Fine print doesn’t mean print that’s illegible or incomprehensible, but it’s there for a good reason.

The fine print is where you will often find an important potential marital asset that can easily slip off the net-worth statement divorcing parties need to provide: Restricted stock units (RSU’s).

These are not the same thing as restricted stock or stock options, and are offered to employees mostly at publicly listed (but also at some private) companies.

What RSU’s Are

An RSU is simply a promise to pay someone later on with stock in a company (or money to buy the stock at the price on the day the promise is granted). Sometimes RSU’s expire if an employee leaves the company before they’re useable, but could be swapped for RSU’s in a new company the employee is moving to.

The time an RSU can be used is called the vesting date. RSU’s held but not yet vested won’t show up on a tax form because they are simply promises to pay (usually conditional on continued employment). Whether they are found to be incentive or bonus payments will often weigh heavily into the calculation of whether they are marital property.

An RSU is different from restricted stock, which is a share in a company that the person gets, but can’t sell until a certain future vesting date. Restricted stock has some value from day one because it confers voting rights, but you can’t sell it.

Stock options are something yet again. They are the right to buy a stock at a certain price at a future vesting date. Their value depends on what price you get to the buy the stock for later on. They can be very valuable if you have the right to buy a $60 share for $30, but if the shares plunge to $20, the right to buy them at $30 is worth nothing when you finally get the right to use the option. Options nearly always have some value before vesting.

How to Find RSU’s

If Husband works for a public company but says he has not been given any RSU’s, how could you find out that he is lying?

One quick way to find out if more investigation is required is to check the securities filings of Husband’s public company. It’s very straightforward if Husband is senior enough to be considered an insider (whether on the board or as a senior executive). The Securities and Exchange Commission filings contain details of compensation granted to such people. We check the annual reports, proxy filings and reports known as Form 4 filings.

But what if Husband is not senior enough to appear among the top few executives? You can still get a notion of the existence of RSUs. Say he works for Atento, S.A., a Luxembourg-domiciled, Brazil-based provider of customer relationship software all over Latin America. Even though Atento is based outside the U.S. it sells shares here and so has to file certain forms with the SEC.

According to an Atento filing last week, in 2017 the company granted RSU’s to “directors, officers and other employees” in 2017. Those RSU’s vested in January of this year.

If Husband insists he never got any RSU’s, the company (via subpoena if necessary) will back him up on it. Many times, a third-party benefits administrator is the one to go see for information.

Once you are going to the company, your lawyer will need other information. The plan document, for one thing, will tell you how to classify the compensation (incentive or bonus). Ask also for award letters, grant agreements, the employee manual and all amendment letters,

And if the company is private? There can still be stock-based incentives against the day the company goes public. You still go back to the company and ask.

As it happens, as I was writing this article a forensic accountant called to ask if I could assist a potential client who said her husband was “hiding stock options in his name or his sister’s name” in a Caribbean tax haven.

My answer: the company is the place to start to see if he got the options or if they were issued to his sister (who may also have worked there). Without knowledge that he had concealed assets, it would be tossing good money out the door to pay an expensive Caribbean lawyer to try to get records from a brokerage account overseas.

[For more on Offshore Asset searches, see our Offshore Asset Search Starter Kit].

[For more on how we approach our work, see our companion blog, The Ethical Investigator].

 

If asked to describe the attributes of a good investigator, “empathetic” is not the first word that would come to mind for most people.

For anyone looking for hidden assets, though, empathy is a must.

Empathy means “the ability to understand and share the feelings of another,” and it’s a critical tool for any professional who deals a lot with people. I realized recently that I’ve been recommending empathy for years without using the word. But I’m part of a wonderful chapter of the National Association of Divorce Professionals, and during a recent meeting one of the therapists in my Manhattan-based group pointed out the now-obvious about empathy. Our group has been together a long time, and the meetings feel like get-togethers will old friends. Out of relaxed discussions come some wonderful insights.

We’ve written many times here about the techniques we use to narrow the scope of an asset search. There are not magic databases that spit out the answer, and since you can’t look everywhere and under all keywords imaginable, you have to make some guesses to render the search manageable.

What might someone name his secret company? Which trusted friends might he use to put assets temporarily in their name? We always ask these questions of our clients because we want to think as much like our subject as we can. That’s empathy. We wrote about this in The Divorce Asset Questionnaire.

Empathy is not sympathy, or “agreement in feeling as between persons.” I don’t agree that someone refusing to pay child support is acting properly. But I empathize with him in understanding his feelings, and by putting myself in his shoes I might be able to guess what he would be doing to hide his money.

When do you want sympathy? If we can sympathize with our clients, that’s certainly helpful for client management, although a lawyer trying to keep a confessed murderer from being executed can’t be faulted for failing to sympathize very much with his client. That lawyer may have more sympathy for his client’s victims. But empathy is always called for when you want to represent your client as zealously as possible or to understand the motivations of your opposition.

 

 

A frequent problem when taking in a new asset search in divorce is figuring out how far back to look.

Clients in divorce usually know a lot more about their spouse than anyone else, at least when it comes to daily habits, close friends, and other bits of information that can inform our asset search. What might a secretive husband name a secret company? Which lawyer would he have used to set it up? Who would be holding assets for him until the divorce is finalized? We’ve written about this in Your Client Knows More than She Thinks.

We’ve also written many times about the questionnaire we insist new clients fill in for us, such as in The Divorce Asset Hunter Questionnaire. It can provide invaluable leads, and save clients money by not having us research and report on something they already know about.

But one blind spot some spouses carry with them is the time when the secretive behavior may have started. Wife thinks everything was fine in the marriage until 2015, because that is when she noticed strange behavior, odd withdrawals, more “business trips” to Europe for unclear purposes.

What we urge clients to remember is that things could have gone bad a lot earlier than that, but they – for a variety of reasons – could have failed to notice. By restricting a search to 2015 forward, we could miss formation of the Delaware company in 2011 that could be a great lead. We could decide not to call the former employee of the husband’s company who left in 2013, and who could have had insight into what went on during business trips that may have been just like the ones the wife noticed two years later.

It’s a balancing act. Your client knows a lot, but after all, if your client knew everything there would be no need to hire out for help with an asset search.

Our firm works on large corporate issues in which hundreds of millions of dollars or more are a stake, but emotions never run higher than in family law matters.

In the case of how far back to look for assets, you are raising the prospect of an even larger, longer-lived betrayal than the client already suspects. They trusted someone when perhaps they should not have, and that is never a pleasant thought to introduce.

We’ve written here many times about how tough (i.e. slow and expensive) it can be to track down overseas assets. In short, you need to be going after serious money to make it worthwhile, and you can often get clues to the location of offshore money right here in the U.S. That’s helpful if you have no idea where to begin looking abroad.

But as the Jeffrey Epstein case illustrates, even when you know where to look, it’s a daunting task.

So far, several hundred million Epstein dollars remain unaccounted for. What we know is that he had money in this or that company or account, but that money is long gone. We know he had associates who helped him, but they are either not keen to cooperate as they contemplate cutting their own deals, or else they were not doing anything illegal in helping Epstein minimize his tax bill.

And what we do know of Epstein’s overseas activity came with some extra help: some documents relating to Epstein’s activities were part of a massive leak to a German newspaper which sent them to the International Consortium of Investigative Journalists, which maintains a very helpful search engine.

A recent Miami Herald story laid it out: “…a more detailed – but still very limited – look at Epstein’s wealth,” which included this: “From at least 2000 to 2007 Epstein was chairman of a company called Liquid Funding Ltd., which was initially 40 percent owned by the Wall Street investment bank Bear Stearns.”

So, the information is now 12 years old. The story continued: “Coupled with the fact that many of his businesses were operated in or with help from Caribbean offshore tax havens, the documents raise the likelihood that Epstein’s wealth is spread secretly across the globe.”

Epstein had as much as $3.46 million in some of the accounts long ago, but “this pales in comparison to his net worth — reported by his attorneys in court as $559 million — but suggests he had the ability to keep money in far-flung places. A check of the bank coding in the profile suggests that Epstein banked at the time with HSBC Private Bank (Suisse) SA in Geneva.”

You can see Epstein’s entry in the ICIJ database as well as the one for Liquid Funding. The ICIJ doesn’t release all the documents it has to the public, but journalists got a look at the 541 pages of Liquid Funding documents, and this is the best they came up with.

The New York Times reported recently that in 2011, billionaire Leslie Wexner’s foundation got a $56 million contribution from a trust linked to Epstein. But while the trust was listed as being under Epstein’s control in a Swiss bank account (again leaked via a French newspaper to the ICIJ), “it is not clear from public records who controlled Community Interest in 2011.”

Good start, long way to go. It seems safe to say that in the near future, any money Epstein’s victims can get will come from onshore assets.

This blog has been pretty clear over the years that an offshore asset search is not for the faint of heart or anyone on a tight budget.

We have recommended that even if you think there are assets outside the U.S., you could get a better idea of where they may be by searching U.S. public records first (The Offshore Assets Play Book).

Assume you want to do a little digging on your own for low-hanging fruit – signs of foreign assets that you could hand an investigator. You wouldn’t necessarily find the assets themselves, but you could provide useful leads that save you money if you eventually hire someone to do a fuller search. Some tips:

  1. Begin by searching widely, because the biggest mistake people usually make is to restrict the scope of their search too quickly. How do you search everywhere in the world without breaking the bank? There are a couple of free databases that list corporate directorships in overseas jurisdictions. The Offshore Leaks Database is a collection of various data dumps uncovered by journalists and includes names and addresses of directors and companies in some of the most difficult-to-penetrate offshore jurisdictions. You won’t find bank account information here but it’s a place you should always check. https://offshoreleaks.icij.org. Next, try Open Corporates. As above, it’s free and while not comprehensive it’s a good starting point.
  1. Remember that the Internet works abroad too. You can see company information in quite a few countries if you look for them. Company registration in England, for example, includes more information that you usually get with a private company in the U.S. British subsidiaries of U.S. companies publish their figures even if they aren’t traded on a public exchange. You can also get address information for directors, and with that you can sometimes find a person’s home address. Real estate in the U.K. isn’t easily searchable by name – you need an address. Companies House can help you get it.
  1. The internet now provides instantaneous translation. Say you come up with great public records in Dutch and you have no idea what they say. Open another window and paste a few hundred words at a time into Google Translate, and you can get a serviceable if not exact translation.

Will any of this replace what an experienced investigator can do? Not usually, because as I explain in my book, The Art of Fact Investigation, the real challenge of fact finding is in knitting together the output of various databases. More importantly, it’s playing smart hunches about which search terms to use and filing in the blanks the databases always leave. “John Smith and hidden assets and bank account” as a search term will never get you very far.

Still, if you run down some of these leads your investigator shouldn’t charge you for work you’ve already done, and you may get farther than you would have before.

In any search, that’s called progress.

The college admissions scandal has been full of wonderful teachable moments – about ethics, humility, greed and corruption. Now for asset hunters there is a new nugget today: overpaying on purpose.

As the Boston Globe reported yesterday, a municipal home assessor found it odd that a home in Needham, Massachusetts (near Cambridge, where Harvard is) sold for close to a million dollars even though it was assessed at $549,000.

Why would someone overpay so much? The mystery deepened when the buyer sold the home 17 months later for a loss of $324,000.

It turns out the seller was the coach of Harvard’s fencing team. The buyer was a man whose sons were on the fencing team. Now Harvard has launched an independent review of the transaction.

What does all of this have to do with asset searches? Simple.

One easy way to hide assets is to overpay for something and then get your money back later from the buyer. It works as long as the buyer is someone you trust. That’s why we always ask clients for lists of trusted friends and associates of whomever we are looking at.

Husband pays $1 million for a racehorse worth $200,000. Seller of horse is his college friend. College friend holds the $1 million, and the plan is to give his friend back the $800,000 after the divorce is finalized.

Of course, in the Harvard case above, it may be that the coach gave out admissions favors instead of excess cash, but the principle is the same: overpay for something in order to get something back in secret.

We always want to know who owns the home, the office, the vacation place of anyone we look at. It can sometimes be a trusted friend holding the asset for them, or a company controlled by the occupant.

And if someone grossly overpays, that’s a red flag, whether you’re looking for cash or a spot at a famous university.

At some point with nearly every asset search our firm conducts, we end up telling clients that finding assets is often more than a one-step process.

The one step some people think we need to take is to consult some databases, and voila! A pot of gold they can easily seize.

While there have been times when we discover real estate ownership in the name of the asset concealer, our clients in these cases usually agree that if their spouse is so careless about the houses, there must be much more money being carefully hidden. At least one study we have written about before indicates that most divorcing men hide assets.

The truth is that a successful asset search sometimes doesn’t seem successful to clients who expect an easy grab. We recently did a search and came up with a two-month old company formed by the person we were looking at. It owned no real estate that we could see and had no liens against it.

Our client was disappointed, but I had to tell her that this was potentially good news.

If someone is hiding assets, they would be silly to stick cash in the bank in their own name. Of course, you need to subpoena all the accounts you know about, but the big money will often be hidden in the name of a company you don’t know about. Finding the name of that company is half the battle.

Then, you need to find out where that company may have a bank account. With whom has it done business? Does the person you are searching have a favorite bank or banks? Any business liens at a bank we haven’t seen before in his affairs? Is there a computer we can look at (legally) that could tip us off?

We cannot stress often enough that there is no legal way for us to consult a database and get a list of someone’s bank or securities accounts. You need to go bank by bank with a court order once you are in discovery or have a judgment. If an investigator tells you he can get you this information with “connections,” he is telling you he will break the law. See our post about that called Can You Get Me Bank Accounts and Some Cocaine, Please?

Sometimes, we find the names of new companies domiciled in other countries. That’s good news, potentially, but getting discovery of those company accounts can be expensive, depending on the jurisdiction. If you are owed a lot of money that can be worth it. But going all-out to get $50,000 in the British Virgin Islands probably won’t be.

Asset searches can work out well if, while being as aggressive as you can be, you exercise patience when needed and follow the rules.

 

Want to know more? Check out our website at charlesgriffinllc.com and this podcast we did, “How a Professional Investigator Finds Hidden Assets.”

One of the most frequently-asked questions new divorce-related clients ask us is: “If I need a forensic accountant can you do that?”

The answer we give is that we are not forensic accountants, but you probably need us anyway because forensic accountants don’t do what we do. And, you may need a forensic accountant as well. Fact-finding and forensic accounting go together to give you a much better shot at finding assets than either function working alone.

What’s the difference?

One forensic accountant we have worked with on assignments describes some of her practice as including corporate fraud investigations, [and] lifestyle analysis for divorce and child support.

What won’t this forensic accountant do? Exactly what we will: Searching the globe for hidden assets and conducting interviews.

A forensic accountant can do a brilliant job analyzing the flows of money into and out of a business to see if funds are leaking to private accounts they shouldn’t be touching. But what happens if you don’t know that a business is linked to the person whose assets you are searching?

That is where we come in. Just as we wouldn’t know what to do if presented with thousands of bank statements, tax returns and deposit slips, most forensic accountants don’t excel at an assignment that reads, “What does this person own anywhere in the world? What companies is he hiding? Which people could we talk to to find out more about him and his activities? What’s the best way to approach these people?”

As an example, we were once asked to find assets of a husband who had controlled some 30 businesses owned by him and his wife. She knew little to nothing of how it all worked, but when they were divorcing, things followed a customary pattern.

The businesses had a “bad year” and showed greatly reduced earnings and assets. What to do?

We were hired first and concluded after a week’s work that the husband was hiding what were probably his most profitable companies (over a dozen of them) while showing his wife’s lawyer the money-losers.

Our advice: Subpoena the missing company financial records, and then get a forensic accountant to tell you if the fuller financial picture makes sense.

Asset searching and accounting are specialties. You don’t ask your lawyer to fix your roof, and you don’t ask your plumber to draft a will.

When two jobs are different, two heads are better than one.