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Divorce & Hidden Money

Real Estate Leskovskiy
A divorcing spouse can hide marital assets by laundering them in a scheme to purchase real estate.

This 26th post in the “Divorce & Hidden Money” series describes one way assets may be laundered through the purchase of real estate.  It supplies the hypothetical situation of “Mark,” a high net worth businessman in the U.S. who hid assets during his divorce.

To hide assets from both his divorcing wife & the IRS, Mark secretly formed a shell company which he used to open an offshore bank account.  Mark hid his beneficial ownership of the shell company & bank account by hiring nominees (i.e.  intermediaries).  Mark employed the nominees as directors of his shell company & they acted as nominee bank signatories on Mark’s offshore bank account.

After Mark opened the offshore bank account, Mark relied on illicit cash couriers, (a.k.a “money mules”), to smuggle the undeclared revenue/cash Mark had accumulated from his business in the U.S.  After the illicit cash couriers smuggled Mark’s cash offshore, Mark deposited it into the offshore bank account he opened in the name of his shell company.  Through his lawyer, Mark then used the cash in this bank account to purchase real estate located in an offshore tax haven.  Mark’s lawyer titled Mark’s newly acquired real estate in the name of Mark’s shell company; and Mark successfully hid his beneficial ownership of the real estate from his wife & the IRS.

A search for assets hidden by a high net worth spouse like Mark, should try to determine whether real estate could have been used as a concealment tool.  When real estate transactions are used to launder or otherwise hide assets, red flags involving lawyers are usually present.  According to pp. 12-13 of a 2013 money laundering report by the Eastern and Southern African Anti-Money Laundering Group¹ these red flags can include the use of: large amounts of cash; intermediaries; money laundering havens; complex structures; business entities and trusts:

“a) Use of large amounts of cash to purchase property involving legal practitioners who do not report STRs [Suspicious Transaction Reports] giving the conclusion that they are either complacent in the money laundering or give a blind eye to circumstances relating to the payment where they could have asked more questions;

b) Distorting information on ownership by using intermediaries and false particulars during purchase of the property through a legal practitioner;

c) Legal practitioners facilitating quick money laundering havens through aborted property transactions where the initial deposited amount has to be paid back or transferred to another account from the legitimate client/trust account of the
lawyer;

d) Instances where legal practitioners have assisted with setting up complex structures to purchase real estate; and

e) Avoiding exposure of the beneficial owner by using the legal practitioner to purchase the property through a company or a trust.”

¹Typologies Report On Money Laundering Through The Real Estate Sector In The ESAAMLG Region Courtesy of: The Eastern and Southern African Anti-Money Laundering Group.

Image: Vycheslav Leskovskiy/Shutterstock.com

Copyright 2015 Fred L. Abrams

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An asset search may reveal that your spouse is hiding assets from you during your divorce.  You might then be able to sue your spouse & possibly others for fraudulently concealing assets.  As this 25th post in the “Divorce & Hidden Money” series shows, you may be able to sue on the ground that assets were  fraudulently conveyed away from you:

Before leaving New York, the divorcing husband in Skiff-Murray v. Murray¹ fraudulently conveyed his business and former marital residence to his newly created Nevada corporation.  Violating a restraining order, the husband next conveyed the residence from his Nevada corporation to his aunt and uncle.  The aunt and uncle then mortgaged the residence to a third party.

According to the Court in Skiff-Murray, the divorcing husband had “…made it impossible for plaintiff [the wife] to enforce her judgments for child support arrears or obtain the maintenance, distribution of marital property and counsel fees awarded in the judgment of divorce.”  After the divorce was over, the now ex-wife filed a lawsuit against the aunt; uncle & others. The lawsuit alleged the residence had been fraudulently transferred.  It asked the Court to set the transfer aside under N.Y. Debt. Cred. Law. §§ 270 – 281, which is the codified version of the Uniform Fraudulent Conveyance Act. Continue Reading Divorce & Hidden Money: Suing Your Spouse For Fraudulently Conveying Assets

shutterstock_226179493Many Asset Search Blog articles emphasize the role intermediaries, (i.e. “nominees”), can have in asset concealment schemes.  This 24th post in the “Divorce & Hidden Money” series reminds you that your divorcing spouse might utilize nominees to hide assets from you.

During your divorce you may need to pursue an asset search in order to determine whether your spouse concealed marital assets from you.  Asset searches sometimes include: hiring private investigators; employing forensic accountants; seeking a copy of your spouse’s passport to help look for any assets parked offshore; tracking trademarks, copyrights or other intellectual property your spouse may own; etc.

Your particular circumstances should dictate whether you pursue an asset search in these ways.  Whatever steps you take in your asset search, it is important to always look for any nominees your spouse may have used to hide marital assets.  As discussed by “Nominees & Hidden Assets,” your spouse may rely on a nominee to open a secret foreign bank account.  It is also true that one can hide or transfer almost anything through one’s nominees.

An illustration of this is the Court’s decision in  Dempster v. Overview Equities, Inc., 2004 slip op. 01149 ; 4 A.D.3d 495; 773 N.Y.S.2d 71 (2d Dept 2004).  According to the decision, the divorcing husband fraudulently transferred title to his residence to his Delaware company.  The company was the husband’s nominee.  The husband established the company and transferred his residence to it right before the asset valuation hearing in his divorce.  The transfer was the husband’s apparent attempt to prevent the residence from being partly distributed to his wife during the divorce.

Image: PathDoc/Shutterstock.com

Copyright 2015 Fred L. Abrams

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By serving a subpoena on any lawyers who helped your spouse hide assets, you can collect legal bills sent to your spouse & other documents such as those related to real estate deals.

This is the 23rd post in the “Divorce & Hidden Money” series:

What can you do if your spouse employs a lawyer in the U.S. to hide cash or other marital assets from you?  To help your spouse hide cash from you, some lawyers will place the cash in a financial account where you &/or your spouse’s identity is never given to the financial institution.  Besides maintaining this kind of secret bank account for your spouse, some lawyers may hide marital assets by titling the assets in the name of a shell company; transferring the assets offshore; etc.  “Bearer Shares & An Asset Search” reveals how a Panamanian lawyer helped a divorcing husband conceal millions of dollars from a divorcing wife.¹ The October 2013 article “Lawyer disbarred for helping client hide funds from wife in divorce, then spent the money” is about a New Jersey lawyer accused of conspiring with a divorcing husband to hide $11,000 dollars from a divorcing wife.  The Court’s 45-page decision disbarring the New Jersey lawyer is available here.

If a spouse hires a lawyer to conceal marital assets from you, during your divorce you could pursue an asset search by serving this lawyer with a subpoena duces tecum.  As a consequence of the subpoena, the lawyer may provide you with documents that have clues leading you to the hidden marital assets.  The subpoena should request copies of legal bills the lawyer sent to your spouse. See e.g Colonial Gas Co. v. Aetna Cas. & Sur. Co., 144 F.R.D. 600, 607 (D.Mass.1992) (billing records subject to discovery/nature of services not disclosed).  Although documents revealing the nature of the legal services provided are generally subject to the attorney-client privilege, some of these documents are not privileged.

To cite just one example, if a lawyer was involved in real estate deals for your spouse, many documents underlying the deals may be disclosable.  See In re Grand Jury Subpoena (Mr. S.), 662 F.3d 65, 71-72 (1st Cir. 2011) (closing statements, sales contracts, records of payment revealing source of funds, etc. are all subject to discovery).  If your spouse is using relatives, friends or other intermediaries to transfer marital assets out of your reach, your subpoena might also seek documents reflecting the source of legal fees paid to the lawyer and the identities of the attorney’s clients.  Cf.  Hanover Ins. Co. v. Rapo & Jepsen Ins. Servs., Inc., 449 Mass. 609, 619, 870 N.E.2d 1105, 1113-4 (2007) (legal fees paid & the identities of lawyer’s clients not protected by attorney-client privilege).

¹The fact pattern supplied by “Bearer Shares & An Asset Search” was sanitized & changed for privacy reasons.

Image: Ragma Images/Shutterstock.com

Copyright 2015 Fred L. Abrams

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This 22nd post in the “Divorce & Hidden Money” series says an asset search of your spouse should include inspecting your spouse’s passport:

Did your spouse hide assets from you during your divorce by opening a secret offshore bank account or by placing valuables like diamonds in a safe deposit box offshore? Did your spouse secretly purchase real estate, art or other assets offshore?  If you believe your spouse hid assets from you in these ways, inspect your spouse’s passport.  You can request to see it during the discovery phase of your divorce.  Your spouse’s passport might reveal offshore tax havens or other places your spouse visited to hide assets.  Based on information at the passport, you may even be able to narrow your asset search of your spouse.

What if your spouse alleges he/she does not currently possess a passport?  If your spouse possesses a U.S. passport & is lying, I recommend you make two requests for passport records to the U.S. State Department (hereinafter “the Department”)— one under the Privacy Act of 1974 and the other as a Freedom of Information Act Request (hereinafter “FOIA Request”).  The best way to do this is by submitting 2 consent forms to the Department, signed by your spouse.  If your spouse refuses to sign the 2 forms and your divorce is still pending before the court, you could file a motion asking the judge to direct your spouse to sign the forms.

The 1st consent form is the Department’s “Form DS-4240, Certification of Identity”.  The DS-4240 form & instructions explaining how to file it with the Department, are available here.  The 2nd consent form is the Department’s “Authorization For The Release Of Records To Another Individual.”  An example of this 2nd form is available here with instructions about filing it as a FOIA Request.  By filing these forms with the Department, you can get copies of your spouse’s past passport applications; issued passports; etc.  Although these passport records will not have border stamps/border crossing markings on them, you will be able to demonstrate your spouse lied about possessing a U.S. passport.

Image: Courtesy of Flickr (Licensed) by Mike Dierken

Forms & filing instructions: Courtesy of U.S. Department of State

Copyright 2015 Fred Abrams

Photo Insider

This is my 21st post in the Divorce & Hidden Money series.  It is also the 8th post in my series describing what private investigators can and cannot do legally when searching for hidden assets.  My July 13th post mentioned private investigators & their clients using law enforcement databases and illegal pretext calls to search for assets.  As a practicing attorney, I am aware of another kind of asset search which would be illegal & this post describes it.  The post provides a hypothetical account which discusses a divorcing wife who hired a private investigator.  The private investigator in this hypothetical account, illegally obtains bank account information from an insider—a teller at a bank located in Nevada.

THE DIVORCING WIFE IN NEW JERSEY

Even though Ralph was a medical doctor with a thriving private practice, Ralph claimed in his New Jersey divorce that he had a low net worth.  Ralph’s divorcing wife Nancy suspected Ralph had hidden money in anticipation of the divorce.  Nancy gathered documents she obtained during the pretrial discovery phase of the divorce and before.

These documents included copies of Ralph’s: passport, statements for airline frequent flyer miles, phone bills, tax filings and additional financial records.  Nancy gave the documents to Mike, the licensed private investigator Nancy retained to perform an asset search regarding Ralph.  After conducting an investigation for more than a month, Mike told Nancy that Ralph hid monies at offshore banks and at a bank in Nevada.

THE SEARCH FOR SECRET BANK ACCOUNTS

Mike stated that Ralph secretly maintained about $2.5 million dollars in the offshore bank accounts which were located in high-risk geographical locations known for money laundering.  Ralph had supposedly hidden another $85,000 dollars in the secret bank account in Nevada.  Mike explained to Nancy that he could collect evidence regarding the secret bank accounts by conducting searches at the Nevada and the offshore banks.

Nancy paid Mike over $10,000 dollars for the bank account searches and Mike provided Nancy with an investigative report summarizing his search results.  The report named the offshore banks and the Nevada bank Ralph supposedly used to hide his money.  It supplied the purported secret bank account numbers; account balances and detailed the bank signatory information.

The report meanwhile, never explained the source of Mike’s information/how Mike detected Ralph’s supposed secret bank accounts.  When Nancy asked Mike how he had obtained the information at the report, Mike said the report was completely reliable.  A trusted colleague supplied Ralph’s offshore bank account information, Mike said.  Mike also explained he obtained Ralph’s Nevada bank account information from an “insider”, a teller who worked for the Nevada bank.  According to Mike, the insider used the bank’s computer system to sneak a peek at Ralph’s $85,000 dollar bank account.

THE U.S. CRIMINAL LAW VIOLATION IN NEVADA

Assuming that Mike’s representations to Nancy were true, then the bank teller and Mike could have violated privacy and other U.S. laws.  The two may have conspired to access Ralph’s Nevada bank account information in violation of  18 U.S.C. §1030  (Fraud and related activity in connection with computers).  Another type of case involving an insider at a bank was U.S.A. v. Feliciano, 2:09−cr−00197−NS.  The March 2009 indictment filed in Feliciano, alleged that a bank teller had stolen confidential customer information as part of a bank fraud/identity theft scheme.

First Image: Patrick Brassat/Shutterstock.com

Second image courtesy of Flickr (Licensed) by Tsahi Levent-Levi

Copyright 2015 Fred L. Abrams

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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 rogatorycompelled 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.

Image courtesy of Flickr (Licensed) by Terrance DC & supplied with his permission.

Photo Of Passports

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—

  1. Mr. X’s passport(s) which we may possess for 60 minutes to photocopy and return to Mr. X.
  2. All of Mr. X’s telephone records, (including cell phone records), for the period of January 1, 2005 to date.
  3. Documents relating to airplane tickets for all of Mr. X’s flights during January 1, 2005 up to the present date.
  4. Frequent flyer mile program statements relating to Mr. X’s flights during January 1, 2005 up to the present date.
  5. Documents relating to hotels Mr. X stayed at anytime during the period of January 1, 2005 to the present.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. Documents relating to Mr. X’s travel outside of the United States any time during January 1, 2005 to present.
  11. 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.

Copyright 2015 Fred L. Abrams

Image Courtesy Of Flickr (Licensed) by Baigal Byamba

Low cost asset search photoMy 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

I.  Real Estate Searches

Some government databases provide free real property searches, like New York City’s Automated City Register System (“ACRIS”).  ACRIS supplies searches about real property owners in New York City by a party’s name, parcel identifiers (such as borough, block and lot numbers), etc.

II.  Lawsuits

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.

IV.  United States Patent & Trademark Office

Patents and trademarks can be researched for free at http://www.uspto.gov/patft/.

V.  Comprehensive Searches

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).

Image courtesy of Flickr (Licensed) by Images Money

Copyright 2008-2017 Fred L. Abrams