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.

For women wondering whether their ex-husband (or soon-to-be ex) is hiding assets on them, rest assured that you are not alone.

According to a new white paper put out by Francis Financial, a wealth-management firm that specializes in advising women, 63 percent of women the firm surveyed “felt strongly that their husband was hiding assets during the divorce process.” The firm says this was among the first such studies focusing on women who have divorced or are in the process of divorcing.

Where to begin if you are one of those women? The study said that many who thought they were being cheated out of assets “had to grapple with the decision of hiring a forensic accountant,” and this may be an advisable step.

But as we often tell our clients, a forensic account is someone you may wish to hire after you are sure you have looked everywhere for the missing assets. As we wrote last year in How Investigation Helps Forensic Accountants, “where we can offer help is to find entire new companies that Wife and her accountants (forensic included) did not know existed.”

Some basics:

  • We don’t start just by looking at what a woman thinks are the places her husband is hiding assets, because if you know where the stuff is, you don’t need us. If assets are hidden you may be surprised at where they turn up.
  • We always like to give our clients a questionnaire that asks for all kinds of information about the person we’re searching. What might he name a secret company? What was the street he grew up on? Many hedge funds and private equity firms turn out to be named for the childhood streets of their founders. I know this because I always ask where these firms get their names.
  • Don’t expect us to come up with lots of hidden cash. People hear “assets” and think “cash” because it’s the first asset listed on any balance sheet and the easiest to use once you get it. The problem is that in the U.S., it’s illegal to get bank account information without a court order. What we can do is find likely hiding places of cash, based on business relationships and other legal sources. One client gave us the home computer she and her husband used, and we found that he had visited about a dozen websites of asset management companies. These were ripe for subpoenas at the appropriate time in the proceedings.
  • You don’t have to find every last penny to get some satisfaction. Once someone knows we have uncovered a significant portion of their hidden assets, their settlement offer can improve quickly. Some women have the means and the drive to litigate for years. Others just want a fair deal and to move on with money sufficient to take care of them and their children. Either way, asset investigations and a good forensic accountant are often worth considering.

A fascinating interview with the chief fact checker for The New Yorker in the Columbia Journalism Review here got us thinking about the distinction between checking the veracity of facts and finding new ones.

Our firm does both, dealing mostly with the former in due diligence and the latter with asset searches.asset search forensic accountant

The New Yorker’s Peter Canby said that people mistakenly think “the world is divided into facts and opinions, and the checkers just deal with facts.” The more complicated reality, according to Canby, is “fact-based opinions….The way you construct an argument, if there are egregious missing ingredients to it, then it’s something we bring up.”

It’s the reference to “missing ingredients” that got our attention, because an asset search is a hunt for just that: something you think should be there but isn’t. Sometimes people want to call in a forensic accountant to look for the missing assets, and sometimes those accountants succeed.

We’ve written before about the timing between investigation and forensic accounting, in How Investigation Helps Forensic Accountants. Our point there was that “where we can offer help is to find entire new companies that Wife and her accountants (forensic included) did not know existed.”

Of all the tricks in hiding assets, the one that forensic accountants have the hardest time with is finding companies with no paper trail linking them to the companies the accountants already know about.

It’s one thing if Husband’s real estate company rents space from a Nevada LLC, and that Nevada LLC turns out to be controlled by Husband.

But what if Husband has been able to sever all links between his known companies and his secret ones, in effect conducting a parallel business life?

Then, a whole new mindset takes over. We are not doing a forensic investigation, but a right-from-scratch asset search. We look not at the mystery company in the records and instead go out and track down a new company among the billions of facts on line and in paper registries.

It’s not verifying, but a different kind of exercise, and doing it right can be worth thousands or millions of dollars.

Want to know more?

  • Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter
  • Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon
  • Watch me speak about Helping Lawyers with Fact Finding, here.

One of the most powerful tools a spouse had to monitor assets or other activities is to look at the shared computer of the spouse under investigation. We have written before in When You’re Allowed to Look Through Your Debtor’s Computers and Phones that as long as a person can show ownership of the computer, anything on that computer is probably fair game to look at, subject to some exceptions.

Hacker in old warehouse.

Sending the contents of what you find to the cloud (a remote server controlled by someone else) is another question. A new case in the Sixth Circuit this month held that software that monitors keystrokes and content amounts to illegal wiretapping under both federal and Ohio statutes. You can read the case, Luis v. Zang here.

This case involved a technology called WebWatcher, which allows a person to monitor a computer’s activity. Where it got the company and the husband in trouble was that WebWatcher allows you to look at the material in nearly real time once the content of the computer activity is stored on the company’s server. The fact that WebWatcher appears captures the information contemporaneously is what turns this into wiretapping, the court held.

The critical distinction in wiretapping jurisprudence is between instantaneous access and access to information that’s stored. If all WebWatcher did was to store a record of the emails sent and received on the computer, that would not have been wiretapping.

The decision applies to the Sixth Circuit, although all the circuits agree that to have wiretapping you need contemporaneous capture of the information. Depending on the kind of software you use to log keystrokes and the transmission (if any) of that information, you could end up with what the Sixth Circuit calls wiretapping or just storage of information you have a right to see.

What’s certain is that it’s incumbent on any lawyer using such information to know how the program works. Just because it comes out of a small box you buy at a big box store doesn’t mean it will produce admissible evidence.

Want to know more?

  • Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;
  • Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);
  • Watch me speak about Helping Lawyers with Fact Finding, here.

 

In a dramatic divorce case unfolding in Southern California this week, Hydee Feldstein, a retired partner at a large law firm, accused her ex-husband Peter Gregora of stealing $20 million of the couple’s money over the course of their marriage.  Feldstein claims Gregora hid the money in secret offshore companies, investment funds, and, in by far the most straightforward method, stuffing cash into envelopes and leaving the money off of the couple’s tax returns.

hidden money divorceBefore she retired, Feldstein’s practice focused on finance and bankruptcy law.  She was the primary breadwinner in the family, and she stated in divorce documents that she entrusted her husband to handle their financial affairs.  She claimed that Gregora used this as an opportunity to drain the couple’s joint accounts.

Commentators have been incredulous that a partner who specialized in finance law at a major law firm could be so out of touch with her own finances that she lost track of $20 million of her own money.  As it turns out, research shows that Feldstein is not so unusual.

As we wrote about here, a study by Prudential explained that most women, including primary breadwinners, lack confidence in investing and tend to shy away from managing the family finances.  No matter how successful women are, they still often leave the big financial decisions up to their husbands.  In fact, 73% of men report being the primary financial decision-makers in their families.  A dishonest husband combined with a lack of oversight can open the door to mismanagement and, as is alleged in this case, fraud.

We have seen this first-hand in countless cases.  Smart, accomplished women come to us looking for money they earned, but which their husbands have magically made disappear.  These women often admit to us that they left all of their financial decisions to their husbands, and have never so much as glanced at a bank statement or tax return.

Even in these cases, all hope is not lost.  Our clients often have far more valuable information than they realize when it comes to tracking down hidden assets, even if they did not control the family finances.  For example, a client may tell us that her husband loves skiing in Colorado, which would lead us to look for a vacation property in that state.  Or she may know the name and address of one of her husband’s companies, which could lead us to a dozen other LLC’s that he kept hidden from her.  We are often able to find hidden companies, real property, stock holdings, and other assets through in-depth client interviews and our meticulous investigation process.

People often ask when it comes to searching for assets, “Where do you even begin to look?” This sometimes comes after we give them the grown-up news that there is no magic computer terminal that will accept a Social Security Number and churn out bank account information.

Looking for assets is like solving a puzzle, and when you solve a puzzle you usually look at as much of the picture as you can before plunging in. People icons head

Our picture is a questionnaire that we ask every spouse for whom we work to fill out. We don’t like their lawyers to do it. It’s best done by the person who knows the subject best, and that is nearly always the spouse.

Asset searching is not usually a deductive process, by which we take two facts and logically deduce that the assets are in Location X. Instead, it is an abductive process that uses some known facts that guide us to make a series of educated guesses.

We know from Wife’s questionnaire that Husband grew up in Texas and goes there from California every year to hunt in the same place he grew up hunting with his grandfather. That does not logically prove that he secretly bought his own house in that part of Texas, but our hunch is strong enough that we would certainly check the public records in the relevant county to see if Husband (or a limited liability company set up by Husband) may have bought something there.

The only way we have to know we should be looking in Texas is the Wife’s questionnaire. Databases will usually fail to link land owned by an LLC controlled by the husband with the husband’s home address in California. Making that link is what alert professionals are paid to do.

If databases are not good at making such links, how would we even find the LLC that owns the secret property? One way is to guess what name the husband may have used for his company. People often use the same name on a new company in a new state as they’ve used on an old company in their home state. It’s not the sneakiest way to operate but not everyone is good at being sneaky.

People also name companies after pets, the name of the street they grew up on, and other intensely personal criteria their spouses would know about – but about which databases are clueless.

That is why we ask on our questionnaire about all addresses a person has ever had, where they went to school, where they vacation, names of pets, and anything else that could give us an edge.

To be in the business of educated guesswork, you have to be educated. When we get our questionnaire, that’s when we go to school on the person who may be concealing assets.

To see a free copy of our questionnaire, please use the contact form on our website. For more of our writing about asset searching, see here.

You wouldn’t think old bankruptcies are a place worth checking when hunting for assets. If someone’s bankrupt, it means they are essentially out of money, right?

Wrong, at least sometimes.

We have found all kinds of wonderful material when looking at bankruptcies. Some of it leads right to assets, and some leads to a non-financial asset known as leverage: good information you can use to extract a better settlement.

Financial assets and information. What kind of asset can you find in a bankruptcy? The exempt kind. When people go bankrupt they don’t have to hand everything over to their creditors. Some states allow an entire main residence to remain in the hands of the debtor after discharge. The other day, we found a large pension fund in an old bankruptcy. Just check the schedule of exempt property in the petition. Of course, the fact that someone had an asset ten years ago doesn’t mean they have it now, but what if that person turns out to have misled his wife about the kind of money he had access to during the marriage? Chances are that if the pension money is something an estranged spouse is just finding out about, that money could have been moved into other accounts, taken out, invested or used in some other way that could be reachable.

Suppose the married couple did all of their banking at Bank of America, and the accounts there are nearly empty. Then, it turns out that the husband had a large IRA on deposit at JPMorgan Chase just before marriage. Wouldn’t the records of that account be of interest during the time of the marriage? What happened to the money?

Leverage. Compare what the debtor presented as his financial situation with what you know about the debtor. Did he leave out assets you know that he owned at the time? Misleading a bankruptcy court is a serious offense. There is no statute of limitations on re-opening a bankruptcy, and knowledge that could get a spouse into major trouble with a court could help move negotiations along on a settlement.

The takeaway point about bankruptcies is the same for most other information in an asset search: Keep your search as broad and general as you can. You are searching for assets, but also information that will lead to assets. That could be anywhere, which is why a good asset search is not that different from a thorough background check.

According to the New York Law Journal, yesterday, a Brooklyn jury convicted former Brooklyn prosecutor, John Headley, of fraud and misconduct over his misuse of New York City Transit Authority funds.  Headley’s company, Advance I.M.E. Co., was hired by the transit authority to obtain medical records and expert witnesses for the authority.  However, Headley did not reveal that he was the principal in Advance I.M.E. Co.  Rather, he used the name James Douglas to get around inevitable conflicts of interest he had in taking on the work–he was dfraud, nyc transit, John Headley, money trainating the transit authority employee responsible for selecting and paying vendors and he also worked as outside counsel to the transit authority on other matters.

So what was Headley’s defense?  He claimed that he masked his ownership in the company to hide assets from his wife in their then-imminent divorce proceedings rather than to bilk the transit authority out of money.  We haven’t seen this type of defense before—usually people don’t want to admit to hiding assets from their spouse.  Given his conviction on six counts, the jury may not have bought it.

If, indeed, Headley was hiding assets from his wife at the time of their divorce, hopefully she was hip enough to his tricks to hire an investigator.  We frequently help our married clients uncover hidden assets and it is not uncommon for one spouse to hide money in a secret company as Headley claims he did.  Using proprietary databases and other resources, we regularly find secret companies, unknown to one spouse, and position our clients to get all the information they need in discovery.

We also help clients find company affiliation information by using databases and individual secretary of state records, among other means.  In this case, it does not appear that “Advance I.M.E. Co.” is registered to do business in New York, however, the indictment indicates that “Advance I.M.E. Co.” may be a fictitious name for Headley’s company.  It states that Headley opened a business checking account at Bank of America in the name of “DBA Advance I.M.E., Co.”  We often find evidence of fictitious names in our databases and run searches at the county level to determine a company’s true legal name.  Had there been some form of vendor verification or approval process, outside of the purview of Headley’s transit authority girlfriend, a few quick searches might have revealed that Headley was the principal of the company.