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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.

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

Copyright 2015 Fred L. Abrams

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This post discusses when federal prosecutors might initiate a criminal prosecution against private investigators and their clients as a consequence of an illegal asset search.  It is the 7th post in my series covering private investigators.

If you are a divorcing spouse; heir under a will; a creditor; etc., you may hire a private investigator to help you search for hidden assets.  Your private investigator might then try to detect assets/discover leads by reviewing: passports; phone records; bank account statements; credit card transactions; tax filings; or other confidential information.  What if your private investigator illegally obtained this confidential information from sources like law enforcement databases in the U.S. or by making illegal pretext calls in the U.S.?

Could federal prosecutors then accuse you of crimes because your private investigator performed this illegal asset search for you?  If you knew that confidential information was going to be illegally obtained, prosecutors might initiate a criminal prosecution against you.  The December 6, 2007 press release issued in U.S.A. vs. Torrella et. al. 3:07-cr-05775 discussed the significance of this element of knowledge.  The press release said that several private investigators had been accused of illegally obtaining confidential information.  The private investigators supposedly wanted “to uncover assets or income” during investigations they performed for their clients.  According to the press release, the U.S. Attorney indicated a willingness to criminally prosecute the clients if the clients knew the ‘information was obtained illegally’:

‘This indictment alleges that private investigators across the country illegally obtained confidential information and sold it to the clients who hired them,’ said United States Attorney Jeffrey C. Sullivan. ‘This is a very serious matter, the investigation is continuing and it is our intention to go after these ‘clients’ if we can prove that they knew this information was obtained illegally.’

In deciding whether to initiate criminal charges against you, federal prosecutors would also follow “the principle that, ordinarily, the attorney for the government should initiate or recommend Federal prosecution if he/she believes that the person’s conduct constitutes a Federal offense and that the admissible evidence probably will be sufficient to obtain and sustain a conviction.”  U.S. Dep’t of Justice, United States Attorneys’ Manual 9-27.220 §B Comment (1997).

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Copyright 2015 Fred L. Abrams

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Determined criminals sometimes conceal their illicit cash by laundering it through banks located in multiple jurisdictions.  Criminals are not the only ones concealing assets by using bank accounts in multiple jurisdictions.  Whether you are a divorcing spouse; a creditor in a bankruptcy case; are collecting money owed on a judgment; etc., these ideas may help you search for bank accounts &/or gather legally sufficient evidence about them:

Photo Of Light BulbTHE UNIFORM INTERSTATE DEPOSITIONS AND DISCOVERY ACT (“the UIDDA”)—The UIDDA may apply to your case if you are searching for monies transferred through bank accounts in multiple states in the U.S.  The UIDDA has been codified in N.Y. at CPLR § 3119 & it “provides a streamlined procedure for obtaining disclosure…for use in an action in another state or territory within the United States.” Connors, Practice Commentary, McKinney’s Cons Laws of NY, CPLR § 3119.  Most states in the U.S. have adopted the UIDDA.  This generally makes it easier for you to use subpoenas to depose bank witnesses in multiple states in the U.S.  At these subpoenas, you can also request that the bank witnesses supply copies of the relevant bank account statements; account opening documents & signatory information.

LPhoto Of Light BulbETTERS ROGATORY/FOREIGN LEGAL PROCEEDINGS—Schemes to hide large sums of money often involve parking money offshore in foreign bank accounts.  This money may be transferred offshore by wire transfers; bulk cash smuggling; trade-based money laundering; employing portable valuable commodities like diamonds; etc.  Since the foreign bank witnesses usually reside offshore/lack a nexus to the U.S., you can not compel them to supply bank account information by using a subpoena issued under U.S. laws.  In many countries you can however, employ letters rogatory (a.k.a. letters of request or legal assistance requests).  Letters rogatory are used to try to compel foreign bank witnesses to disclose bank account information.  Besides letters rogatory, there may also be other legal remedies available to you under foreign laws.

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PRIVATE INVESTIGATORS—A highly skilled investigator can sometimes be one of the reasons your asset search or asset recovery succeeds.  Such an investigator will know how to relentlessly dig for information.  One private investigator I know spent 17 years investigating an ultra-high net worth family suspected of concealing more than $100 million dollars in a financial fraud.  A good investigator may also be able to sniff out informant’s tips concerning hidden assets, as suggested by my recent post “An Asset Search By Pursuing Interviews & Tips.”  Finally, additional information about searching for bank account information is available at “5 Things To Be Aware Of When Hiring A PI For A Bank Account Search.”

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Second image courtesy of Flickr (Licensed) by One Way Stock

Copyright 2015 Fred L. Abrams

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I do not know how many witnesses Brian interviewed while he was an IRS Special Agent or when he was a high-ranking official at U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”).  Nor do I know the number of informants’ tips Brian collected over the course of his federal law enforcement career.  I did however, watch Brian try to collect tips during the witness interview depicted below.  I first wrote about the witness interview at an Asset Search Blog post published in 2008.  I now supply this post because I believe the most effective way private investigators can search for hidden assets in some matters is through witness interviews & informants’ tips.  This is the 6th post in my series about what private investigators can and cannot do legally while searching for assets:

The information supplied by foreign-based private investigators indicated the divorcing husband hid marital assets offshore.  Evidence gathered during the divorce also suggested the husband might have committed a tax fraud in hiding the marital assets.  To try to detect any additional assets hidden by the husband, I contacted Brian.  Brian was a former high-ranking official at FinCEN and he had earlier been an IRS Special Agent.  Brian was going to lead our interview of the husband’s business associate, who we were about to meet for the very first time.  Right before the interview, Brian identified some of the federal statutes relevant to many tax fraud investigations:

  • 26 U.S.C. § 6050I, large cash reporting requirements for trades & businesses (including attorneys).
  • 26 U.S.C. § 7201, most commonly applied tax evasion statute (however requires proof of a tax liability).
  • 26 U.S.C. § 7203, failure to file a timely tax return.
  • 26 U.S.C. § 7206 (1), perjury on a return / false statements, (unlike 26 U.S.C. § 7201,  proof of a tax liability is unnecessary).
  • 26 U.S.C. § 7206 (2), perjury on a return / false statements, but primarily used against tax return preparers such as accountants and attorneys.
  • 18 U.S.C. § 371, conspiracy to commit offense / defraud the United States.
  • 18 U.S.C. § 1001, false statements made to the federal government (can apply to any material verbal or written statement, even if unsworn).
  • 18 U.S.C. § 1956, money laundering.
  • 18 U.S.C. § 1957, money laundering involving property derived from specified unlawful activity.
  • 18 U.S.C. § 1961, Racketeer Influenced & Corrupt Organizations (“RICO”).
  • 31 U.S.C. § 5324, structuring bank deposits.

I hoped that Brian and I would learn what the business associate knew about the divorcing husband’s hidden money and suspected tax fraud.  As Brian started the interview, he told the business associate: “once a tax fraud investigation starts rolling along, nobody knows where it may end up.”

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

Copyright 2008-2025 Fred L. Abrams

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As “A Surreptitious Search For Money Hidden In Divorce & Other Cases” explains, law enforcement databases may house confidential information about a person’s assets.  Private investigators & the general public cannot lawfully access these law enforcement databases/computers.  This is the 5th post in my series about what private investigators can and cannot do legally when searching for assets:

NJ.com reporter Vernal Coleman & private investigator Brian Willingham recently tweeted on an alleged scheme to access a confidential law enforcement database:

These tweets link to articles saying that Newark N.J. Police Captain Anthony Buono & Nutley N.J. private detective Dino D’Elia are suspected of conspiring to access a law enforcement computer/database.  According to one article, “Buono and D’Elia allegedly obtained the personal data of approximately 900 individuals, selling each set for $100.”  Mr. D’Elia &/or Mr. Buono are thought to have then possibly sold the data to private investigators &/or to data brokers.  State prosecutors have charged Mr. Buono & Mr. D’Elia with supposed violations of New Jersey’s conspiracy & computer theft laws.

Private investigators like Mr. D’Elia, (who are suspected of computer intrusions), sometimes face a federal prosecution rather than state prosecution.  USA v. Buell et. al., Index No. 1:15-cr-00385 is a matter in which a private investigator faced this type of federal prosecution.  At the criminal complaint in Buell, federal prosecutors alleged that private investigator Joseph P. Dwyer bribed an NYPD officer & conspired to obtain data from a law enforcement database.  Last week federal prosecutors slimmed down the criminal charges at their complaint against Mr. Dwyer.  They did this on June 18th by filing a one-count superseding information against Mr. Dwyer, charging him with a suspected bribery scheme.

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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 rogatory; compelled 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.

Puzzle Money PhotoTo cheat you out of your fair share, your divorcing spouse, a business partner, an executor handling a decedent’s estate or someone else may hide assets from you.  As a result of an asset search or other investigation you might uncover a money trail for these hidden assets.

If you follow the money trail & locate the assets, how do you then recover them?  One way could be through a settlement with those hiding the assets from you.  You might also be able to recover the assets by pursuing available legal remedies.

These remedies sometimes include proving to the Court that assets were hidden from you through nominees (i.e. intermediaries); fraudulent transfers; &/or trusts.  To recover assets hidden these ways, you may have to demonstrate the following to the Court:

I.  NOMINEE OWNERSHIP —‘A nominee is one who holds bare legal title to property for the benefit of another.’ In re Callahan, 442 B.R. 1, 5 (D. Mass. 2010) (quoting Black’s Law Dictionary 1076 (8th ed. 2004)).  A true beneficial owner can easily hide assets by employing a nominee to make purchases &/or hold assets.  To recover these assets you may have to prove nominee ownership by showing that the owner transferred assets in anticipation of a lawsuit; that the assets were transferred to the nominee although the nominee did not pay for them; etc.  See e.g., Fourth Inv. LP v. United States, 720 F.3d 1058, 1070 (9th Cir. 2013) (six-part test for nominee ownership applied to tax lien case).

II.  FRAUDULENT TRANSFERS—If there were badges of fraud when an asset was transferred, you might be able to recover the asset on the ground it was fraudulently transferred.  The badges are used to prove fraudulent intent or an intent to hinder creditors.  A fraudulent transfer is marked by the badges when assets are transferred in anticipation of a lawsuit or liability; when assets are transferred even though there is inadequate or no payment for them; etc.  The badges are listed at Salomon v. Kaiser (In re Kaiser), 722 F.2d 1574 (2d Cir. 1983) and additional cases discussing them are at “Badges Of Fraud In Debt Collection, Divorce & Bankruptcy.”

III.  TRUSTS—IRS Talking Points say that trusts can be misused “[t]o depreciate personal assets (such as a home)”; “[t]o deduct personal expenses”; “[t]o split income over multiple entities…”; “[t]o underreport income”; “[t]o avoid filing returns”; “to wire income overseas and fail to report it”; & “[t]o attempt to protect transactions through bank secrecy laws in tax haven countries.”  If a trust is abused in these kinds of ways to hide assets, assets could conceivably be recovered from the trust.

Depending on the circumstances, you may recover trust assets by claiming the trust is only a nominee owner; or by claiming that assets were fraudulently transferred to the trust.  It may also be possible to recover assets by piercing the trust veil on an alter ego theory.  The gravamen of this claim would be that the individual hiding assets at the trust & the trust were inseparable.  See United States v. Evseroff, No. 00-CV-06029 KAM, 2012 WL 1514860, (E.D.N.Y. Apr. 30, 2012) aff’d, 528 F. App’x 75 (2d Cir. 2013) (trust assets subject to collection/can be reached under nominee ownership, fraudulent conveyance and alter ego theories).

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This video¹ discusses ways assets can be concealed via money laundering.  As the video observes, billions are thought to be laundered worldwide & “laundering takes place within our everyday world of routine business transactions.”

Looking for laundered assets can be critical to a successful asset search, my last post says. The video embedded above explains how the laundering works.  As more fully set forth at the video, the 3 laundering stages are known as placement, layering and integration.  The video also mentions that criminals involved in terrorist financing; drug trafficking; weapons smuggling; fraud; theft; Ponzi schemes; etc., hide their illicit proceeds by laundering them.

Criminals are not the only ones hiding assets by washing them.  Others with high-value assets, (including some divorcing spouses; judgment debtors; etc.), may conceal assets in money-laundering-like schemes.  These schemes typically obscure who the true beneficial owners of the assets are.  In other words, the schemes attempt to hide assets through a lack of financial transparency.  Companies on the Internet like Capital Asset Mgmt. Assoc. Inc. seem able to add to this lack of transparency.

Capital Asset Mgmt. Assoc. Inc’s website promotes “bullet proof asset protection” as a countermeasure to “specialized ‘Asset[sic] search’ agencies.”  One of its webpages apparently asserts that beneficial owners can conceal assets by establishing offshore bank accounts with anonymity.  It hints that one can supposedly open a bank account with anonymity in Panama “as no one will be able to find out to whom exactly has the money gone to.”  The webpage also discusses using bearer shares & nominee directors to open an apparent secret Panamanian bank account.  Meanwhile, these are the same elements some money launderers have successfully used to wash their funds.

¹Video courtesy of The Egmont Group Of Financial Intelligence Units

Copyright 2015 Fred L. Abrams

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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 2015-2020 Fred L. Abrams

Image Courtesy Of Flickr (Licensed) by Baigal Byamba

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.

Video courtesy of the Federal Trade Commission

Copyright 2015 Fred L. Abrams