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.

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.

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.

In a country in which people can form a company in minutes over the internet, it’s amazing to us how many asset searches proceed on the basis that you only need to look for property owned directly by a person.

So often, we find that someone can truthfully state at a deposition that he owns no real estate personally. But unless he’s asked about ownership beneficially or ownership of shares in companies or membership interests in limited liability companies, you could be missing out on lots of wonderful assets.

How to figure out the name of a person’s company, through which he may own all kinds of valuable property, is a good part of what our asset searches are for.

One place we always like to start is the search for licenses.  As The Economist highlighted earlier this year, U.S. businesses in many sectors face a blizzard of licensing requirements before they can get up and running.

Licenses can be a pain, but for asset hunters they are a gift: an on-line record of names, addresses, and often trade names that link the public name of a business with the name of the company behind that business.

Take the New York State Liquor Authority: If you enter the name of an establishment you know into the Authority’s website, chances are the name of the company that owns it won’t be the same as the name by which you know the establishment.

Because most bars and restaurants in New York don’t operate with their legal names on the outside, lit up in neon, any proper asset search will proceed based on the company’s real name.  As it is with restaurants, so it is with lots of retail establishments.

The other thing we love to do when we find the name of a new company is to look for other companies with closely similar names. That’s because many people just don’t put a lot of time into naming companies for the purposes of making them hard to find.

If someone who owns’ “Bill’s Tavern” names the holding company “Jeffersonville Restaurant LLC,” his next establishment could be owned by “Jeffersonville Restaurant II, LLC.”  What does company II own? Instead of starting with the business and finding the name of the owner, this time you find the owner and figure out the name of the business.

A little bit of playing around with name indexes kept by licensing authorities or the Secretary of State can pay big dividends.

According to a recent story in the UK’s Daily Mail, Elie Taktouk, the estranged husband of Daniella Semaan, girlfriend of Barcelona soccer star Cesc Fabregas, is alleging that that the soccer star was involved in a property fraud.  Although the UK’s High Court seems skeptical of the allegations, they are interesting from an investigative standpoint, regardless of whether the High Court ultimately tosses the suit.

soccer, fraud, experts, hidden assets, forensics
Maxisport / Shutterstock.com

In 2013, as a part of their divorce settlement, a UK family judge ordered that Taktouk and Semaan sell their London flat in order to award Semaan a £1.4 million cash settlement.  Three weeks after this order was handed down, a company controlled by Fabregas put in a £5.4 million bid to purchase the flat.  Although Taktouk challenged the sale to Fabregas, the judge refused to block it and Fabregas ultimately became the owner of the couple’s former marital home.

Taktouk contended then, and still contends now, that Fabregas got the flat significantly cheaper than he should have and that others were willing to purchase the pad for upwards of £7 million.  A hearing re-examining these allegations will take place later on this year.  Although here, it was no secret that Fabregas was the purchaser of the marital home, it underscores the need to take an interdisciplinary approach to divorce at times.

When people think of the divorce process, they probably envision an embattled couple, their two lawyers and a judge.  In reality, there can be many other people involved.  For one, we, as investigators, are frequently called on to help clients find hidden assets or uncover any other kind of fraudulent activity.

We’ll dig in and help clients figure out what kind of property or other assets their spouse holds.  Hypothetically, maybe in this case Semaan was unaware of other properties owned by Taktouk, which might each have had millions of dollars of art sitting in them.  But beyond identifying hidden assets, we also work with a network of other professionals such as property valuation experts, forensic accountants and computer forensic experts.

We don’t know the degree to which a property valuation expert was involved in this case, but you can see how the testimony of one might have at least given the UK judge pause before permitting Fabregas to purchase the marital home for £5 million.  Also at issue in this particular case, was the amount of financial support Fabregas provided to Semaan at the time. That is, whether or not Taktouk should have been on the hook for Semaan’s living expenses if she already had her footballing boyfriend covering them.  Again, we don’t know the degree to which a forensic accountant may have been involved here, but a forensic accountant might have been helpful to examine just how much money from Fabregas was going in and out of Semaan’s accounts.

PROBLEM:

The debtor, whose family lives in Brazil, claims to have no foreign investments.  He mentioned years ago that his family had some rental properties in Sao Palo, but you have never seen them, and you don’t know exactly where they are located.  You suspect that he may be a part owner.

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SOLUTIONS:

The process for finding overseas property can vary drastically from country to country.  Even in the U.S., finding property will be more or less difficult depending on the county where the property is located.

The easiest searches are in places such as Great Britain, which has a centralized national property registry available online.  The French national property registry (called the Cadastre) includes not only France, but also Corsica, Guadeloupe, Martinique, French Guyana, and Reunion Island.  At the opposite end of the spectrum are countries like Greece and India, which have no centralized registry and, in many areas, keep only inaccurate, outdated handwritten records.

Before you can start your search, though, you need to know where to look.  If your debtor is foreign, then the obvious starting place is his country of origin.  Scour your Christmas card list for the addresses of relatives and close friends because your debtor may own property nearby.  You may also be able to nail down the debtor’s foreign address by searching public records other than the local property registry.  For example, in Norway, all tax returns are published online in what is called the Skattelister, and they include the town of residence of every person who files a return.

In some cases, you may need to know the exact street address of the debtor’s foreign property, as even the best online registry may only be searchable by address rather than by name.  A chat with the debtor’s childhood friends or his parents’ neighbors may be enough to get you the information you need, especially if the debtor is from a small town.

Even if you know of a particular property, be sure to check local records to verify its value and ownership.  What you find may surprise you.  We recently had a case in which a foreign wife asked us to find her husband’s assets in the U.S.  She told us to ignore any mention of property in South Dakota because she knew all about it.  She explained that she was a part owner of the property, and that her husband had told her that the property was worthless.  A quick search of the county records showed us that the property actually had a lucrative retail store on the premises.  The records also revealed that the husband had transferred the company out of his name and placed it under the name of an LLC owned by a family member.

What did this tell us?  That the property was worth much more than our client suspected.  Her husband had lied about its value and had forged her signature on the documents transferring the property to his family’s company.  Our client had never heard of the company, and had no idea that she had been bilked out of her share.

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Last week, a Tennessee judge fined Oprah Winfrey’s father, Vernon Winfrey, $70,000 in legal fees as punishment for bad behavior during his divorce.  According to the judge’s decision, Mr. Winfrey used some fairly complicated maneuvers to avoid splitting the value of a barbershop he owned with his soon-to-be ex-wife while at the same time leaving her on the hook for a loan taken out against the property.

First, Vernon transferred the barbershop to a friend, who did not pay him anything for the property.  He then he intentionally let the property go into foreclosure, knowing that Oprah would purchase it at a discounted rate.  In the end, his wife caught wind of the scheme, and ended up getting what she was due.

We see it all the time: spouses who just don’t want to ante up their share of the marital assets.  The scheme Vernon Winfrey employed to keep his wife from getting half of the barber shop may seem elaborate, but divorcing spouses commonly use relatives, shell companies, or a combination of the two to hide assets.

As we wrote here and here, we have found that the best way to start unraveling any money-hiding scheme is with a search of the public record.  Searching the public record is cost effective, productive, and carries a very low risk of alerting the subject that he or she is being investigated.

For example, if Mrs. Winfrey had come to us with suspicions that her husband was hiding property from her, we would have begun by searching proprietary databases that aggregate public information about the search subject.

That search would lead us to list of properties Mr. Winfrey had owned, the dates when they were transferred, and the name of the transferee.  Once we had identified the barbershop property as having been transferred after the couple knew they were heading for divorce, we would then conduct a search of county records for details about the barbershop.

County property records would have revealed the initial transfer of the barbershop from Winfrey to his friend, the subsequent foreclosure, and the purchase by Oprah.  We could have reconstructed Vernon’s entire scam without formal discovery and without putting him on notice that we were conducting an investigation.

Gossip sites were all abuzz last week with news of rapper Lupe Fiasco’s legal battle with Inita Patton, the estranged wife of convicted drug kingpin and Fiasco’s mentor, Charles Patton.  The court filings have yet to be released to the public, but reports say that as part of her divorce action against Patton, Inita sued Fiasco in an attempt to recover millions of dollars in drug money that Fiasco allegedly hid at Patton’s direction.

Inita claims that Fiasco funneled Patton’s money through Fiasco’s music production company, 1st and 15th Productions, Inc., and into secret accounts.  Charles Patton has apparently counter-sued Inita, alleging that she pocketed funds intended for real estate purchases that she never actually made.

When we are called upon to help find where a spouse has hidden assets, the first thing we look for are companies owned by the spouse, his family and his close associates.  While we cannot legally access bank account information for these companies, their mere existence can provide a substantial clue that the spouse has been less than forthcoming in his financial disclosures to his spouse.

For example, one client asked us to look into three or four companies in which she thought her husband was involved.  We ended up uncovering nearly fifty companies in multiple states that he owned either alone or with his business partners.  Exposing the debtor spouse’s lies about side companies can give the creditor spouse significant bargaining power in settlement negotiations and pave the way for broad financial discovery in divorce proceedings.

The second place we look for hidden assets is in property records.  We could easily verify whether Inita Patton had actually purchased the real estate she received money to buy.  A simple county-level search, as we explained in our post on tracking down real estate, will show whether she owned the properties Inita said she bought.  Information on any mortgages she may have used to purchase the property would likely be available in the same database, depending on the county.

PROBLEM:

The debtor has a passion for historic architecture, and you remember him once mentioning a beautiful old house that he was thinking about buying years ago.  You suspect that he may have secretly purchased the house and has failed to disclose it.

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SOLUTIONS:

Real estate protected by historic designations can be found several ways, thanks to publicly available resources.  As we have explained in previous posts, county records are an excellent place to start when looking for real property.  In New York City, property records are digitized on ACRIS, and can be searched by owner name, address or parcel.  Other jurisdictions may have similar records on line, and some may not. Find out here.

But an ACRIS search of the debtor’s name (and this applies to most any other database) will reveal nothing if the debtor does not own the property under his own name.  However, in New York, if you have even a vague idea of where the property might be located, then you may be able to find it using New York State’s GIS map of historic places or this online map of New York City’s historic landmarks.  These maps provide each historic property’s address, block and lot number, and national registry number.

The registry numbers of properties you think may belong to the debtor can be used to search New York State’s Document Imaging database, which contains digitized records of historic designation applications. These applications provide a wealth of information about individual properties.  While the applications generally not include the owner’s name, they do list the name of the individual who prepared the designation application.  If the debtor did not fill out the application himself, a conversation with the person who did may lead you to the property’s owner.

Once you have an address, you can also check to see if the debtor received any grants or loans from the New York Landmarks Conservancy or the Historic House Trust, which post lists of grant recipients online.

Finally, tax returns can provide information regarding historic property ownership, as well.  Owners of designated historic properties receive a federal income tax credit for certain restoration costs.  This means that the debtors tax returns can tell you not only whether he owns a historic property, but also how much he has spent on improvements.

Hunting for a secret but valuable property is a lot like other kinds of searches we do: it requires the use of many databases, not just one. And as often as not, an interview or two will help to nail down the piece of real estate in question.

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PROBLEM:

You think that your debtor owns property, but you cannot find any evidence that he owns any real estate in his own name.  You suspect that he purchased property through a corporation so that you would not be able to find it.

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SOLUTIONS:

If you do not know the name of the debtor’s companies, or you think he may have more companies than he has told you about, begin with a search of the department of state website in the debtor’s home state.  Also try searching corporate filings in Delaware and Nevada, two common places to register businesses. 

Keep in mind that certain states’ corporate registry databases are far more helpful than others.  In New York, searching a partial name of a company will result in a list of all entities with names similar to the one you entered.  This is a fantastic way to find the debtor’s other corporate entities, since people often will often have a series of companies with similar names.  For example, a search of Company Inc. will also reveal Company II Inc., Company LLC., et cetera.

In one recent case, our client suspected her husband was concealing assets in companies he had kept secret from her.  We found dozens companies the husband had registered in New York, Delaware, and Nevada simply by searching for company names similar to the handful of names our client had given us.  We were then able to search public records to find out whether the debtor had purchased real estate through any of his myriad LLC’s and partnerships.

Once you know the names of the debtor’s companies, search county property records for each of them.  As we discussed in our prior blog post on locating hidden real property, the best place to start is a search of property records in each of the counties where the debtor’s companies are registered or wherever else the debtor may have ties.  You can also search online resources like ACRIS, the New York City Finance Department’s database of property records, which allows you to look up deeds by the owner’s name or by address.

UCC filings against the debtor or his companies can also reveal hidden assets.  Public records of UCC liens will show whether the debtor has put up any property as collateral on those liens.

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