Last week, Curtis Harold DeBerry, owner of the Texas-based Progreso Produce Company, was arrested and accused of cheating investors, business partners and banks out of millions of dollars over the past few years.  He now faces up to 30 years in prison.

According to the criminal complaint, DeBerry hid assets by transferring money to his children, and diverted assets meant for creditors to pay for his own luxury items (including a yacht).  One of the more egregious allegations in the complaint is that he bilked a fruit wholesaler out of over $8 million.

We regularly come across people that are hiding assets in their family members’ names or in secret companies.  We recently found that a debtor had placed all of his North Carolina companies in his nephew’s name, and then used those companies to buy up loads of property.  We always think outside of the box when we’re doing an asset search.  We’re well equipped to look for assets in the names of people close to the debtor using our proprietary commercial databases and by scouring the public record.

On the flip side, in many cases, our clients would not have needed an asset search if they’d done some more diligence prior to entering into the bad business deal.  This looks to be the situation here with the fruit wholesaler.  Sure, it costs money to do diligence, but a few thousand dollars to save $8 million seems more than worth it.

In this case, Fruit wholesaler, Eclipse Berry Farms, LLC, and Progreso entered an agreement to grow and sell strawberries together.  According to a civil complaint, to induce Eclipse to sign the agreement, Progreso showed Eclipse 42 leases with strawberry growers in Zamora, Mexico where the strawberries for the joint venture were to be harvested.  Eclipse then sent over $8 million to Progreso for growing, producing and packaging the strawberries.

According to the complaint, after the contract had been signed and money advanced, Eclipse sent a quality control person to Mexico to actually take a look at the strawberry harvesting land and operations.  It was then that Eclipse learned that Progreso did not have any leases with strawberry growers in Mexico and had instead been haggling with local strawberry growers to buy strawberries at a very low price.  Ultimately, Progreso used about $2 million of Eclipse’s funds to purchase strawberries in Mexico, but kept the balance of the $8 million for itself.

Though it was prudent for Eclipse to eventually send a quality control person to Mexico to check on the strawberries, it would have been wiser to send someone down prior to investing $8 million in the first place.  A few phone calls to the counterparties on the strawberry leases might have even been enough to put Eclipse on notice of Progreso’s alleged fraud.  Had they discovered that Progreso did not have any leased strawberry land, they would have never advanced the money, and wouldn’t now be stuck duking it out with other creditors to get pennies on their dollars back from Progreso.

Whitney St. John and James B. Fairchild’s acrimonious divorce began in 2011, and the couple has been fighting over how to divide their fabulous collection of art and antiques ever since.  With no amicable resolution in sight, last week, a Suffolk County judge ordered the couple to liquidate their possessions and equally divide the proceeds.  The sale took place over Memorial Day weekend at the couple’s Hamptons home.

According to Fairchild, the sale brought in far less than it should have because St. John squirreled away over $300,000 worth of jewelry that she was required to sell.  The couple had purchased the jewels as inventory for a boutique they planned to open together before their marriage went off the rails.  St. John lobbed identical accusations at Fairchild.  Her lawyer told the press that Fairchild “intercept[ed] valuable store inventory.”  She also accused Fairchild of selling a 1955 Jaguar for $175,000 and keeping the proceeds of the sale for himself.

As we wrote here and here, valuables like jewelry and cash can be extremely difficult, but not impossible, to track down.  If we were conducting an investigation for either party in this case, we would first suggest subpoenaing the opposing side’s bank records.  Each side knows when and where the jewels were bought, so they would not look for a large cash purchase.  Instead, we would recommend looking for payments to jewelry appraisers, insurers, or payments to a bank for a safe deposit box.  They should also subpoena the other side’s insurance policies and look for an itemized schedule of the items covered or evidence that the coverage amount of the policy was recently increased.

Determining whether Fairchild sold his car is far easier than finding hidden jewelry.  As we wrote here, antique cars must be registered with the DMV just like any other vehicle.  A vehicle registration search would thus reveal whether Fairchild recently transferred the car’s title to another owner.  Some states’ DMV records are private, but we still might be able to find evidence of the sale in the form of a UCC filing if the buyer financed the purchase of the car.

To hunt down cash resulting from the sale, we would first look for companies, trusts, or other entities where Fairchild may have stashed the cash.  Then, we would recommend getting the bank records for those entities.  As we have written many times, this can only be done with a court order.  At that point, it is just a question of looking for suspicious deposits or cash purchases that correspond to the car’s value.

PROBLEM:

Your debtor has a taste for fine jewelry and you suspect that she’s recently purchased and hidden some expensive pieces.

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SOLUTIONS:

If you have access to your debtor’s bank records, they are a great place to begin looking for evidence that your debtor has some jewelry stashed away.  You may not find something as obvious as massive payments to Tiffany & Co., but look for things like payments to a jewelry appraiser, an insurer or payments for a safe deposit box.

If your debtor is purchasing expensive jewelry, it’s a pretty safe bet that she is also insuring it.  A basic homeowner’s or renter’s policy might not fully cover high value items.  If this is true of your policy, your debtor may have purchased additional coverage under your policy for her pricy baubles.  See if you can get your hands on your insurance policies.  When reviewing the policy, look for a schedule that lays out the high value items covered.  If you don’t find an itemized schedule, you may find that some form of high value coverage was added to the policy of which you were unaware.

Keep in mind that if your debtor really wanted to make it a point to keep her jewelry collection from you, she may not have insured the jewelry under your policy.  You should also look for payments to insurance companies with which you are unfamiliar.  A quick Google search will tell you the names of some popular jewelry insurance companies.

You may also want to look into expensive jewelry that your debtor could have inherited over time.  Think back.  Maybe your debtor told you at the time that she inherited her great aunt’s jewelry collection and you didn’t think much of it.  Or maybe her recently deceased grandmother was always draped in diamonds and you know your debtor was her favorite grandchild.  As we mentioned in our blogpost about tracking down an inheritance, if your debtor’s relative left her something in a will that went through the probate process, you should be able to access the will since it is a public record.

You may know more about your debtor’s jewelry collection than you think, having lived with her during your marriage.  Call on your memory, and if you have good relationships with people who might know something about your debtor’s collection, such as a friend or a family jeweler, don’t be afraid to get on the phone and call them to see what you might learn.

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PROBLEM:

You know that your debtor has a taste for the finer things in life, but, above all she adores furs.  Occasionally, a new mink would suddenly appear on the first wintry day of the year.  If you asked about it, she would shrug it off, explaining that she bought it years ago. You always suspected that she hid her big-ticket purchases from you. When you ask where her furs are now, she replies that she sold all of her furs and donated the proceeds to PETA just before you split up.

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SOLUTIONS:

Unless your debtor has a secret room to hide her collection, she will need to store those furs somewhere. Like art, furs have special requirements when it comes to storage.  Furs can dry out or mold over time and sustain considerable damaged if they are not housed in a climate-controlled environment. Even worse, they can fall prey to insects and rodents.  This rules out most run-of-the-mill storage lockers as viable options for a serious collector.

Your local dry cleaner may be able to keep a few coats, but they are probably not equipped to store a sizeable fur collection.  Try contacting storage facilities that specialize in maintaining furs.  The list of fur storage sites will likely be a short one.  Even in a place as big as New York City has only a handful of fur storage facilities, and nearly all of them are located in the “fur district,” an area just southwest of Herald Square.

Many high-end furriers also offer repair and storage as ancillary services to their customers.  If you know the debtor’s favorite place to buy furs, check there first.  Her entire collection may be safely tucked away in their cold-storage locker. If the furrier does not have its own storage facility, ask them who they use to store their customers’ collections.

If you don’t know the debtor’s furrier of choice, her financial records may give you a clue, if you have access to them. Pay special attention to the debtor’s records for bank accounts or credit cards that she does not share with you.  If she is trying to keep her purchases a secret, she likely did not use the joint checking account or the Mastercard that is billed to your house to buy a $10,000 coat.

If you only have access to joint accounts, look for smaller charges for repairing, cleaning or storing her furs.  She may have gotten sloppy and used your shared credit card if the amount was not enough to raise any eyebrows.

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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:

The debtor is a big collector, whether of coins, stamps, toys, or comic books. You ask about the collection but get no response, or else you are told it was “lost” or sold for much less than you were always told it was worth. You need answers about what happened to it.

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SOLUTION:

As with any asset not subject to the government-imposed recording requirement that governs real estate, companies or vehicles, chasing down a collectible will usually require the use of a telephone. The advent of the internet has changed collection hunting as well.

Think of it this way: If you were a collector seeking to get rid of something of value, why would you sell to the rare-stamp dealer in your city when dozens of dealers around the country stood to offer you a superior price?

The traditional way to track sales of collections was to make inquiries at well-known dealers, and to check the classified ads in reputable publications that specialize in the thing being collected.

Nowadays, people can post their own ads. The nice thing about collections is that their owners often really love them and can’t help boasting about them. That means that while a person would never write openly about a Bahamas bank account, the same may not be true for the $200,000 collection of thimbles or Japanese fans he has carefully built over the past 30 years.

One tool we especially like is to figure out the internet “handle” of the person we are looking at. If he is Superman112 on MySpace, chances are that the Superman112 selling his stamp collection is your man.

As with antiques, you may also want to check the debtor’s records for evidence of a trip taken to dispose of the collection, the hiring of movers, or evidence from customs records.

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PROBLEM: 

A debtor may say he has no assets when he actually owns an art collection worth millions.  Or, in anticipation of a divorce, a debtor may convert ready cash or easily-discoverable assets into art, which can be safely stashed away until after a settlement is reached.

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SOLUTION:

Art, like some of the other luxury goods we have discussed such as antiques and wine, is hard to locate because even if it is worth millions, it does not require any kind of licensing or title registration.  There may be little direct evidence tying a debtor to a particular art purchase, but you may still be able to find clues that a debtor recently purchased art or stashed a valuable collection.

Unlike jewelry or expensive china, you usually cannot hide an art collection in the back of a closet.  Most art is also delicate and requires storage in a climate-controlled environment.

Art storage facilities are fairly rare and may provide a good starting point for a search.  A nationwide list of art storage spaces can be found at: http://www.axa-art-usa.com/artprotect/grasp.html.  If you have access to financial records or credit card statements, check for payments to art storage companies.

Some high-end art dealers such as Christie’s also offer storage and shipping services.  While the debtor may take precautions to conceal large payments for the art itself, look for smaller payments made to galleries or auction houses for these ancillary services.

  • We can also search customs records to see if the debtor or any of the debtor’s companies have received shipments from overseas.
  • Look for any purchases of new windows or window treatments, such as low-e glass or a spectrally selective window film, which protect art from sun damage.  This could be a sign that the debtor is storing art at home.
  • Any serious art owner would insure his collection.  Increases in insurance premiums and bills from appraisers are clues that art may have recently been insured.
  • If the debtor has enough lead time to arrange it, a free method to temporarily and safely store museum-quality art is to loan it out.  Look for shipping receipts, loan agreements, or even thank you notes from institutions that display art such as museums, libraries or universities.  Pay particular attention to institutions where the debtor has given large donations in the past or with which he has an established relationship.

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PROBLEM:

The debtor has chosen to hide his beloved boat to avoid having to relinquish it or sell it to pay off debts. Or he decides to liquidate some cash by purchasing a boat and storing it out of sight from his creditors.

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SOLUTION:

There is no nationwide vessel identification system for boats (there are plans to complete one in the future, but launch is some way). This means that there is no central database permitting a search of all state title and boat registration information. A state-by-state search is therefore the only option.

Boat registrations usually come up during property ownership database searches. But confirming accuracy is labor intensive and highly dependent on where the debtor lives, what information about the vessel is available and possibly even on the size of the vessel.  Like cars, boats usually have to be registered with the state, though the department that handles the registration varies. In some states, the department of motor vehicles oversees boat registrations, but in others it may be the parks division, the wildlife or the fish-and-game department.

Some states allow searches of their registration databases using the owner’s name or personal identification information. Other state search engines require information specific to the boat in question, like the boat’s vehicle identification number (VIN) or hull identification number (HIN). These databases may help confirm whether a known boat is still in the debtor’s possession, but make it nearly impossible to determine whether a boat is owned at all. And other states don’t provide access to any boat ownership databases at all.

When the state databases are less than helpful, there are a few other options, though they are only useful if the boat in question weighs five net tons or greater. The U.S. Coast Guard’s vessel documentation division provides an abstract of title for a vessel documenting all bills of sale, mortgages and notices of claim of lien filed and recorded by the Coast Guard. This information is crucial to an asset search, but the database is limited to vessels that pass the five net tons test and whose owners are U.S. citizens. Complicating the search are the Coast Guard’s search parameters: Vessels can only be searched using their HIN or official Coast Guard-assigned six or seven digit number.

Luckily, if a vessel is heavy enough and documented by the Coast Guard, it can also be tracked via the National Oceanic and Atmospheric Administration Office (NOAA) of Science and Technology, though this requires knowing the vessel’s name. Many of the search records provide detailed owner information.

If tracking down the boat itself is a challenge, then other searches may provide circumstantial evidence to bolster allegations that the debtor owns a boat. For instance, many municipalities have wait lists to grant people mooring permission, and many of the lists can be searched by last name. Or a review of the debtor’s financial records may prove helpful. A home run would be a record of payments to a marina. Also helpful might be charges to a stoarge facility that houses boats, or larger than average fuel charges.

If the debtor has any ties abroad, he may have chosen to have the boat stored out of the country. If he sailed it abroad himself, look for any evidence of one-way travel back to the U.S. Otherwise, he might have hired someone to transport the boat for him. Look for any payments to people or companies that may have experience handling these sort of transactions, or unexplained large cash withdrawls that may have been used to cover the fees and costs for the delivery.

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PROBLEM:

The debtor has a taste for the finer things in life, and we suspect that among his most valuable assets is an extensive (and expensive) collection of fine wine. But how much the collection is worth and where it’s located remain unknown.

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SOLUTION:

Every oenophile knows that proper storage is vital to preserve their collection. Efforts to store a wine collection adequately are liable to leave a paper trail. For instance, are there records of any recent purchases like large-scale wine refrigerators? Or perhaps there is evidence that the debtor bought the tools necessary to build a do-it-yourself wine storage space. Look for purchases of lumber supplies, refrigerators, and temperature- and humidity- regulation appliances.

If the debtor isn’t the DIY type, look for records suggesting that he retained a construction crew. Evidence could include payments to a construction company, as well as construction permits and public records indicating an increase in property value due to the new construction. Even court records might be useful—sometimes construction projects result in litigation. Fact summaries in court documents may provide information on the project, including the names of the contractors who may be knowledgeable on the scope of the collection.

Some debtors are unwilling to store their wine at home, preferring to rent space at a wine storage facility. You need to call all nearby facilities. They may have information on how large a space has been rented. Also, check with movers in the area who may have been hired to deliver the wine to a storage facility. They may have a sense of just how large the collection is.

Serious oenophiles insure their collections. If there is access to the debtors’ financial statements, look over his insurance coverage and check to see if he’s made payments to insure his wine.

In some instances, debtors will increase their wine collections as a way to lower their cash reserves. Has he taken any trips to areas known for good wine, like Sonoma County in California, or France? Be on the lookout for payments to shipping companies or cargo charges to airlines that transported his purchases. Has he paid any membership fees to wine clubs that provide access to wine directly from vineyards?  Or could he have had any wine shipped to him? A thorough check of customs records may provide information on any deliveries from overseas.

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The Judge Judy lawsuit over some very expensive china and flatware has apparently settled. Former model Patric Jones had alleged that her ex-husband sold the expensive goods to Judge Judy Sheindlin of television fame for far less than the goods were worth.

This, despite the fact that the china was community property in California – something the judge should have known. Judge Judy reportedly paid $50,000 for the goods that another judge valued at $125,000.

This is fun celebrity stuff when the people involved are wealthy, but wedding china can sometimes constitute a meaningful portion of disputed assets in cases that don’t involve highly paid individuals.

As we wrote recently in Something Old: Finding Antiques, personal property that doesn’t require licensing or title registration, such as cars, boats or aircraft can present a special challenge. We advised that a good way to proceed is to check insurance records as well as local storage facilities for big expensive things.

The problem with wedding china is that like cash, you can fit a lot of value into a box that sits snugly in the back of a car. But what asset searches have going for them is what Patric Jones had: knowledge beforehand that the asset exists. These are, in the end, the easiest things to trace because both spouses have good knowledge of their existence and – even better – documentary evidence in the form of a wedding registry.

Unless a marriage goes bad on day one, both spouses should always know what they got for wedding presents. Therefore, when looking for assets, we always find it critical to get a full catalogue from our clients about the assets they know are present, not to mention an extensive questionnaire that helps us find as much as we can.

You can see more on the way we approach this issue here, including an entire continuing legal education course we give on marital asset searches.