Based on the many questionnaires we’ve reviewed over the years, here are some tips on what kinds of questions you the divorcing party should be asking yourself as you contemplate separation, divorce, and compiling information on what is rightfully yours:
- What properties do you own? (The answer may surprise you.)
On two occasions this year alone, I have had clients tell me that they thought they and their husbands owned at least three properties. In one case, I had to inform the client that she had never owned a particular piece of expensive farmland. Her husband had bought it in the name of a new company she knew nothing about, and then one month later sold it to a different company (associated with his mother) for $1.
If our client’s lawyer had asked about this piece of property at a deposition and the husband had said, “No, I don’t own it,” he would not have been lying. Now we knew about it, plus a bonus piece of property: That new company had also bought a vacation home in another state. Because we had the company name, we had the vacation home too.
On a different case, we found that one of three buildings had been sold two years ago because it had belonged not to the husband and wife but to the husband’s now-defunct company. A second building was still under the husband’s control, but in the name of yet another company. In both cases, we were not sure how much of each company the husband had owned or still owned. That was work to be done in discovery.
- Is that previously owned business really in the past, or is it still going?
Our client’s husband once had a company doing business and holding property in his home state on the east coast. That company had not filed its annual return in years and gave the impression that it was no longer active. It turned out that upon inspection, the company was domiciled in Delaware, not the state the husband had lived in. The registration in his state was old, but when we pulled the corporate tax records out of Delaware, he was still paying $300 a year to keep the Delaware company going. Nobody does that for an inactive company.
Later we found that the Delaware company was the way the husband was being compensated for sitting on several boards of public companies. Deep in some public securities filings was the name of the Delaware company, in a footnote to the compensation the husband was getting from the company in the form of fees and stock options.
- Is the main business really the main business?
Husbands have a way of having really bad years in business around the time they are getting divorced. One husband we investigated recently had quietly formed a brand new company with his business partner, about a year before leaving the marital home. The new business had no internet presence and no publicity attached to it. We suggested that in discovery, our client determine that revenues were not being diverted from the company she knew about to this one we had discovered. That could happen with a switch in how he got paid, or else the new company could show up as a vendor to the old company. Both are common tactics.
THE TAKEAWAY: People getting divorced often know more than anyone else about their spouses. But as much as they know, it’s dangerous to assume that they know enough to run the asset search. Confirmation bias (the idea that you know what you’re going to discover before you start looking) is part of human nature. A new set of eyes on what looks like familiar territory can be just what an asset search needs.