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.

Nearly ten years on since the arrest of master Ponzi schemer Bernard Madoff, the Ponzi fraudsters are still with us. Maybe not with as much money as Madoff’s billions, but powerful enough to do a lot of damage.

Being devoted to finding assets, this blog doesn’t usually talk about ways to lose them. But we have had asset searches in which we suspect money was lost in a Ponzi scheme. The schemer may have assets, just not as many and not in the hard form the investor thought were there.

It never hurts to remind ourselves of what Ponzi schemes are and how to check to see if one of them is coming for you and your money.

We’ve written here about some of the warning signs that alerted plenty of smart people that Madoff was too risky. Sadly, those signs and repeated whistle-blowing to federal regulators failed to prevent massive losses by investors, as Madoff’s scheme went on and on. Other Ponzi schemes are easier to spot.

The Securities and Exchange Commission defines a Ponzi scheme as “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.” Also known as pyramid schemes, they are named after Charles Ponzi (below) who swindled people in the U.S. in the 1920s before his get-rich-quick fraud collapsed.

If the scheme doesn’t make a profit, it’s bound to collapse because it always needs more members than it had before (to supply the prior investors’ returned capital plus an ‘investment return.”)

Combined with various kinds of fraud we’ve dealt with as well as the Madoff experience, we offer some signs that an investment opportunity you are offered may be one to be avoided.

  • Length of the investment enterprise. Madoff’s decades-long Ponzi operation was unusually old and added to his trustworthiness, but many Ponzis are much shorter-lived affairs. According to a paper Who Gets Swindled in Ponzi Schemes?[1] the average lifespan of U.S. Ponzi schemes prosecuted between 1988 and 2012 was four years. Charles Ponzi’s racket lasted just one year. If your supposed investor can show you no track record or one that’s just a year old, be on extra-careful alert.
  • Promise of outsized returns. While Madoff cleverly promised low but rock-steady returns (also extremely difficult to pull off for real), the average Ponzi scheme in the sample above promised between 111 percent and 437 percent returns. The lower the promised return, the longer the scheme can on, as long as new investors keep coming in. If it’s a very high return, especially if it’s “low risk,” the old “if it’s too good to be true, it’s probably not true” applies.
  • If they aren’t asking for millions, it’s probably not a fraud, right? Wrong. The average investment in Ponzi schemes between 1988 and 2012 was $431,000. Half of all investments in Ponzi schemes were for less than $87,800.

Sometimes you don’t have to crunch numbers to realize you’re being courted by a crook. The main reason we concluded one of our clients had been taken by a Ponzi scheme was that the companies he had invested in didn’t even exist.

We are self-serving when we say this, but it could help you too: If you are prepared to invest $100,000 to earn another $50,000 or to double your money, why not take one or two percent of that and spend it on some due diligence?

Investors in Madoff and the other schemes would have saved themselves a world of heartache.

 

[1] By Stephen Deason, Shivaram Rajgopal and Gregory Waymire of the business schools at Columbia and Emory Universities and quoted with permission. Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2586490

Clients who hire us for asset searches always want to know what we find. As often as not, the big news after an asset search is when we don’t find something we should be seeing but are not.

When someone is concealing the truth, they often put in place a lie to throw you off. One of the best ways to figure out if someone is lying is to ask yourself, “is this likely?”

Remember the Bernard Madoff Ponzi scheme? The people who managed not to get burned turned away from Madoff because of what they didn’t see:

  • No major accounting firm auditing what purported to be a multi-billion-dollar fund.
  • No independent custodian.
  • No regulatory filings in the last couple of years that reflected billions of dollars in holdings.

Computer programs are terrible at telling you what they should be seeing but are not, which is why so many investors never clued in to the Madoff risks that many experienced professionals noticed.

When we do an asset search, we are always on the lookout for what doesn’t make sense. In the past three years, we’ve seen the following:

  • A man who claimed to put no money in any financial institution, yet whose computer showed a browsing history at two-dozen brokerages. You can keep your money out of banks, but still on deposit with Schwab or TD Ameritrade. Next step: 24 subpoenas to those brokers.
  • A divorcing husband’s loss-making entity that did no business (zero sales) yet persisted in paying one employee $75,000 a year. And, bank accounts showed the business paid plenty of taxes.

Both of these fit the common scenario in divorce: appearing to have fewer assets that you really have. In the first case, the husband hoped to get money out of his brokerage after the divorce was final. In the second, the company may have been in partnership with another company that was holding back the first company’s share of the profits until after the divorce. The second company could also have been owned by the husband or trusted friend or relative.

As with the Madoff fraud, a computer program did not point to either of the divorce cases above and spit out a “High Risk” or “Possible Asset Concealment” result. Instead, both findings were the product of hours of slow and careful research.

The next time you wonder why an asset search takes hours and not just the feeding of a few names and numbers into a database, remember: Databases tell you (sometimes) what’s there – not what isn’t.

Finding assets can be satisfying work, but frustration sometimes comes in realizing that a client’s lawyers haven’t been asking the right questions in their depositions.

We have written repeatedly that getting bank account information without a court order is illegal (other than discovering it on a shared computer or in records lying around). When we are looking for assets before a lawsuit has been filed, getting at bank records is a long shot, and what we look for are banks and brokerage accounts our clients’ lawyers can ask about when the time comes for discovery.

But how unfortunate it is when a client has been through discovery, or perhaps has a divorce agreement the former spouse is cheating on, and we find out that the lawyers never asked the right question.

The right question involves not just what someone makes, but what a company may be paying a company that employs that person or that beneficially owned by that person. The right question might be: “we see that your Oklahoma company paid taxes in seven other states. Why? What activities has the company had there?”

Not long ago, a woman came to us and asked us to find out where her ex-husband is working. We found convincing evidence that he was still employed at the same company as he had been during the divorce. At the time, his boss had been deposed and told our client’s lawyer that the ex-husband was making a paltry amount of money.

This seemed unlikely given his title and his history of high compensation. When we looked at the deposition transcript, it turned out that the boss had never been asked about beneficial ownership of companies.

It can work this way: instead of paying Mr. Jones his full salary, it pays Mr. Jones a small amount of money so that Mr. Jones can look as if there’s not much money to go after. The real money goes to Alpha LLC, a company Mr. Jones controls. Alpha LLC may have an agreement with the company that it will supply Mr. Jones’ services, for instance.

Companies don’t care how they pay you as long as they account for all of their payments and withhold the right amount of taxes and other government payments. If they are public and Mr. Jones is a major executive, they may have to disclose the compensation arrangement in securities filings. But if they are private, they don’t have to tell you about those payments to Mr. Jones’ side companies, trusts, or other vehicles.

Unless of course they are under oath and you ask them.