudster, Steven Wessel, is currently trying to seek a plea deal in a federal case alleging that he used a sham investment company to dupe investors out of money. What we found particularly interesting about Wessel from a Divorce Asset Hunter standpoint, is that, in a separate action, he has also been accused of scamming his wife, Mary Margaret Butler, and causing her Upper West Side home to go into foreclosure behind her back. While we haven’t seen this particular scenario before, we did have one client in Pennsylvania whose husband secretly conveyed her interest in a shared property to her husband’s cousin right under her nose.

So how does that happen? Wouldn’t you know if your home went into foreclosure? Butler claims that when she married Wessel in 2003, she turned over all of her finances to him, despite the fact that she was the sole owner of her apartment. She says she did this because she was under the impression that he had “extensive expertise” in investment banking. Wessel told Butler that he had paid off the mortgage on the apartment and showed her falsified letters purportedly from the bank evidencing the payoff. When Wessel was arrested for his investment scheme in June 2014, Butler went to bail him out of jail using her apartment as collateral, but instead learned that her lender had foreclosed on the apartment back in April. She also found out that she was a party to an eviction action brought against her by the bank. Wessel had accepted service of the lawsuit but did not notify Butler.

Although we think this level of fraud between spouses is uncommon, we do think it’s prudent to at least keep your finger on the pulse of the family finances. Most times, we see smaller financial secrets, like a spouse taking secret vacations with a mistress or mister, but it can’t hurt to take a peek at your monthly bank account and mortgage statements. You don’t have to be an expert in finance to know that your mortgage payments aren’t being paid, and the more you know about the family finances during the marriage, the better chance you’ll be able to find hidden assets if the marriage ever breaks down.

Ex-Wife Wants Second Bite at Former Apple CEO’s Million Dollar Hidden Assets

Posted in Banking and Investments, Common, Finances

According to media reports, Former Apple CEO John Sculley is currently being sued by his ex-wife, of 32 years, Carol “Leezy” Sculley, for allegedly hiding more than $25 million in assets from her at the time of their divorce.  Sculley and Leezy settled their divorce in 2011, but Leezy claims that Sculley hid more than $25 million from her at that time.  According to Leezy’s petition to the Florida Circuit Court, Sculley failed to disclose “substantial private equity investments and investments in privately held companies and ventures around the globe.”

Leezy claims Sculley hid his assets by transferring them to and placing them in the name of family members. Leezy alleges that Sculley’s stakes in several startup companies were actually held in his brothers’ names.  We see this all the time and we blog about it over and over (here, here and here).  People from the ultra-rich to those with modest incomes tend to hide their assets with family members and close friends.  That’s why, to do a thorough asset search, you generally have to look into the assets of close friends and family members as well.

It’s unfortunate that Leezy didn’t do a little due diligence while the divorce proceedings were ongoing.  It would have been better to uncover the assets at that time rather than try to undo a divorce settlement agreement years later.  Chances are, if we’d done a search on Sculley and his brothers, we may have come across something that might have led us to the names of at least some of the companies Sculley was involved with.

We’re skilled at identifying debtor’s stakes in secret companies through extensive public record research and through interviewing people.  Given more information about some of Sculley’s company investments, Leezy’s attorney would have been able to seek discovery of those companies and may have learned what Sculley’s stakes were.  This might have entitled Leezy to millions of dollars in assets she did not otherwise know about.  As we often say, it’s worth spending a few thousand bucks up front on due diligence to save millions of dollars down the road.

Bankruptcy Judge Pounds on Drumm in Judgment Denying Discharge

Posted in Common, Finances, Property, Real Estate

According to several media reports, former Anglo Irish Bank chief executive, David Drumm was recently denied a bankruptcy discharge by a judge in Boston.  Drumm appealed the ruling on Friday.  Not only did the judge keep Drumm on the hook for $10.5 million euros in debt, but he released a 122-page judgment with damning findings about Drumm’s attempts to defraud creditors by hiding assets in his wife’s name.

Drumm was the CEO of Anglo Irish Bank in September 2008 when its finances fell apart in the global crash.  He left his post later that year, following disclosures that the bank’s chairman had received $115 million in hidden loans from the bank.  Drumm ultimately fled to Massachusetts and purchased a $5 million Cape Cod estate before moving to a $2 million home in the suburbs of Boston.

At trial, the bank claimed that Drumm had secretly transferred his interest in his homes to his wife to shield them from creditors, in addition to making $1.2 million in cash transfers to his wife.  Drumm was also accused of hiding proceeds of sales of property in Ireland and luxury vehicles.

Drumm tried to chalk up his failure to disclose these asset transfers to poor record keeping, memory lapses and harmless accounting differences, but the judge didn’t buy it.  According to the judge’s opinion, the fact that Drumm misunderstood what he was supposed to have disclosed as to some of the transfers and “simply forgot several others” was “exceedingly implausible” and Drumm was “not remotely credible.”

Transferring assets into a spouse or other family member’s name is common.  We see it frequently in a number of contexts, including divorce, which is why we always propose to look at recently obtained assets of people close to the debtor.  Real property is a typical asset to transfer to someone else, but it’s not the only thing to watch out for.  We recently found that a debtor in Nebraska transferred a tractor and a boat out of his name and into his aunt’s to keep those assets out of his divorce proceedings.

There is no simple formula when approaching an asset search.  Often, a successful search turns on factors such as how much information our client gives us, the comprehensiveness of the search and our intuition.  The intuition comes into play when we see something that, for whatever reason, just seems a little off.   A small bit of information that others might gloss over, often leads us down a path to finding hidden assets that would not have otherwise been uncovered.

Stashing Cash with Ammo: Convicted Fraudsters Hide Money Away in Ammunition Canisters

Posted in Finances, Uncommon

We’ve heard of people stowing money beneath the mattress and under floorboards before, but we recently came across this article about the family of convicted Ponzi-schemer Ron Wilson hiding Wilson’s money for him in ammunition canisters.  That’s a new hiding spot for us.

Wilson’s brother, Tim, and estranged wife, Cassie, pleaded guilty last month to conspiracy to obstruct justice in a South Carolina federal court.  This was no small offense, the charge carries up to five years in jail and a $250,000 fine.  According to the article, Ron Wilson handed over the canisters of cash to Tim and Cassie right before he was set to plead guilty to mail fraud, in case he were ever released from prison.   Cassie Wilson’s canister had $172,859 and Tim got $164,300.

We’re blogging about this story not because we think ammunition canisters are the first place you should look for assets, but because this story highlights two things that we come across regularly in asset searches:

  1. People tend to stash their money with close friends and family.  We’ve blogged about this here before.  If someone wants to appear cash/asset poor, friends and family are a good place to stow money or other assets because, chances are, they’ll give it back.  We always look at the full picture and have been successful at identifying transfers of assets from our debtor to a close friend or family member for our clients.
  2. People get creative when they hide their money.  It’s important to approach asset searches with an open mind.  Before we start any marital asset search, we ask our client to fill out a questionnaire about their spouse.  The more information we have about our subject, the more assets we are likely to find and the greater chance we’ll be attuned to something about our debtor that just might be the key to finding their assets.

So you may not have to go running to find ammunition canisters in the house, but when approaching an asset search, really think about your debtor.  Where or with whom might he/she hide assets?  You probably know more than you think.

Divorce Assets in Bankruptcy? Oh Yes!

Posted in Finances, Legal issues, Property

You wouldn’t think old bankruptcies are a place worth checking when hunting for assets. If someone’s bankrupt, it means they are essentially out of money, right?

Wrong, at least sometimes.

We have found all kinds of wonderful material when looking at bankruptcies. Some of it leads right to assets, and some leads to a non-financial asset known as leverage: good information you can use to extract a better settlement.

Financial assets and information. What kind of asset can you find in a bankruptcy? The exempt kind. When people go bankrupt they don’t have to hand everything over to their creditors. Some states allow an entire main residence to remain in the hands of the debtor after discharge. The other day, we found a large pension fund in an old bankruptcy. Just check the schedule of exempt property in the petition. Of course, the fact that someone had an asset ten years ago doesn’t mean they have it now, but what if that person turns out to have misled his wife about the kind of money he had access to during the marriage? Chances are that if the pension money is something an estranged spouse is just finding out about, that money could have been moved into other accounts, taken out, invested or used in some other way that could be reachable.

Suppose the married couple did all of their banking at Bank of America, and the accounts there are nearly empty. Then, it turns out that the husband had a large IRA on deposit at JPMorgan Chase just before marriage. Wouldn’t the records of that account be of interest during the time of the marriage? What happened to the money?

Leverage. Compare what the debtor presented as his financial situation with what you know about the debtor. Did he leave out assets you know that he owned at the time? Misleading a bankruptcy court is a serious offense. There is no statute of limitations on re-opening a bankruptcy, and knowledge that could get a spouse into major trouble with a court could help move negotiations along on a settlement.

The takeaway point about bankruptcies is the same for most other information in an asset search: Keep your search as broad and general as you can. You are searching for assets, but also information that will lead to assets. That could be anywhere, which is why a good asset search is not that different from a thorough background check.