I do not know how many witnesses Brian interviewed while he was an IRS Special Agent or when he was a high-ranking official at U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”). Nor do I know the number of informants’ tips Brian collected over the course of his federal law enforcement career. I did however, watch Brian try to collect tips during the witness interview depicted below. I first wrote about the witness interview at an Asset Search Blog post published in 2008. I now supply this post because I believe the most effective way private investigators can search for hidden assets in some matters is through witness interviews & informants’ tips. This is the 6th post in my series about what private investigators can and cannot do legally while searching for assets:
The information supplied by foreign-based private investigators indicated the divorcing husband hid marital assets offshore. Evidence gathered during the divorce also suggested the husband might have committed a tax fraud in hiding the marital assets. To try to detect any additional assets hidden by the husband, I contacted Brian. Brian was a former high-ranking official at FinCEN and he had earlier been an IRS Special Agent. Brian was going to lead our interview of the husband’s business associate, who we were about to meet for the very first time. Right before the interview, Brian identified some of the federal statutes relevant to many tax fraud investigations:
26 U.S.C. § 6050I, large cash reporting requirements for trades & businesses (including attorneys).
26 U.S.C. § 7201, most commonly applied tax evasion statute (however requires proof of a tax liability).
I hoped that Brian and I would learn what the business associate knew about the divorcing husband’s hidden money and suspected tax fraud. As Brian started the interview, he told the business associate: “once a tax fraud investigation starts rolling along, nobody knows where it may end up.”
These tweets link to articles saying that Newark N.J. Police Captain Anthony Buono & Nutley N.J. private detective Dino D’Elia are suspected of conspiring to access a law enforcement computer/database. According to one article, “Buono and D’Elia allegedly obtained the personal data of approximately 900 individuals, selling each set for $100.” Mr. D’Elia &/or Mr. Buono are thought to have then possibly sold the data to private investigators &/or to data brokers. State prosecutors have charged Mr. Buono & Mr. D’Elia with supposed violations of New Jersey’s conspiracy & computer theft laws.
The instant post analyzes 2 mistakes I occasionally see divorcing spouses make when they consider whether to search for marital assets hidden from them. It is the 20th post in the “Divorce & Hidden Money” series:
A One-Size-Fits-All Strategy—Spouses in high net worth divorces may rely on a one-size-fits-all strategy to detect hidden marital assets. As part of this strategy, the divorcing spouses may hire domestic private investigators & domestic forensic accountants to respectively track or valuate marital assets. More than a one-size-fits-all strategy will however, likely be needed if assets are hidden offshore by laundering through multiple jurisdictions. When this occurs, offshore investigators and foreign legal proceedings can become necessary. The foreign legal proceedings may detect hidden assets and can consist of letters rogatory; compelled consent forms; or other legal tools.
A Wait-and-See Attitude— Many want to wait and see progress in their divorces before spending time & money searching for hidden marital assets. It can take months to gather legally sufficient evidence demonstrating that assets have been fraudulently concealed. Where vast sums of money are concealed in offshore bank accounts, it may even take years to collect bank account statements & account opening documents from foreign bank witnesses. Those who adopt a wait-and-see approach can run out of time to search for marital assets. They especially risk running out of time if they fail to adhere to the Court’s scheduling order for the divorce; & fail to search for assets during the pretrial discovery phase of their divorce.
To cheat you out of your fair share, your divorcing spouse, a business partner, an executor handling a decedent’s estate or someone else may hide assets from you. As a result of an asset search or other investigation you might uncover a money trail for these hidden assets.
If you follow the money trail & locate the assets, how do you then recover them? One way could be through a settlement with those hiding the assets from you. You might also be able to recover the assets by pursuing available legal remedies.
These remedies sometimes include proving to the Court that assets were hidden from you through nominees (i.e. intermediaries); fraudulent transfers; &/or trusts. To recover assets hidden these ways, you may have to demonstrate the following to the Court:
II. FRAUDULENT TRANSFERS—If there were badges of fraud when an asset was transferred, you might be able to recover the asset on the ground it was fraudulently transferred. The badges are used to prove fraudulent intent or an intent to hinder creditors. A fraudulent transfer is marked by the badges when assets are transferred in anticipation of a lawsuit or liability; when assets are transferred even though there is inadequate or no payment for them; etc. The badges are listed at Salomon v. Kaiser (In re Kaiser), 722 F.2d 1574 (2d Cir. 1983) and additional cases discussing them are at “Badges Of Fraud In Debt Collection, Divorce & Bankruptcy.”
III. TRUSTS—IRS Talking Points say that trusts can be misused “[t]o depreciate personal assets (such as a home)”; “[t]o deduct personal expenses”; “[t]o split income over multiple entities…”; “[t]o underreport income”; “[t]o avoid filing returns”; “to wire income overseas and fail to report it”; & “[t]o attempt to protect transactions through bank secrecy laws in tax haven countries.” If a trust is abused in these kinds of ways to hide assets, assets could conceivably be recovered from the trust.
Depending on the circumstances, you may recover trust assets by claiming the trust is only a nominee owner; or by claiming that assets were fraudulently transferred to the trust. It may also be possible to recover assets by piercing the trust veil on an alter ego theory. The gravamen of this claim would be that the individual hiding assets at the trust & the trust were inseparable. See United States v. Evseroff, No. 00-CV-06029 KAM, 2012 WL 1514860, (E.D.N.Y. Apr. 30, 2012) aff’d, 528 F. App’x 75 (2d Cir. 2013) (trust assets subject to collection/can be reached under nominee ownership, fraudulent conveyance and alter ego theories).
This video¹ discusses ways assets can be concealed via money laundering. As the video observes, billions are thought to be laundered worldwide & “laundering takes place within our everyday world of routine business transactions.”
Looking for laundered assets can be critical to a successful asset search, my last post says. The video embedded above explains how the laundering works. As more fully set forth at the video, the 3 laundering stages are known as placement, layering and integration. The video also mentions that criminals involved in terrorist financing; drug trafficking; weapons smuggling; fraud; theft; Ponzi schemes; etc., hide their illicit proceeds by laundering them.
Criminals are not the only ones hiding assets by washing them. Others with high-value assets, (including some divorcing spouses; judgment debtors; etc.), may conceal assets in money-laundering-like schemes. These schemes typically obscure who the true beneficial owners of the assets are. In other words, the schemes attempt to hide assets through a lack of financial transparency. Companies on the Internet like Capital Asset Mgmt. Assoc. Inc. seem able to add to this lack of transparency.
USE LEGAL TOOLS TO SNIFF OUT A MONEY TRAIL—Tools which may help detect your adversary’s money trail are available in legal proceedings ranging from divorces to bankruptcies. My May 18th post discusses one of these tools, 11 production requests geared toward detecting assets hidden offshore. Depositions are another legal tool for gathering evidence about your adversary’s assets. At a deposition, your lawyer should ask your adversary about any bank accounts; credit cards; real estate; etc. The IRS asks these questions at its Information Collection Statement, Form 433-A. The questions/material at the Form 433-A can be modified and used to depose your adversary about assets.
A divorcing spouse could conceivably hide the following types of assets offshore: bank accounts; business entities; trust funds; real estate; aircrafts & yachts; automobiles; fine art and other valuables. Leads which may help reveal the existence of these offshore assets might be elicited from a divorcing spouse’s: passport(s); frequent flyer mile program statements; tax filings; phone bills; etc.
This 19th post in the “Divorce & Hidden Money” series supplies 11 requests for production. The 11 requests seek disclosure of the above-mentioned kinds of documents. The 11 requests would be served with others, upon a divorcing spouse suspected of hiding marital assets offshore. This would happen during the discovery phase of the divorce. After the divorcing spouse, (referred to below as “Mr. X”), was served with these 11 requests, Mr. X would hopefully turn over his passport(s), frequent flyer miles statements and the additional documents—
Mr. X’s passport(s) which we may possess for 60 minutes to photocopy and return to Mr. X.
All of Mr. X’s telephone records, (including cell phone records), for the period of January 1, 2005 to date.
Documents relating to airplane tickets for all of Mr. X’s flights during January 1, 2005 up to the present date.
Frequent flyer mile program statements relating to Mr. X’s flights during January 1, 2005 up to the present date.
Documents relating to hotels Mr. X stayed at anytime during the period of January 1, 2005 to the present.
All Internal Revenue Service Forms 3520, (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts), for years 2005 to the present, filed or executed by Mr. X or on his behalf.
All Internal Revenue Service Forms 3520-A, (Annual Information Return of Foreign Trust With a U.S. Owner), for years 2005 to the present, executed or filed by or on behalf of Mr. X or any entity he beneficially owns.
All Financial Crimes Enforcement Network (a.k.a. FinCEN) Form 114’s, Report of Foreign Bank and Financial Accounts (FBAR); or TDF 90-22.1 FBAR forms, executed or filed by or on behalf of Mr. X for years 2005 to the present.
Documents relating to any foreign trusts Mr. X beneficially owned or formed or was employed by; was a grantor of; or was a beneficiary of; or was otherwise related to.
Documents relating to Mr. X’s travel outside of the United States any time during January 1, 2005 to present.
Documents relating to any business entity or person residing outside the United States with whom Mr. X, (or an entity he beneficially own[ed]), engaged in a business transaction, any time during the period January 1, 2005 to date.
As the Federal Trade Commission, (“FTC”), video depicted above reveals, data brokers (a.k.a. “information brokers”) and some other private sector businesses sell your highly personal information. The video says for example, your location, interests, prescriptions and medical history may all be “shared or sold.” Pages 22, 24, 34 & Appendix B-5 of a May 2014 FTC report similarly indicate that data brokers can search for your financial information including: where and when you open a bank account; estimated household income; the assets you own; loan history; credit card use and tax return transcripts.
The video shows how private sector businesses can collect your personal information through “mobile, social media, free internet search and more.” A March 9, 2014 60 Minutes episode entitled “The Data Brokers” sheds light on this situation. The 60 Minutes episode explains your computer’s browsers and your mobile devices permit businesses like data brokers to follow your click stream. Stated differently, private sector businesses are able to employ browsers and mobile devices to mine data and harvest your personal information.
According to the 60 Minutes episode, the end result is that people “are making dossiers…about individuals” and “[t]he largest data broker is Acxiom, a marketing giant that brags it has, on average, 1,500 pieces of information on more than 200 million Americans.” If you are not already convinced that the private sector’s collection of your personal information violates your privacy, perhaps Senator Richard M. Burr’s recent speech will convince you. As the transcript available here demonstrates, the Senator suggested during his speech last week that your private sector grocery store collects more information about you than the National Security Agency does.
My last 2 posts discussed asset recovery tools such as recognizing red flags & using compelled consent forms. Assets might also be recovered as a consequence of researching public records. This 18th post in the “Divorce & Hidden Money” series focuses on how one can perform a low-cost asset search by digging through public records/databases:¹
A divorcing spouse’s assets held in the form of personal injury or other type of legal claim, (if any), can sometimes be uncovered via court databases. Although limited to New York State courts, eCourts is a free database. After signing up for an access code, PACER enables one to conduct searches of federal courts nationwide.
III. Corporate & U.C.C. Searches
Free government websites including New York’s http://www.dos.state.ny.us/corps/ may provide ownership or other useful information about duly licensed New York businesses/corporations.
LexisNexis offers “SmartLinx” which is a fee-based service for attorneys, government authorities, etc. It can be used to search domestic public records. Records regarding real property, motor vehicles, telephone numbers, can often be accessed.
¹The instant post contains material courtesy of L.L. Jones, Concealing Assets In Bankruptcy: What Are the Consequences And How Do Trustees Find The Assets?, Association of the Bar of the City of New York (Presentation: April 24, 2008).
This 17th post in the “Divorce & Hidden Money” series details how compelled consent forms are sometimes used to gather confidential foreign bank account records. In Doe v. United States, 487 U.S. 201, 108 S. Ct. 2341, 101 L. Ed. 2d 184 (1988), the Court talked about using these forms in connection with grand jury proceedings. Compelled consent forms may also be used to collect financial evidence from foreign bank witnesses & in other situations. This post supplies a copy of the kind of compelled consent form I used when I sought evidence regarding a divorcing husband’s secret Swiss bank accounts in Geneva & Zürich:
A scheme to hide marital assets can be as basic as forming shell companies in order to secretly maintain monies in offshore bank accounts. One divorcing husband who carried out this sort of scheme is described at “An Asset Search In Switzerland”. This divorcing husband used a nominee, (i.e. an intermediary), to establish shell companies. The divorcing husband then instructed the director to use the shell companies to open the secret Swiss bank accounts.
The only bank account signatory listed on the Swiss accounts was this nominee director who the divorcing husband controlled. The divorcing husband eventually transferred millions in marital assets into his secret Swiss accounts. Uncovering much of the foregoing during the discovery phase of her divorce, the divorcing wife retained Swiss counsel. Swiss counsel advised that because of bank secrecy laws, legal proceedings/letters rogatory were needed in Switzerland to elicit evidence of the divorcing husband’s Swiss bank accounts.
To try to facilitate the release of the secret Swiss bank account information, the divorcing wife used a compelled consent form. The divorcing wife did this by seeking a court order requiring the director listed as the bank signatory, to execute a form authorizing the release of banking records. Once the director executed this compelled consent form, Swiss counsel could present the form to the Swiss banks in an effort to access the divorcing husband’s account opening documents, monthly bank account statements and other banking records. The following is one of the compelled consent forms,¹ employed in the divorcing wife’s legal matter.
¹ The compelled consent form herein has been sanitized/changed for privacy reasons.