One of the most powerful tools a spouse had to monitor assets or other activities is to look at the shared computer of the spouse under investigation. We have written before in When You’re Allowed to Look Through Your Debtor’s Computers and Phones that as long as a person can show ownership of the computer, anything on that computer is probably fair game to look at, subject to some exceptions.

Hacker in old warehouse.

Sending the contents of what you find to the cloud (a remote server controlled by someone else) is another question. A new case in the Sixth Circuit this month held that software that monitors keystrokes and content amounts to illegal wiretapping under both federal and Ohio statutes. You can read the case, Luis v. Zang here.

This case involved a technology called WebWatcher, which allows a person to monitor a computer’s activity. Where it got the company and the husband in trouble was that WebWatcher allows you to look at the material in nearly real time once the content of the computer activity is stored on the company’s server. The fact that WebWatcher appears captures the information contemporaneously is what turns this into wiretapping, the court held.

The critical distinction in wiretapping jurisprudence is between instantaneous access and access to information that’s stored. If all WebWatcher did was to store a record of the emails sent and received on the computer, that would not have been wiretapping.

The decision applies to the Sixth Circuit, although all the circuits agree that to have wiretapping you need contemporaneous capture of the information. Depending on the kind of software you use to log keystrokes and the transmission (if any) of that information, you could end up with what the Sixth Circuit calls wiretapping or just storage of information you have a right to see.

What’s certain is that it’s incumbent on any lawyer using such information to know how the program works. Just because it comes out of a small box you buy at a big box store doesn’t mean it will produce admissible evidence.


The New York Times was half right and half wrong when it reported that the boom in “trophy homes in the sky” is over. The right part:  It turns out that there is not an inexhaustible supply of people willing to spend $50 million or more on a condominium they may rarely visit.The Good Life: Limousine & Mansion

The wrong part of the story is that many of these apartments were anything but trophies: they were means to conceal the wealth of the apartment’s beneficial owner. Many were bought by limited liability companies with difficult-to-trace ownership, often using limited liability companies formed in Delaware.

In some cases, the demand for this real estate was the product of capital flight from overseas, but in others it was money from inside the United States.

In January of this year, federal authorities said they would more closely scrutinize large all-cash transactions in New York and Miami.

As we predicted at that time on our other blog The Ethical Investigator, in a post called Four Ways to Evade the New Rules on Luxury Property, the government’s extra scrutiny appears to have driven the buyers into some of the more than 3,000 remaining counties in the United States.

Nobody looking to hide $1 billion puts it all in one bank account. They spread it around to hedge their risk. In the days that I was a financial reporter interviewing private bankers in Hong Kong, they all had the same comment to questions about loyal customers. The clients usually claimed that all their money was with the banker being interviewed, but the bankers didn’t believe it.

As it goes with money in the bank it now goes with pricey real estate in New York. Why put $80 million into one apartment in one of only a dozen or so buildings when you have your pick of thousands of $2 million homes anywhere in the country?

We have been writing about tracking down real estate since this blog was founded, and nothing has changed since our original House Hunting: Tracking Down Real Estate in the U.S.

As we explained, figuring out the name of a shell company that holds real estate is a challenge that can sometimes be cracked, but all-cash transactions don’t have valuable information divulged in mortgages.

However, litigation does. Even very rich people fail to pay gardeners, movers and others who come back and sue them. Newspaper articles are useful too. If a Russian billionaire shows up in a well to do neighborhood, that’s often newsworthy. We can then work backwards from the address to find the name of the company that owns the property.

Clients always want to know what’s involved in searching offshore for hidden assets. Our usual answer is, “time and a lot more money than it’s probably worth, unless you’re looking for millions of dollars.”Woman Telescope IN MONEY SEA

Suddeutsche Zeitung, one of the recipients of the leaked Panama Papers reported that one lawyer “represented a female client in a divorce case, and it cost $2 to $3 million to uncover and disentangle the web of front companies into which the assets had been poured by her husband. That is a lawyer’s fee not many are able to pay.”

While not every divorce case involves many millions, even an onshore search follows the same principles: look not just for money in the name of the person but in the name of secret companies that person created.

As I wrote in my just published book, The Art of Fact Investigation, “Given how quickly and cheaply people can set up limited liability companies (and even ordinary corporations) it is folly to assume that a person who may be concealing assets would not have availed him or herself of this simple mechanism.”

Unless there is hard evidence that a person has hidden assets offshore, we like to start onshore for a few simple reasons:

  1. It’s a lot cheaper, and if you find a good haul of assets you may find your way to a reasonable settlement. The extra money offshore could still be there, but it may not make financial sense to go after it because of the fees and the length of time it could take to litigate in Caribbean and other tax havens.
  2. It’s easier to find onshore side companies because of the much larger store of public information in the U.S. compared with most overseas jurisdictions.
  3. The onshore records may provide good leads to the offshore companies. You may find a property deed notarized in the Cayman Islands or Isle of Man, for example. If you get the tax returns in discovery to a new onshore company, you could see payments from an offshore company that could end up being the subject’s secret company.

Wherever you look for secret companies, a few similar search rules apply. These include the propensity to use the same name in multiple companies. We’ve seen net worth statements with Alpha I and Alpha II listed, but the person has omitted Alphas III, IV and V. Other common names include streets the subject grew up on, names of summer camps, favorite pets, or combinations of children’s names or initials.

Offshore or Onshore, people are people and tend to behave the same way the world over when it comes to stashing their cash.

What’s wrong with using a forensic accountant in your hunt for a spouse’s hidden assets? Nothing, provided you hand that accountant all the pertinent information you can. We’ve mentioned the need for these professionals frequently on our site, and this Forbes article by Jeffrey Landers explains similar reasoning.forensic accountant divorce

The problem with forensic accountants can be timing. We are often brought into an asset search after a forensic accountant has been hired. The accountant has the sense that something is amiss but beyond being able to testify that the numbers don’t add up, things are at a standstill and the pressure to settle continues to mount.

Our firm is not made up of accountants, and we are not able to testify that the books and records of eight companies controlled by Husband are probably not reflecting all income generated.

But where we can offer help is to find entire new companies that Wife and her accountants (forensic included) did not know existed.

How can this happen? For the simple reason that forensic accounts are trained to look at what is in front of them and to decide if it makes sense. They can tell if money has been stolen, but are on less firm ground in deciding where that money went. What did it buy? Where might it be sitting today?

Our strength is in taking a fresh look at a person and trying to find everything he owns.

If our client tells us not to bother looking for assets outside a person’s state of residence, we look anyway. If our client tells us about a piece of property that was sold last year, we make sure it really was sold. If it was, we try to see who bought it, because it could be that Husband sold it to a company he, a friend or relative controls.

So by all means, hire a forensic accountant if you need one. Just remember to make sure an investigator with a wide scope has taken a look. No point in examining “all books and records” when there could be millions stashed in a company you know nothing about.

The debate so far over whether Apple should help the U.S. government execute a warrant to see what is on one of its phones has focused on the information of a dead terrorist and the prospective data breach (according to Apple) of millions of law abiding citizens.

The stakes are high, but lost in the discussion is the future of data retrieval to fight another kind of wrongdoing: deadbeat parents who won’t pay child support or greedy spouses who hide assets during and after divorce.prenups if apple wins

We spend a lot of time looking for such assets, and while we have generated lots of good leads, nailing the case often requires the production of bank accounts.

Imagine this: Husband handles all the finances of his businesses and gives Wife an allowance to run the home, pay the school fees and taxes. When Husband decides to end the marriage, he begins to divert cash taken out of the business to bank accounts held in the names of limited liability companies he has set up around the country. Some of the accounts are in Caribbean tax havens.

The court orders Husband to produce all financial records. He does, but they seem “light.” Husband is ordered to produce his phone as evidence, since some of his banking may be paperless. He hands over the phone but not the password. “If a dead terrorist has rights, so have I,” he proclaims.

Recall that Apple co-operated with law enforcement in handing over everything the terrorist had backed up on the i-cloud. It was just the material not backed up that Apple decided it should not have to help uncover.

What should wives like the woman in our example do to protect themselves against super-encrypted, paperless financial records available for the price of a smartphone?

One idea we had in our office was this: draft a prenuptial agreement that shifts financial burdens in the event that the entire contents of the phone are not backed up once a week. In the event of a divorce, once Husband can be shown to have stopped uploading the records to the cloud, he automatically surrenders his share of tangible assets the wife can find: homes, cars, shares of businesses.

Some states may frown on such an approach, but we will have to figure something out if millions of us (in a world in which Apple prevails) can go dark as to our financial records at the drop of a hat.

Side note: would we back Apple if the facts and company involved were a little different? What if Goldman Sachs built a super-secure bank vault miles underground in the desert? Hedge fund billionaires and Russian oligarchs use the vault to keep records that could prove tax evasion, insider trading, market rigging and a host of other financial crimes. The vault is booby-trapped to explode if anyone tries to break into it. Even if you get past that system, each individual box is rigged so that if anyone dries to drill into it, acid is released and destroys the contents.

When presented with a court order to open the vault, Goldman says, “No. If we break into one bad guy’s vault, the secret of how to disable it would leak out and someone else could break in. Our customers find this offensive.”

In honor of today’s $1.5 billion Powerball jackpot, we bring to the top the piece we wrote nearly three years ago, Jackpot! Finding Lottery Winnings.

hidden powerball winnings

The executive summary of that entry is that lottery winnings are federally taxable and therefore harder to conceal than other kinds of assets. If you can subpoena a tax return you can usually see signs of the gambling income unless the other side is actively evading the IRS.

Prior to the subpoena stage, however, it would be a staunch individual who would not be tempted to spend at least a bit of the $900 million cash value of today’s Powerball (assuming a single winner and the election of the lump sum amount after withholding).

But what about if the winnings are older or, while not as large as $900 million, large enough to elicit some new spending?

There, we start to talk about the special way asset searchers look for cash.

Our approach is that absent a court order that gets you into bank account records, the search for cash is most often the search for things that will lead you to cash.

In looking for non-cash assets, we pay especially close attention to the way those assets were acquired. Where did the cash come from? Were there companies we have never seen before used as acquiring vehicles?

We once had a case in which a New York resident bought New York property on several occasions over a period of a year. The buyer’s signature on each and every one was notarized in Dallas, where we had no record of any buyer activity. A short time later, a more detailed search revealed Texas business links and more assets.

Like anything else brought out into the sunlight, assets of any kind cast shadows. Those shadows can tell you a lot.

One of the core principles of good investigation is to assume nothing and start looking from scratch. We have found a lot of money over the years hiding in plain sight: in new companies named after old companies in neighboring states, or even in places mentioned in emails left lying around the house.prenup investigation

Liberian corporations, apartments in Monaco, it’s amazing what turns up among forgotten papers in desk drawers (or on shared computers at home).

One plain sight source for possible martial assets is the structure set up at the time of a prenuptial agreement. That may seem counterintuitive. Why go after something that is not a marital asset and is contractually off-limits?

For the very simple reason that a structure set up with non-marital assets could be a perfect place to hide cash that is properly subject to division at the time of divorce.

Consider the advice of Chicago divorce lawyer Thomas J. Handler, writing in the New York Times a couple of years ago here. He argued in favor of a “stealth” prenup, which is a structure of an offshore trust, combined with a limited liability company and a management company that could be a conventional corporation or another LLC.

That’s a lot of layers and foreign borders to work through and may not be worth it unless there’s considerable money at stake. But if there is, these vehicles can be detected and breached, especially if there is a U.S. corporate vehicle attached to them.

We specialize in finding side companies that people wish to keep secret, and have written about the process many times, including here, where we wrote about secret partnerships as well as LLC’s.

Secrecy is often the most important thing about stealth prenups. As Handler wrote,

A key element of this technique is that it is, in fact, “stealthy”; no disclosure obligation is necessary because these structures have been put in place prior to marriage. Unlike traditional prenuptial agreements, where there is little chance of enforcement without the exchange of full and accurate financial information, no such requirement applies to the stealth prenup.

Even if a prenup should name the offshore-linked assets that are off-limits, they are worth a look anyway. What if the structure has changed over the years? What if cash from marriage should have been placed in the structure supposedly restricted to the pre-marriage assets?

If you don’t look for it, you won’t find it. With a lot of money at issue, that would be a real shame.

You wouldn’t want to ask anyone to steal bank account information about your client’s spouse. You would never ask for the theft of that person’s medical records. You would not try to break into his office to take the computer on his desk to see his work email.

So why would you delight in using information stolen from Ashley Madison? Why would you even endorse it, as many have, because it somehow gives wrongdoers what they deserve?

Where adultery is legal, disapproving of the activity is no reason to commit a crime. If the Ashley Madison break-in was OK, so was Watergate.

Of course, using information that is in the public domain is different from using information that you yourself have stolen. Newspapers in the U.S. routinely report the products of illegal leaks, but even journalists in countries outside the U.S. who do not enjoy First Amendment protections need to be careful about possessing stolen information.

The next time a newspaper (even in the U.S.) reports on a leak and writes that its reporters have reviewed (but not obtained) documents, you might ask why they didn’t make a copy. It could be because possession is worse in the eyes of law enforcement than a quick look at what someone else obtained.

With Canadian police saying that they intend to prosecute the leak of Ashley Madison’s information as a theft, just as they would go after a bank robber or a credit card hacker, we should ask ourselves what to do with the information that comes from the theft.

Is it admissible into evidence? Lots of information that is reported in the newspapers or on the internet every day would not be admissible, because it is hearsay and doesn’t fall into one of the many hearsay exceptions, or maybe because it violates the no-contact rule. Or, it was procured legally but in a way that bar associations would view to be unethical. For instance, recording a phone conversation is legal in many states if just one of the two people on the call knows about the recording, but many bar associations say lawyers should not record conversations unless someone’s liberty is at stake.

The search for assets would not likely take us toward the Ashley Madison database to begin with. But if one day a client asked about it, my preference would be to warn my client that this is stolen property and to let them look if they want (how can you stop them?) If my client were outside the U.S., I would warn them to proceed with even greater caution.