California businessman Steven Zinnel was sentenced to a 17 year prison term last week for defrauding the bankruptcy court in an effort to avoid paying child support and alimony to his ex-wife. The prosecutors on the case believe this to be the longest sentence for bankruptcy fraud ever handed down in the Eastern District of California.
In 1999, Zinnel and his wife initiated what later turned into an acrimonious, drawn-out divorce. In 2001, Zinnel threatened to file for bankruptcy to keep his ex from accessing their marital assets. Zinnel followed through on his threat in 2005, claiming that he was millions of dollars in debt.
All the while, Zinnel was in fact a successful business owner with a substantial income. Zinnel’s attorney, Derian Eidson, helped him hide his money from his wife and the bankruptcy court by funneling cash into shell companies held in relatives’ names. Eidson also laundered money through her attorney-client trust account, companies she owned, and her personal bank account. Eidson will soon face sentencing for her role in Zinnel’s crimes.
Schemes like Zinnel’s are precisely why we have all of our matrimonial clients complete a detailed asset search questionnaire before we begin our investigations. As we wrote here, it is important to remember when starting an asset search that you should look for clues that lead to assets, not just the assets themselves. Looking at Zinnel’s bank accounts would probably have given you little or no information about his hidden money. Instead, you would have needed to look at companies and property owned by his attorney and family members.
Our clients often know more than they think when it comes to tracking down hidden marital assets. We ask our clients to tell us about their spouse’s relatives, hobbies, and favorite vacation spots, among other information. While these questions may seem irrelevant at first blush, we often find that debtors hide money in companies named after something dear to them, like the street they grew up on. We once had a client whose husband had cached assets in a series of shell companies named after his favorite movies.
We can also look for companies or real property that the debtor’s relatives acquired under suspicious circumstances. For example, it might raise some eyebrows if your spouse’s favorite unemployed cousin purchased a $2 million home in cash or suddenly became the president of four companies the month after you filed for divorce. If you are thorough, keep an open mind, and think creatively, then you will have a much better chance of finding hidden money.