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Investigating & Recovering Hidden Money & Other Assets

Red Flags & The IRS Search For Attorney Memmott’s Assets

Posted in Asset Search/Fraud Investigation, Hidden Money, Tax Fraud, White-Collar Crime Generally

My January 13th post notes that divorcing spouses can employ nominees, (i.e. intermediaries), to secretly purchase property, conceal bank accounts, etc.  Prosecutors claimed Attorney Orion Douglas Memmott similarly used nominees to hide assets from the IRS.  Mr. Memmott’s 2010 superseding indictment asserted Mr. Memmott hid assets from the IRS by “placing real property in the names of nominees…” It charged him with attempted tax evasion (26 U.S.C. § 7201) and perjury/false statements (26 U.S.C. § 7206 (1).  Prosecutors alleged Mr. Memmott hid real estate titled in the name of Mr. Memmott’s nominee, his ex-wife Sheila Enos-Boyd.  Mr. Memmott was found guilty of these charges and on December 15, 2014, the Court sentenced him to 18 months of prison.

THE RED FLAGS

A) Nominees

In addition to hiding real estate through his nominee, prosecutors accused Mr. Memmott of embezzling hundreds of thousands of dollars from law firm clients and friends.  One of Mr. Memmott’s victims was Merrill Osmond, lead singer of the world famous Osmond family.  Mr. Memmott is believed to have embezzled $60,000 from Mr. Osmond.  Another victim was Ms. Ranelle Wallace, who was left homeless by Mr. Memmott because he reportedly embezzled $37,000 from her.  Prosecutors claimed Mr. Memmott hid these and other funds he embezzled, in business bank accounts belonging to his nominees.  Mr. Memmott’s suspected use of nominees to conceal assets, was just one red flag of fraud in his case.  Other red flags were: Mr. Memmott’s claim at his June 9, 2005 IRS Form 433-A, that he had no bank accounts; Mr. Memmott’s alleged use of back-dated promissory notes; and Mr. Memmott’s suspected use of a business bank account instead of a trust account.

B) Mr. Memmott’s June 9th 433-A Form

Click Here for the June 9th 433-A Form¹

When the IRS determined that Mr. Memmott owed about $655,555 in unpaid personal federal income taxes for years 1993-1999, it assigned IRS Revenue Officer Miller to search for Mr. Memmott’s assets.  On June 9, 2005 Officer Miller had Mr. Memmott execute an IRS Form 433-A, Collection Information Statement.  At this June 9th Form, Mr. Memmott indicated he had no personal bank accounts.  This was a red flag for Officer Miller who testified at Mr. Memmott’s trial that: “I just found it very odd that the defendant was an attorney, a businessman, he was receiving Social Security, but he had no personal bank accounts. So that was kind of an indicator of fraud for me because it just was so out of the ordinary to have someone of that stature not have a personal bank account.”   Continue Reading

Divorce & Hidden Money: Mr. Benjamin’s Divorce & His White Collar Crimes

Posted in Asset Search/Fraud Investigation, Divorce & Child Support, Divorce & Hidden Money, Hidden Money, Tax Fraud, White-Collar Crime Generally

I first published this post on December 14, 2007 and it is now the 12th post in the “Divorce & Hidden Money” series.  As shown below, a divorcing spouse’s effort to valuate marital assets occasionally raises tax fraud or other criminal law issues.  Furthermore, assets and income can be concealed by pocketing cash; using a business bank account to pay personal expenses; and cashing checks instead of depositing them into a bank account:

As my post “Divorce, Child Support & Reporting Tax Fraud” mentioned, divorcing spouses sometimes tip the IRS about a suspected tax fraud.  Mrs. Benjamin for example, tipped the IRS because she thought that her divorcing husband had underreported revenue from his commercial maintenance and landscaping business.  She specifically provided the IRS with the business documents Mr. Benjamin had produced during the pretrial discovery phase of their divorce case.  These documents included payment summary records from Mr. Benjamin’s customers like Wal-Mart.  As part of her tip to the IRS, Mrs. Benjamin also turned over joint tax returns which Mr. Benjamin had supposedly filed for the years 1998 and 1999.

A records check at the IRS however demonstrated that the 1998 and 1999 joint tax returns had never actually been filed by Mr. Benjamin.  The IRS also learned that from 1997 through 2001, Mr. Benjamin had neither paid income tax nor filed state or federal income tax returns.  IRS Special Agents then received false information from Mr. Benjamin when they interviewed him at his home on June 26, 2002.  The IRS also reviewed Mr. Benjamin’s bank accounts and conferred with Wal-Mart along with Mr. Benjamin’s other customers.  As a consequence of its asset search and tax fraud investigation, the IRS finally determined that Mr. Benjamin’s total gross receipts or sales between 1998 and 2001 had actually been about $1,139,470.18; and that Mr. Benjamin had a $129,396.91 tax liability.

The IRS further recognized that Mr. Benjamin had hidden assets and income by: pocketing cash payments from customers; paying personal expenses from a business bank account; and cashing customers’ checks instead of depositing them into his bank account.  During its investigation, the IRS additionally discovered that Mr. Benjamin had defrauded Wal-Mart through a false invoicing scheme.  By seeking payment for services he had never performed, (and faxing Wal-Mart twenty-two phony invoices between February 2001 and January 2002), Mr. Benjamin had duped Wal-Mart out of $417,583.

The IRS criminal investigation started by Mrs. Benjamin’s tax fraud tip eventually led to Mr. Benjamin’s 58 count indictment on July 27, 2005 in U.S.A. v. Benjamin, Index # 05-Cr-00348, U.S. District Court, District of Colorado.  Pursuant to his January 5, 2006 plea agreement, Mr. Benjamin pleaded guilty to violating 26 U.S.C. § 7201 (tax evasion) and 18 U.S.C. § 1343 (wire fraud).  Because of his white collar crimes, Mr. Benjamin was sentenced on June 16, 2006 to serve two years in prison followed by three years of supervised release.  As Mr. Benjamin’s sentence and criminal judgment both mentioned, he was also directed to start making restitution payments to Wal-Mart after his release from prison.

(Edited 1/30/15)

Copyright 2007-2015 Fred L. Abrams

Looking Back At Breaking Bad & Some Suspected Asset Concealment Schemes

Posted in Asset Search/Fraud Investigation, Drug-Related Assets, Hidden Money, Holocaust-Era Assets, Money Laundering, Swiss Banks, Tax Fraud

In the Breaking Bad television series, Walter White hid profits from his illegal manufacture of methamphetamine.  He hid illicit drug profits in a crawl space under his house, as the video above partly reveals.  Walter and his wife Skyler also laundered money through the A1A Car Wash.  Walter’s partner in crime, (Breaking Bad’s Jesse Pinkman), purchased real property with illicit cash and drug kingpin Gustavo Fring opened 12 secret Swiss bank accounts.  These asset concealment schemes were described by my post “How Walter White Could Take His Money To A Swiss Bank .”  My post also mentioned Walter could have concealed his illicit profits by using diamonds, as set forth at “Secreting Assets Without A Border Trace.”

“Secreting Assets Without A Border Trace” discussed the fact pattern of a Ponzi schemer who might have travelled to Luxembourg and then concealed Ponzi scheme proceeds in a secret bank account there.  Besides the above-mentioned asset concealment schemes, there are countless others.  The following posts also describe what conceivably could have been fact patterns involving asset concealment schemes.

Video: Courtesy of AMC Network Entertainment, LLC

Copyright 2015 Fred L. Abrams

Divorce & Hidden Money: Three Tactics Your Spouse May Use To Cheat You Out Of Marital Assets

Posted in Asset Search/Fraud Investigation, Divorce & Child Support, Divorce & Hidden Money, Hidden Money

Like my posts dated July 3 &  February 3, 2014 & December 9, 2013, today’s post outlines tactics for hiding assets.  Today’s post is also the 11th post in my Divorce & Hidden Money series.  

Your divorcing husband/wife may try to cheat you out of your fair share of marital assets by employing the following tactics in anticipation of a valuation, equitable distribution or other court hearing:

  1. NOMINEES:  Paramours, friends, family members or business entities might secretly purchase real estate, automobiles and other valuables on behalf of a divorcing spouse, as nominees (i.e. intermediaries).  A divorcing spouse may also utilize nominees to open bank accounts which the divorcing spouse then transfers his/her cash to.  Some additionally conceal these nominee bank accounts by hiring a third party to be the signatory on the accounts, as discussed at this webpage offering a nominee bank signatory service.
  2. FRAUDULENT TRANSFERS:  When fraudulent transfers are used to hide assets the subject of a divorce, the Court looks for suspicious circumstances known as badges of fraud.  For example, the Court in Dempster v. Overview Equities, Inc., 773 N.Y.S.2d 71 (2d Dept 2004), commented that a divorcing husband’s transfer of his residence to a Delaware corporation was ‘replete with badges of fraud.’  This transfer occurred during the divorce just before the valuation trial of the husband’s business interests.  The Delaware corporation also operated from the same address as the husband’s other businesses and was formed only two days before the residence was transferred to it.
  3. ALTERED RECORDS:  Mr. Harold Hamm’s $17 billion ownership interest in Continental Resources, Inc. was at stake in his divorce from Ms. Sue Ann Arnall.  A September 24th Reuters article suggests Continental could conceivably have altered its website and a U.S. Securities Exchange Commission filing, to diminish Continental’s accomplishments under Mr. Hamm’s leadership.  Since Ms. Arnall reportedly argued that Mr. Hamm’s labor enhanced Continental’s value, the altered records had the potential to reduce Mr. Hamm’s divorce payout to Ms. Arnall.  Meanwhile, Mr. Hamm is believed to have basically asserted that the altered records at Continental’s website were revisions to inaccuracies. Furthermore, the Daily Mail reports the couple recently reached a divorce settlement which is the 2nd largest in U.S. history.

Image Courtesy of Flickr (Licensed) by West Midlands Police

Copyright 2014 Fred L. Abrams

Private Investigators: A Surreptitious Search For Money Hidden In Divorce & Other Cases

Posted in Asset Search/Fraud Investigation, Bank Search, Divorce & Child Support, Divorce & Hidden Money, Financial Institutions, Hidden Money, Illegal Asset Searches, Privacy Laws, Private Investigators

This is the 2nd post in my series about private investigators & what they can & cannot do legally when searching for assets.  It is also the 10th post in my Divorce & Hidden Money series.  The Huffington Post article “Uncovering Hidden Assets In Divorce Litigation” observes that information obtained by “surreptitious means” might be used by one divorcing spouse against the other.  Obtaining information through a surreptitious search can be critical to recovering assets in a broad range of criminal & civil cases.  Depending on the circumstances, surreptitious searches might involve wiretaps; bank searches; law enforcement databases; and physical surveillance.  These surreptitious means have however, sometimes been abused by private investigators, attorneys & others in the following ways:

WIRETAPS- As stated in testimony at a 1967 U.S. Senate hearing ‘private bugging in this country can be divided into two broad categories, commercial espionage and marital litigation.’ ¹  Former attorney Mary Nolan handled divorce & family law matters for nearly 30 years before pleading guilty to the wiretapping & tax fraud charges at counts 1-4 &/or 6 of her 2012 criminal indictment.  An amended judgment showed Ms. Nolan was sentenced to serve 24 months in prison, 3 years of supervised release, etc.  Ms. Nolan’s sentencing memorandum said her cases frequently involved allegations that husbands were hiding assets.  The prosecutor’s sentencing memorandum meanwhile, claimed Ms. Nolan had employed a private investigator “to install eavesdropping devices in cars used by her clients’ spouses for use in their divorce proceedings.”

BANK SEARCHES- Some private investigators try to surreptitiously search banks in the U.S. for accounts secretly opened by divorcing spouses, debtors, etc.  These investigators may claim they search through computer research; insiders; or information brokers.  Private investigators cannot ordinarily search banks legally because of privacy and other U.S. laws, as explained by the post available here.   The Court has also noted “it is more likely than not that the only way that information brokers can obtain private financial information from banks is through the use of deception and trickery, including impersonation of account holders.”  Commonwealth v. Source One Associates, Inc., No. CIV. A. 98-0507-H, 1999 WL 975120, at *6 (Mass. Super. Oct. 12, 1999) aff’d sub nom. Com. v. Source One Associates, Inc., 436 Mass. 118, 763 N.E.2d 42 (2002). Continue Reading

Detecting Hidden Assets By Putting Tipsters To Work

Posted in Asset Search/Fraud Investigation, Divorce & Child Support, Hidden Money, Money Laundering, Securities Fraud, Tax Fraud

How can one detect assets one is unaware of?  Sometimes by putting tipsters to work and collecting their tips.  These tips may be gathered in a variety of ways.  “An Asset Search, Tax Fraud & Divorce” describes a private investigation in which a prospective tipster was interviewed by “Brian”, an ex-IRS Special Agent and former high-ranking official at FinCEN.

Brian conducted the interview on behalf of a divorcing wife trying to locate marital assets hidden by her divorcing husband.  “Warsaw Prosecutors Eye Possible Money Laundering At 50 Platowcowa Street” mentions a tip supplied by an anonymous letter.  This tip letter caused Polish prosecutors to launch a money laundering investigation and search for assets connected to a suspected shell company in Delaware.

Meanwhile, the whistleblower programs at the U.S. Internal Revenue Service and the U.S. Securities Exchange Commission, (“the Commission”), also collect tips.   The two programs respectively sniff out tips about assets hidden in tax or securities frauds.  The article “What Happens To An SEC Whistleblower Tip?” available below, gives an insider’s view of the Commission’s whistleblower program.  One of the article’s authors is Jordan A. Thomas, a former assistant director in the Commission’s Enforcement Division.  Mr. Thomas had a leadership role in developing the Commission’s whistleblower program and he is now a partner and chair of the Whistleblower Representation Practice at Labaton Sucharow LLP.

What Happens To An SEC Whistleblower Tip?¹

One of the questions we’re frequently asked by clients and prospective clients is “what happens to a whistleblower tip once it’s submitted to the SEC, and how does the SEC determine which tips to actively investigate?” These are crucial questions for any potential whistleblower, especially given that the SEC receives approximately 30,000 tips, complaints and referral each year – 3,200 of which were whistleblower tips in 2013 – but can only conduct about 700 active enforcement investigations each year. Continue Reading