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.
If a divorcing spouse hides marital assets there usually are red flags. Red flags are also often found when assets have been hidden by tax fraudsters, Ponzi schemers, bankruptcy debtors, money launderers & narco-traffickers. This 16th post in the “Divorce & Hidden Money ” series examines the red flags.
This post describes a case in which illicit drug monies were concealed offshore and laundered via a Cayman Island bank account. The case is also about tax fraud; identity theft and a murder. I published the post earlier at the Asset Search Blog and have used the post as a handout at many of my speaking engagements. It is an example of how financial fraudsters can operate. Some of the facts below have been changed/sanitized for privacy reasons. The following occurred over a four month period during 2002:
As part of his tax fraud, “Mr. Wallace” contacted a Cayman Island bank by mail in order to open a personal account with it. He mailed account opening documents to it which included a copy of his U.S. passport and also supplied the names of references. According to these documents, Mr. Wallace lived in Miami and was a real estate developer. Based upon all of the foregoing, the Cayman Island bank opened Mr. Wallace’s personal account with a “O” balance. Just six days later however, bank “X” in Panama wired $6.3 million to Mr. Wallace’s Cayman account without any mention of the remitter.
Mr. Wallace then went on a business trip to Central America for several months; so he rented his Miami home to “Chuck”. Although Mr. Wallace hadn’t known at the time, Chuck was a small-time crook. In fact, soon after Chuck took possession of Mr. Wallace’s home, Chuck started stealing Mr. Wallace’s mail. One of the letters Chuck had stolen was written by “Bob”, a personal banker from the Cayman Island bank where Mr. Wallace maintained his account. Bob had written to Mr. Wallace about a lucrative investment opportunity.
THE IDENTITY THEFT & MURDER
Surmising from Bob’s letter that Mr. Wallace had a sizable bank account, Chuck wrote to Bob pretending to be Mr. Wallace. As the sanitized copy of Chuck’s First Letter partly demonstrates, Chuck had assumed Mr. Wallace’s identity in that particular letter by forging Mr. Wallace’s signature. To comfort Bob, Chuck’s First Letter had also asked Bob for the minimum balance required to keep Mr. Wallace’s account open. Chuck’s “softening up” letter further suggested to Bob that Mr. Wallace’s funds might soon be needed “at very short notice” for an alleged real estate deal in Mexico. In the sanitized copy of Chuck’s Second Letter, Chuck again pretended to be Mr. Wallace as he wrote to Bob at the Cayman Island bank. In his Second Letter, Chuck directed the wire transfer of Mr. Wallace’s funds from the Cayman Island bank to Chuck’s own bank account in Mexico. Continue Reading
At the New York County Lawyers’ Association on October 13, 2015 from 5:30 PM to 9:00 PM, I will be the program chair of “Whistleblowers, Secret Swiss Bank Accounts & Recovering Hidden Assets.” Attendee registration opens in the Fall & will be available through the New York County Lawyers’ Association. During the course I show how to search for assets which can be hidden by high net worth divorcing spouses; corporations; Ponzi schemers; tax fraudsters; etc. I describe methods the private sector and governmental authorities both use to recover hidden assets. These methods range from employing civil &/or criminal law tools to collecting whistleblower tips. Among other things, the course highlights the Internal Revenue Service & Securities Exchange Commission whistleblower programs which can provide qualifying tipsters with the largest payouts compared to any other reward programs in the world.
As a partner at the Geneva, Switzerland law firm Des Gouttes & Associés, Robert Fiechter represents Swiss financial institutions and bankers. Advocate Fiechter has served as a Deputy Judge at the Court of Justice of Geneva (i.e. the Appellate Court); been a substitute criminal judge; & acted as Deputy Secretary of the Supervisory Board of the Swiss Bank’s Code of Conduct, (regarding the exercise of due diligence). Advocate Fiechter will speak at the May 4th course about Swiss bank accounts; Swiss reforms; tax evasion; and the concealment of assets through money laundering. He will additionally discuss Mr. Hervé Falciani, the whistleblower the media dubbed “the [Edward] Snowden of Swiss banking.” Mr. Falciani allegedly stole Swiss bank account information from HSBC in Geneva and as a whistleblower turned the information over to French authorities. This alleged HSBC bank account information eventually fell into the hands of the International Consortium Of Investigative Journalists, which published part of it at their webpages known as the Swiss Leaks project.
Washington, D.C. attorney Jack Blum is well-known internationally for his representation of whistleblowers. Like Advocate Fiechter, Mr. Blum will talk at the May 4th course about Mr. Falciani, HSBC and the Swiss Leaks project. During a February 8, 2015 interview by CBS/60 Minutes, Mr. Blum analyzed the HSBC bank account information allegedly stolen by Mr. Falciani. At his February 8th appearance, 60 Minutes introduced Mr. Blum by saying “[f]ew people know more about money laundering and tax evasion by banks than Jack Blum (emphasis mine).” Mr. Blum will additionally discuss the IRS whistleblower program; problems whistleblowers face in the real world; and the difficulty lawyers may encounter in dealing with whistleblowers either as clients or tipsters.
Labaton & Sucharow partner Jordan A. Thomas will also speak at the May 4th course. As one of the world’s leading experts on the Securities Exchange Commission’s whistleblower program, Mr. Thomas will discuss this program. He will coverthe advantages and disadvantages of the different whistleblower programs; and the ethical concerns gatekeepers like attorneys, accountants, officers and directors have, in reporting illegal behavior in both the civil and criminal contexts. Asmore fully set forth below, Mr. Thomas: is a former assistant director in the Commission’s Enforcement Division; had a leadership role in developing the Commission’s whistleblower program; and was assigned to many of the Commission’s highest-profile matters such as those involving Enron, Fannie Mae, UBS & Citigroup. Continue Reading
When vast sums of money are hidden in a bank account there is usually an electronic trace or other kind of money trail. A skilled investigator may help detect the money trail, as suggested by my 2010 post Secreting Assets Without A Border Trace. The post quoted “Roger” a former foreign intelligence officer who was working as a private investigator. At the post, Roger discussed some asset concealment methods and investigative techniques for following a money trail. As these concealment methods and investigative techniques are still being used, the relevant part of Secreting Assets Without A Border Trace is featured below. This is also the 4th post in my series about what private investigators can and cannot do legally when searching for assets.¹
As a consequence of his U.S.-based Ponzi scheme, Bill the investment adviser was indicted for alleged violations of 18 U.S.C. § 1956 (money laundering); 26 U.S.C. § 7201 (tax fraud); 18 U.S.C. §§ 1341 and 2 (mail fraud); 15 U.S.C. §§ 78j(b) and 78ff(a) (securities fraud); and 15 U.S.C. §§ 80b-6 and 80b-17 (investment adviser fraud). The critical question now was: what had happened to the $35 million dollars lost by the damaged investors in Bill’s Ponzi scheme? After Bill insisted he dissipated this $35 million by gambling and on cocaine, prostitutes, etc., federal agents interdicted $1 million U.S. dollars hidden in a bedroom wall at Bill’s California home.
Among the other items the agents seized during their search of Bill’s home, were Bill’s passport, desktop computer, cell phone, bank statements and jewelry store receipts. Some of these items revealed that Bill laundered $7.5 million of the damaged investors’ money through a nominee bank account opened in the name of a Nevada shell company.
Bill had eventually withdrawn this $7.5 million to purchase diamonds and other portable valuable commodities at Nevada jewelry stores He next traveled as an airline passenger to Zurich, Switzerland, according to his passport. To date, the only recovery from Bill’s Ponzi scheme has been the $1 million once hidden in his bedroom wall. Given all of the above, “Roger” explained how investigators could try to determine whether Bill had secreted any of the $35 million in a foreign bank account: Continue Reading
A spouse can use the pretrial discovery phase of a divorce to gather evidence about any marital assets concealed by a trust. Based on this evidence, the divorcing spouse may be able to credibly argue that assets at the trust are marital property subject to distribution by the Court. A divorcing spouse might also claim the trust was void if the trust was “self-settled” (i.e. the grantor and beneficiary were found to be one and the same). Under certain circumstances a divorcing spouse can additionally assert the trust veil should be pierced because the trust wrongly concealed assets &/or facilitated fraudulent transfers. SeeBabitt v. Vebeliunas (In re Vebeliunas), 332 F.3d 85, 91 (2d Cir. 2003) (discussing New York cases where right to pierce trust veil was preserved).
Below is a demand for documents, (i.e. a production request) and demand for answers to interrogatories employed by the Chapter 7 trustee in the Seattle, Washington Michael Mastro bankruptcy case. The Chapter 7 trustee made these demands suspecting Mr. Mastro hid assets at trusts. Mr. Mastro had formed LCY Trust under Belizean law and it had a Belizean trustee, called “Compass Trust Corporation.” The Chapter 7 trustee’s demands sought information regarding the location of assets, transfer of assets, banking records, etc. They give a glimpse of the kind of evidence a divorcing spouse should collect if a trust is thought to conceal marital assets.
(To Access The Discovery Demands Click On Each Image)