Governmental authorities follow money trails in order to interdict assets hidden by narco-traffickers; money launderers; Ponzi schemers; tax fraudsters & other determined criminals. During your asset search, you can similarly follow a money trail to track assets which have been hidden from you. You might detect a money trail by scrutinizing data related to the person or business entity suspected of hiding assets.
You can collect this data in some situations, by issuing subpoenas; using compelled consent forms; or through additional legal tools. Below is the “Financial Investigations Checklist” & it includes a laundry list of items which contain data.¹ You may be able to collect some of the items the list mentions: bank account records; telephone records; utility company records; credit card statements & many others. Data at these kinds of items could conceivably help you follow a money trail to assets hidden from you.
(To Read The Financial Investigations Checklist, Click On The Following Image)
¹Financial Investigations Checklist, Courtesy of The United States Department of Justice.
First image: Picsfive/Shutterstock.com
Copyright 2016 Fred L. Abrams
If your adversary is using a business entity to conceal assets from you, one thing to look for is trade-based money laundering. A June 2006 report by the Financial Action Task Force explains that trade-based laundering schemes can include: the over or under-invoicing of goods or services; the over or under-shipping of goods; falsely describing goods or services; or multiple invoicing.¹ You can search for assets hidden via trade-based laundering by spotting the red flags. Page 24 of the June 2006 report describes the red flags and some of them are:
a disparity between a shipped commodity’s bill of lading and its invoice.
a disparity between a commodity’s value as recorded on its invoice and fair market value.
the shipping of goods although there is no profit/economic benefit.
a shipment with a nexus to shell companies.
letters of credit related to a shipment that have been amended or extended repeatedly.
the type of shipped commodity is inconsistent with the importer’s/exporter’s ordinary business activities.
shipping to or from a high-risk geographical location (i.e. a jurisdiction especially vulnerable to money laundering).
Pages 9-20 of the June 2006 report also provide 12 case studies showing how trade-based money laundering can be used to conceal one’s assets. The August 24, 2007 plea agreement of Gene Haas might describe another case of trade-based money laundering. Mr. Haas entered this plea agreement after his arrest on June 19, 2006 for suspected tax fraud. Attachment A at the plea agreement says the Enmark Aerospace and Supermill companies had provided Mr. Haas with invoices for fictitious purchases.
According to Attachment A, Mr. Haas paid Enmark & Supermill millions of dollars pursuant to these invoices; and Mr. Haas then took business deductions for “cost of goods sold.” Attachment A also indicates that Enmark and Supermill eventually returned the millions, (less a 2% kick back fee), to Mr. Haas through Mr. Haas’ intermediary, CNC Associates, Inc. Stated differently, it seems that Enmark, Supermill and CNC Associates could have been employed as laundering links in a money laundering circuit. After Mr. Haas’ plea agreement, Mr. Haas was sentenced on November 5, 2007 to two years in prison for violating 18 U.S.C § 371. Mr. Haas additionally paid a $5 million dollar fine and over $70 million dollars in back taxes owed for 2000 and 2001.
¹ See p.4 at “Trade-Based Money Laundering,” Copyright © FATF/OECD. All rights reserved.
Copyright 2007-2016 Fred L. Abrams
When naming offshore havens for opening secret bank accounts, people usually mention Switzerland, the Cayman Islands, Liechtenstein, etc. Meanwhile, bank accounts in almost any country can be put to work to hide & place assets out of reach. “Using Multiple Jurisdictions To Launder Money” discussed a suspected scheme to bribe judges in Italy. According to prosecutors, illicit proceeds from this offshore scheme were hidden in bank accounts located in the U.S. & elsewhere. “Money Laundering, Marital Assets & Divorce” outlines another scheme which relied on cross-border elements to conceal assets. The scheme involved a divorcing spouse in the U.S. who hid undeclared revenue in a Swiss bank & then “washed” it through a bank in Germany.¹
As the above essentially suggests, tracking assets offshore can become a critically important part of your asset search. How do you search for assets hidden offshore? One way is by employing legal tools. The following article discusses the tools federal prosecutors may use to collect evidence from witnesses residing offshore.² Two of the tools the article mentions are compelled consent forms & letters rogatory. These two tools are not just for use by prosecutors. They are sometimes used by divorcing spouses, judgment creditors & others searching for offshore bank accounts/assets hidden offshore:
Click On The Image To Read The Entire Article
¹The fact pattern supplied at “Money Laundering, Marital Assets & Divorce,” has been changed & sanitized for privacy reasons.
²“Obtaining Foreign Evidence Outside of The Mutual Legal Assistance Treaty Process,” U.S. Attorneys’ Bulletin March 2007, is supplied courtesy of the Executive Office for United States Attorneys.
Image of offshore banking & tax haven concept: ChameleonsEye/Shutterstock.com
Copyright 2016 Fred L. Abrams
As this 31st post in the “Divorce & Hidden Money” series reveals, you may be able to employ letters rogatory to detect assets hidden offshore.
A letter rogatory is an application to a foreign tribunal. It seeks permission to serve process on or gather evidence from a foreign witness. If you are in a divorce in the United States, letters rogatory can usually help you collect evidence of offshore assets your spouse hid from you. You might use letters rogatory to search for assets which can include: bank accounts; real estate; valuable art; business entities; etc. My February 25, 2015 post mentioned the use of letters rogatory in relation to divorce/child support cases in New York.
The February 25, 2015 post discussed one ex-husband who for 30 years failed to pay spousal maintenance &/or child support to his ex-wife in New York. Since the ex-husband lived in places like Mexico, the Dominican Republic & Barbados, legal proceedings in New York did not get the ex-husband to pay his ex-wife. Had the ex-wife been able to afford it, she might have hired lawyers to seek the issuance of letters rogatory to search for the ex-husband’s offshore assets. You may similarly employ letters rogatory if you are in a divorce outside of the United States & your divorcing spouse hid assets from you in the United States.
These kinds of cases are highlighted at Part 1 & Part 2 of “Asset Searches In The U.S. For Divorces Brought Outside The U.S.” Below is a translated copy of a letter rogatory arising out of a divorce in the Republic of Colombia at The 8th Family Court, in Barranquilla.¹ In connection with The Family Court’s distribution of community property from a marriage, the letter rogatory requests bank account/bank customer information at Bank of America in the United States.
¹The letter rogatory has been partly sanitized for privacy reasons.
Offshore Image With Cash: esfera/Shutterstock.com
Copyright 2016 Fred L. Abrams
In some situations, the transfer of large sums of cash is a red flag that assets have been hidden by money laundering. Government authorities therefore require banks to report their customers who transfer or exchange large sums of cash. For example, banks in the United States are required to report bank customers who deposit or withdraw more than $10,000 in cash. The banks fulfill this requirement by electronically filing a Currency Transaction Report.
A bank customer trying to evade the filing of a Currency Transaction Report can be prosecuted for structuring, (a.k.a “smurfing”), in violation of 31 U.S.C. § 5324. Opinion blogger Radley Balko talks about some of these prosecutions at “The federal ‘structuring’ laws are smurfin’ ridiculous.” As discussed by “An Asset Search Over Corruption Proceeds,” prosecutors accused former Russian diplomat Vladimir Kuznetsov of violating structuring law(s).
At Count Two pp. 6-9 of Mr. Kuznetsov’s superseding indictment, prosecutors alleged Mr. Kuznetsov had structured deposits he made in New York City at Chase Manhattan Bank & the United Nations Federal Credit Union. The following case study also discusses structuring.¹ It analyzes how a group of criminals hid illicit drug proceeds by structuring deposits, smuggling cash & going offshore:
Image of hand with money: Africa Studio/Shutterstock.com
¹Case Study/Case Ref: 06082 Courtesy Of The Egmont Group of Financial Intelligence Units
Copyright 2016 Fred L. Abrams
This is the 10th post in my series about what private investigators can and cannot do legally when searching for assets. The post discusses “K.C.” who was defrauded out of at least $500,000.00 by Patricia Walker-Halstead, a private investigator “K.C.” hired to investigate a suspected stalker. The post discusses wire fraud & bribery—which are issues that sometimes arise during an asset search or other private investigation:
“K.C.” a resident of Nebraska, thought she was being stalked. She therefore hired Patricia Walker-Halstead, (“Walker”), to investigate the alleged stalker. Between March 11, 2011 & November 28, 2012 “K.C.” made 59 payments to Walker Investigations, Walker’s private detective agency. Walker represented to “K.C.” that some of the payments would be given to “Scott.” Walker told “K.C.” that “Scott” was a Captain with the Nebraska State Patrol who could help with the investigation.
Walker even supplied “K.C.” with e-mails purportedly sent by “Scott” & represented that “Scott” was a potential romantic suitor for “K.C.” Walker however, never paid anyone at the Nebraska State Patrol named “Scott”, to investigate on behalf of “K.C.” As part of Walker’s scheme to defraud “K.C.”, Walker fabricated “Scott” & Walker had not performed any investigation. Given all of the foregoing, federal prosecutors in USA v. Walker-Halstead charged Walker with 11 counts of wire fraud. Walker’s indictment alleged the 11 counts were based on false e-mails Walker sent to “K.C.” about “Scott.”
Walker ultimately pleaded guilty to one count of wire fraud. On April 1st, Walker was sentenced to 12 months & 1 day of imprisonment & Walker was ordered to pay restitution to “K.C.” in the amount of $500,000.00. Under a fact pattern different than what is written above, prosecutors might also consider whether someone like “K.C.” intended to have a stalker investigated by bribing the Nebraska State Patrol. Bribing a local law enforcement officer can violate the federal program bribery statute codified at 18 U.S.C. § 666. As a manual for federal prosecutors explains:
[A] charge under 18 U.S.C. § 666 may nonetheless be appropriate if the solicitor or intended recipient of the bribe is a person who acts as an agent of an organization that receives in one year $10,000 or more in Federal grant, loan, contract, or insurance funds. U.S. Attorney’s Manual, 2044 Particular Elements, Web. May 11, 2016.
This 30th post in the “Divorce & Hidden Money” series highlights a RICO lawsuit Helga Glock commenced in 2014. The lawsuit alleges Glock pistol inventor Gaston Glock initially hid assets via shell companies supplied by Charles Ewert—a resident of Luxembourg known as Panama Charly.
Moneylaundering.com’s Editor-in-Chief Kieran Beer says at his April 11th article, that the Panama Papers represent “an unparalleled look at the…abuse of shell companies, in this case those created by Panama-based law firm Mossack Fonseca.” ¹ Like Mossack Fonseca, Charles Ewert was in the business of forming shell companies. Although based in Luxembourg, Charles Ewert was reportedly called Panama Charly because of the large number of shell companies he had formed in Panama. Charles Ewert is also one of the defendants at Helga Glock’s RICO lawsuit against her ex-husband gunmaker Gaston Glock.
The Court’s docket report shows that last month Helga Glock filed her proposed Second Amended Complaint, (“the Proposed Complaint”), in the RICO lawsuit. The Proposed Complaint asserts that Charles Ewert had supplied Gaston Glock with Panamanian shell company Reofin International S.A. The Proposed Complaint seems to basically allege that Reofin & other shell companies were used as laundering links to conceal assets in a money laundering circuit. It also seems to basically claim that assets belonging to Helga Glock were supposedly hidden from her through: lawyers; sham loans; trade-based money laundering via false invoices &/or leases.
According to allegations at the Proposed Complaint, Charles Ewert, Glock, Inc. & others were members of an alleged RICO enterprise led by Gaston Glock. The Proposed Complaint says that one goal of the alleged RICO enterprise was to deprive Helga Glock of her assets. It claims that Helga Glock detected this alleged scheme in 2011, because of her divorce from Gaston Glock & her ouster from one of Gaston Glock’s companies. Helga Glock apparently filed the Proposed Complaint to search for & recover assets Gaston Glock supposedly hid during the couple’s marriage. Earlier Asset Search Blog posts discussing Helga & Gaston Glock are “Helga Glock’s Search For Gaston Glock’s Assets” & “Helga Glock Claims Gaston Glock Started Concealing His Assets.”
¹Moneylaundring.com’s Webpage, “From The Editor: Will Panama Papers Give Governments New Backbone for Transparency?” Web. Last Viewed May 4, 2016.
Photo: NSC Photography/Shutterstock.com
Copyright 2016 Fred L. Abrams
This post was written by Leila A. Amineddoleh, Esq., Partner & co-founder at Galluzzo & Amineddoleh LLP. As the Galluzzo & Amineddoleh website mentions, Ms. Amineddoleh “has been published extensively on issues related to art, cultural heritage, and intellectual property, and has appeared in major news outlets, including the New YorkTimes, Forbes Magazine, TIME Magazine, and the Wall Street Journal.” Ms. Amineddoleh’s post discusses how art assets may be hidden from divorcing spouses, creditors & others. It is also the 29th post at the Asset Search Blog’s “Divorce & Hidden Money” series:
In an entry that was published on this blog, I discussed the ways in which art collectors use undisclosed art holdings and valuation uncertainties to evade legal responsibilities (such as payment of tax bills of alimony to divorced spouses). Just as Audrey Hepburn’s character discovered that her husband hid his wealth in three valuable stamps in the 1963 film “Charade,” art collectors have been using their collections to hide value for years. Difficulties related to valuation arise, particularly when it becomes impossible to locate the artwork or determine the identity of the actual owner. But with breaking news about the “Panama Papers,” suspicion about art’s role in the obstruction of justice and concealment of funds has been confirmed again. Wealthy individuals are using artwork as an investment tool and they are shielding these holdings through shell companies and misleading tools. In light of these facts, the art world is once again coming under scrutiny.
The art market is one of the least regulated markets in the world, as transactions are completed without oversight, due to the nature of the trade. It is particularly shocking as the value of the art market is astronomically high. According to Art Market Report, sales of art exceeded $63.8 billion in 2015.
However, there are valid reasons for anonymity in the art world. First and foremost, secrecy is guarded due to security concerns. Whereas tens of millions of dollars in cash are difficult to walk off with, artworks are usually portable. A single lightweight canvas may be worth over $100 million, making the object vulnerable to theft. It is important to protect information about the works in private collections to limit the information available to thieves fixated on the objects.
Another reason to hide information is more personal. Collectors may not want to admit to selling works due to poor cash flow. Some owners are forced to sell works when facing financial hardships. Those individuals do not want this information to become public. At the same time, buyers may not want competing buyers to procure an overabundance of information about their purchases. Art is a personal passion, and something that some collectors do not want made public.
However, art is also used to hide assets, evade taxes, and unfairly withhold value from deserving parties (like creditors or divorcing spouses). This regrettable use of art was confirmed after the leak of the “Panama Papers.” In April, a Panamanian law firm, Mossack Fonseca, experienced a security breach and had over 11 million documents from internal files become public. Although illegal to assist someone in tax evasion, Mossack Fonseca specializes in establishing corporate structures to hide assets. The information in the leak confirmed the suspicion that wealthy individuals use shell companies to hide assets in contemplation of impending divorces or litigation. Continue Reading
Last Wednesday, prosecutors in Panama seized dozens of computer servers belonging to the Panama Papers law firm, Mossack Fonseca. The prosecutors might be investigating whether Mossack Fonseca violated money laundering laws when it supposedly helped clients hide assets offshore. A U.S. State Department report published last month analyzed how money is laundered in Panama. The report said:
Money is laundered via bulk cash and trade by exploiting vulnerabilities at the airport, using commercial cover and free trade zones (FTZs), and exploiting the lack of regulatory monitoring in many sectors of the economy. The protection of client secrecy is often stronger than authorities’ ability to pierce the corporate veil to pursue an investigation. (U.S. Department of State International Narcotics Control Strategy Report for Panama, March 2016)
Money can also be laundered in Panama by putting shell companies to work, the same way shell companies are used to launder money in other parts of the world. Assets may be secretly transferred to a shell company &/or a shell company may be used to open a secret offshore bank account. In these situations, the shell companies may act as laundering links which wash assets in a money laundering circuit.
Mossack Fonseca was apparently in the business of establishing shell companies. Businesses that establish shell companies are usually called “nominee incorporation services,” as mentioned by the November 9, 2006 advisory from U.S. Treasury’s Financial Crimes Enforcement Network. The advisory essentially reveals that shell companies & nominee incorporation services can be a money laundering risk. The webpages of Panama Offshore Worldwide demonstrate the way one nominee incorporation service works.
At “Anonymous Panama Corporation” &/or “Panama Bank Secrecy,” Panama Offshore Worldwide seems to describe how you can open a secret offshore bank account by titling the account in the name of a Panamanian shell company. Panama Offshore Worldwide indicates that if you want additional anonymity, you should staff your Panama corporation with nominee directors (i.e. stand-ins/intermediaries):
We provide nominee directors for the corporation, so your name is not actually registered in the government’s documents and therefore cannot be traced back to you. The corporation is controlled with shares, which are registered by date at a notary and not accessible online like the directors of a corporation. (Panama Offshore Worldwide’s “Panama Bank Secrecy” Webpage. Web. April 16, 2016.)
Copyright Fred L. Abrams 2016
2008 was the first time I wrote an article mentioning hiding assets via a lawyer in Panama. The article was called “Bearer Shares & An Asset Search.” Although the facts at the article were sanitized & changed for privacy reasons, it described a divorcing husband in the U.S hiding assets from both his wife & the I.R.S. through: a Panamanian lawyer, bearer shares, a shell company & other offshore elements.
Meanwhile, there have been many articles this week discussing the Mossack Fonseca Law Firm headquartered in Panama City, Panama. These articles arise out of the investigation of Mossack Fonseca which is detailed at the “Panama Papers” website published by the International Consortium of Investigative Journalists. Among other things, the website has a page of graphs, with one graph called “The hunt for bearer shares.” This particular graph seems to suggest that Mossack Fonseca employed bearer shares to help clients hide assets offshore.
At its own website, Mossack Fonseca says they are “Offshore Specialists since 1977.” In this role, Mossack Fonseca is thought to have helped a large number of law-abiding clients transfer assets offshore for legitimate purposes. Mossack Fonseca could however, have also helped a large number of criminals seeking to conceal illicit assets. These criminals might have been tax cheats hiding undeclared revenue; corrupt government officials; & others seeking to conceal money by laundering it offshore.
Any criminals hiding assets through Mossack Fonseca will soon become known, since over 11 million documents at Mossack Fonseca were apparently hacked & leaked to the press. I suspect the hacked documents will show that assets were hidden offshore through elements commonly used to wash vast sums of money. Some of these elements are listed below & they should always be considered by anyone searching for valuable assets hidden from them.
Panama Papers Image: catwalker/Shutterstock.com
Copyright 2016 Fred L. Abrams