An Asset Search For Automobiles

Posted on June 21, 2008 by Fred Abrams
Harold is an asset recovery agent, ("repo man"), who works in New England.  He sometimes lives out of his tow truck for a couple of days while searching for a particular debtor's automobile.  When I recently called Harold on his cell phone, he said: "Until I put the GPS in my tow truck, I had boxes and boxes of road maps.  I've also been doing most of my skip-tracing from the truck, right on my laptop.  I am in the middle of a repo right now and a lady is running out of her house into the street.  She is yelling at me, can I call you right back?"


 Harold does Internet research on his laptop via the website of IRB, at www.irbsearch.com.  IRB is a comprehensive search service similar to SmartLinx and DEBTORDiscovery, which were mentioned at my post "A Low-Cost Asset Search".  Harold often uses IRB to identify the name and address of a relative, friend or neighbor who may be hiding an automobile as a debtor's nominee.  Some debtors, divorcing spouses, etc. however, do not just simply use a nominee to conceal their automobiles.  In some debt collection, divorce or bankruptcy proceedings, an automobile may even be registered in or moved through multiple jurisdictions in order to conceal it.


In U.S.A. v. Henry, U.S. District Court for the District of Columbia, Index No. 1:06 Cr 00079, Mr. Henry for example, was accused of concealing his $113,000 dollar Porsche 911 during his Chapter 7 bankruptcy.  According to pages 11-14 of his Second Superseding Indictment, (and other documents), Mr. Henry had concealed his Porsche by temporarily registering / insuring it out of the District of Columbia in the name of a nominee-- his brother in New York. 


The Second Superseding Indictment further alleged that Mr. Henry had engaged in a health care fraud scheme, and had  purchased his Porsche with illicit proceeds from the same.  He was also accused of using his purchase of the Porsche as a means to launder money from his health care fraud.  Mr. Henry ultimately pleaded guilty to charges of health care fraud and agreed to forfeit his Porsche, as mentioned by paragraph "7" of the Government's plea offer.  As the Court's December 13, 2007 Judgment mentioned, Mr. Henry was sentenced to twenty months of prison.


Copyright 2008 Fred L. Abrams
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A Debtor & His Bankruptcy Fraud

Posted on November 13, 2007 by Fred Abrams
With the lawsuit ending in a large money judgment in favor of the Judgment Creditor, the Debtor filed for bankruptcy in order to protect his personal assets.  To collect on its judgment against the Debtor, the Judgment Creditor then filed a proof of claim as an unsecured creditor in the bankruptcy.  The Judgment Creditor thought that it would eventually receive the proceeds of the bankruptcy estate with the Debtor's assets, upon its liquidation by the bankruptcy court.


An investigation however, suggested that in order to cheat the Judgment Creditor out of its fair share of these proceeds, the Debtor had earlier mortgaged and given liens on all his property in favor of an offshore lender, Sham Creditor.  The Debtor had agreed to these mortgages and liens in consideration of phony loans which he had defaulted on.  Because of these phony loans and mortgages, Sham Creditor filed a secured proof of claim for millions in the Debtor's bankruptcy.


Nobody knew at the time Sham Creditor filed its secured proof of claim that, (in anticipation of his bankruptcy), the Debtor had transferred millions prepetition to Sham Creditor through offshore bank accounts and a nominee.  Nor did anyone initially know that Sham Creditor was just a shell corporation controlled by the Debtor through bearer shares, like the attached sanitized copy.
 

In fact, the Debtor pretended throughout his bankruptcy that his phony loans, mortgages and liens were all legitimate and that Sham Creditor was an ordinary arm's-length lender.  The Judgment Creditor soon realized that it would not be able to successfully compete with Sham Creditor for the limited assets in the bankruptcy estate.  This was true because Sham Creditor had filed a secured proof of claim, (unlike the Judgment Creditor), and therefore had priority over the Debtor's assets in the bankruptcy estate. 


The Judgment Creditor finally accepted a settlement offer from the Debtor, who had agreed to pay just a small amount of the large money judgment / unsecured proof of claim.  The Judgment Creditor had thrown in the towel because it lacked legally sufficient evidence that the Debtor had essentially filed Sham Creditor's proof of claim by using: bearer shares, phony loans, a shell corporation and a nominee.


Copyright 2007-2008 Fred L. Abrams
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Asset Search Indicia For Divorce, Debt Collection & Bankruptcy

Posted on October 14, 2007 by Fred Abrams
People don't typically think of the money laundering indicia when searching for hidden assets the subject of a: divorce; bankruptcy; commercial collection or other legal proceeding.  Such indicia can however be effectively used as part of an asset search even in situations where there is no money laundering.  In the United States, the indicia or red flags of money laundering are described at pages 19-23 and Appendix "F" of the Bank Secrecy Act / Anti-Money Laundering Examination Manual.  They are also described in Money Laundering Prevention, A Money Services Business Guide, at pages 16-24. 


Money laundering indicia are sometimes used outside of the United States.  For example, India's Financial Intelligence Unit relies on "broad categories of reason for suspicion"; the Belgian Financial Intelligence Unit ("CTIF-CFI") uses Money Laundering Indicators; the Swiss Federal Banking Commission has the Schedule: Indicators of Money Laundering ; and the Asia / Pacific Group on Money Laundering also uses such a list.  Recognizing the following money laundering indicia however, may lead to the discovery of assets concealed in a divorce, commercial collection or bankruptcy case:

Copyright 2007 Fred L. Abrams
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Bankruptcy Fraud, Money Laundering & Hidden Assets

Posted on October 5, 2007 by Fred Abrams
According to page nine of the 2005 U.S. Trustee's Annual Report:  "Every year since 1996, more than one million individuals and businesses have filed bankruptcy, making  the bankruptcy caseload the largest in the federal court system".  Since it detects and combats bankruptcy fraud, the U.S. Trustee Program is a critical part of the bankruptcy court system.  According to its June 2007 Report to Congress, the U.S. Trustee Program referred 925 criminal cases for prosecution in 2006.  This was a 24 percent increase from the 744 criminal referrals made by the Trustee Program in 2005. 


One kind of  fraud the Trustee Program is concerned with occurred when husband and wife Terry and Susan Brunning hid assets and laundered money the subject of their 2002 Chapter 7 bankruptcy case.  As their June 3, 2003 indictment explains, the Brunnings were suppose to disclose all their assets at the time of their Chapter 7 bankruptcy so that the bankruptcy court trustee could then liquidate the same for the benefit of creditors.  The Brunnings however instead hid over $1 million dollars in accounts at: San Diego National Bank; Abbey National Treasury Limited in the Isle of Man, Great Britain; and at Lloyds Bank, PLC in London.  The Brunnings had also concealed a $155,000 promissory note; a 1981 Rolls Royce; a 1990 Jaguar; and their 57-foot sailing yacht.  According to their indictment, the Brunnings had even concocted the fictitious creditor "Donna Kerns", in an effort to falsely claim the monies from the bankruptcy trustee's sale of their $155,000 promissory note.

On October 23, 2006, Terry Bruninng was finally sentenced to thirty-three months in prison plus three years supervised release after pleading guilty to two counts of 18 U.S.C. § 152 (Concealment of assets; false oaths and claims; bribery), and one count of 18 U.S.C §157 (Bankruptcy fraud).  At that same time, Susan Brunning similarly pleaded guilty to one count of 18 U.S.C § 152, and was sentenced to a prison term of six months plus three years of supervised release.


Copyright 2007 Fred L. Abrams
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Badges Of Fraud In Debt Collection, Divorce & Bankruptcy

Posted on August 27, 2007 by Fred Abrams
When financial transactions hide assets the subject of a debt collection, divorce, or bankruptcy case, the Court looks for badges of fraud.  As explained in Wall Street Associates v. Brodsky, 257 A.D.2d 526, 529 (1st Dept 1999), the badges of  fraud for fraudulent asset transfers are: 
  • A Close Relationship Between The Parties
  • A Transfer Outside The Ordinary Scope Of Business
  • Inadequate Consideration
  • Knowledge Of A Creditor’s Claim
  • Retention Of Control Of The Property
For example, in AMP Servs. Ltd. v. Walanpatrias Found. a.k.a. Doraw, 2006 slip op. 7985 ; 34 A.D.3d 231; 824 N.Y.S.2d 37 (1st Dept,  2006), the Appellate Division upheld an injunction against a debtor dodging a debt collection proceeding.  In applying New York Debtor and Creditor Law, the Appellate Division ruled that the debtor could not transfer a stock portfolio offshore to Europe because there were badges of fraud as mentioned by Wall Street Associates, 257 A.D.2d 526.


In another Appellate Division case, Dempster v. Overview Equities, Inc., 2004 slip op. 01149 ; 4 A.D.3d 495; 773 N.Y.S.2d 71 (2d Dept 2004), a divorcing husband transferred his residence to a Delaware corporation just before his valuation/equitable distribution hearing.  Since the Delaware corporation had filed for bankruptcy, the residence was eventually sold by the bankruptcy court as a corporate asset.  The husband in Dempster had also diminished his net worth by alleging he had a $1,473,362.74 debt because of two confessions of judgments from construction loans.


Since the the above transfer happened just two weeks before the valuation hearing, the Appellate Division found it "replete with badges of fraud".  The Appellate Division further stated that the Delaware corporation had been created only two days before the residence was transferred to it and that the corporation had operated from the very same address as the husband's other businesses.  According to the Appellate Division, the husband's residential transfer and construction loans also violated New York Debtor and Creditor Law because they had occurred without any monies ever being paid, (i.e. without "fair consideration").


In Allan J. Bentkofsky, Trustee v. Ralph J. Malandra, et. al., United States Bankruptcy Court, N.D.N.Y.,  Adv. Pro. No. 00-80221, the Court also found there were badges of fraud when a husband and wife transferred their residence to their children.  Despite the transfer, the husband and wife continued to live at the residence because they had retained a life estate interest.  Since the couple had filed a Chapter 7 bankruptcy petition, the Bankruptcy Court analyzed the residential transfer only to discover that it had occurred without any payment of money/was without "fair consideration".  The couple had also made the transfer at a time they had been insolvent.  Given these facts, the Court found there were badges of fraud and set aside the transfer as it violated New York Debtor and Creditor Law.


Finally, badges of fraud can sometimes be used in debt collection, divorce, or bankruptcy cases to demonstrate that an opposing party has hidden assets or removed property with "actual intent" to defraud.  Robert M. Morgenthau v. A.J. Travis Ltd., 708 N.Y.S.2d 827, 842 (N.Y. Sup. Ct. 2000); Wall Street Associates, 257 A.D.2d at 529.  The badges can also become important in court because a concurrence of several badges always makes a strong case for fraud. Gafco Inc. v. H.D.S. Mercantile, 47 Misc. 2d 661, 665 (N.Y. Civ. Ct. 1965).


Copyright 2007 Fred L. Abrams
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