The Expert Podcast

So, you've heard us talk about it a million times on this channel, whether it's probate cases, red divorce cases, or custodial conservative cases. The level of fraud going on in family law is through the roof. In divorce cases, people are hiding assets left and right. In probate cases, people are stealing money from their relatives left and right. Even conservators are stealing money from people under their care.

This is a great article from ACFE, the Association of Certified Fraud Examiners. We're proud members. We've been keynote speakers at their events. We're also on the board of directors for one of their divisions, and the ACFE is cutting-edge in terms of fraud and fraud investigations. And they have a great article this month about unraveling the web of tracing marital assets. That's the key—tracing the assets—because when one party to a divorce is hiding assets, you have to trace them. And they go through a lot of details. It gives you some basics on what a fraud examiner should do. This is from the standpoint of a fraud examiner reading this article, so it has some technical things in it.

First, it talks about understanding marital and separate property and what the difference is. One is acquired during the marriage, and one is owned before the marriage. There may be some crossover, right? If you have a house that was acquired before the marriage, but somebody else maybe puts money into the house; maybe they put on an addition; then maybe that part is joint property. You also have to look at what are premarital assets, so you can differentiate those from marital assets. Inheritances, gifts, and property designated as separate in agreements could be a prenuptial or postnuptial agreement.

Here's the essential document you have to get: tax returns. This is key. Many times, assets are hidden, but you can't hide them from the IRS, and tax returns will give you that. You can get financial statements, especially if the person is a businessperson or prepares personal financial statements for whatever reason. A lot of times, loan applications are great ways to get that kind of information.

The techniques for asset tracing are: you want to get bank statements, investment accounts, and credit card statements. Even though credit cards technically don't have assets on them, you can always find leads for assets from credit card payments. Somebody who has a hidden boat is going to go to the boatyard and buy gas with their credit card. You're going to maybe pay for a repair on your Rolex watch at the jewelry store. You can look through these credit card statements and find a lot of leads where the assets are hidden, even things like safe deposit box payments.

You want to definitely check deeds and titles, not just for properties you know about. You want to do a full index search in all the county record offices to find out other properties that have been purchased by that person, maybe properties they have mortgages on. So many times, we find one party to a marriage has a secret property with another person that they're in a relationship with as a hidden second property. Sometimes you'll find mortgages that benefited them on property deeds.

Then you want to do some forensics. You want to analyze the financial records and look for things that don't add up. You want to look for records that don't make sense; they don't go along with what is reported. Remember, at the beginning of every divorce, both parties have to file a financial disclosure showing this is what I have; here's the list of assets. Many times, those are, shall we say, fudged, or they're not 100% accurate. A lot of times, it's done on purpose. A lot of times, even the attorney will tell the client, "Don't fill it out right. Nobody's going to check."

You need to check, review the transactions, and identify deposits and withdrawals. If you see a bank account with huge deposits, you want to know where they come from. Is there some other income source? Is there some other asset being transferred? Also, you want to look at it another way: are there assets going out? One of the legal theories that attorneys will use is what's called a fraudulent conveyance. If money was transferred out improperly to dilute the estate, that's something you want to know about.

Looking for patterns, that's the key; that's what we do as investigators: look for things that maybe don't seem like by themselves any big deal, but when you look at the totality in the big picture, it means there's something being hidden, right? If someone withdraws a payment of $200 ATM every week, what are the funds used for? A lot of times, it's used for another relationship. We saw one party that was every Thursday at 11:45, taking out a few hundred bucks from an ATM. Wasn't a lot of money, right? But it wasn't something that was going to make the other person rich. But what we found was that when we did surveillance, that person was going to the ATM, taking out a few hundred dollars, and meeting their girlfriend at the motel. It was actually not a motel; it was a nice hotel. They checked in and paid cash, and they had a relationship with somebody else. We also found out that the ATM that they were using was at a different bank than where they normally bank, and it wasn't close to the hotel. So we did some searching and found they used that bank because they had an account there, but they weren't taking money out of that because that wouldn't reduce their marital assets.

Checking for joint accounts to see if maybe they're a co-signer on another account—a number of different methods to use—won't get into all of them. Document findings, which is good. You want to do forensics on the documents to see if they've been altered. You want to analyze transactions to see if they make sense for what's been reported to you.

The bottom line is that if you are in any kind of family law case—divorce, probate, conservatorship—you want to double or triple check to make sure that somebody isn't artificially moving assets that belong to you to benefit another third party.