Over a 30-year career, I’ve managed hundreds of investigations for law firms and corporations seeking to locate assets to satisfy judgments, collect debts or track down the proceeds of frauds. Usually, by the time clients call me in, the debtor’s assets and revenue sources have been disguised in as many ways as human ingenuity can fashion.
ecently, a lawyer who had won his case in court engaged me to help enforce the judgment. The assets his client had won – assets the judgment-debtor said he no longer possessed – surely were out there somewhere, hidden.
Before I began investigating, I hoped the lawyer had asked himself five questions that should precede any hidden-asset investigation.
1. Who should conduct the investigation?
People with assets to lose are powerfully motivated to hide them, and motivation is the mother of invention. These people have learned how to cover their tracks, and finding their assets most often requires resources, hands-on experience and personal contacts that law firms generally don’t have.
Conversely, professional investigators have access to specialized data products that enable us to start the investigation by casting a net over billions of public records and credit data from the United States and elsewhere. This preliminary work may identify family members who could be holding assets, or a record like an auto registration that links the target to a location he or she hadn’t been previously associated with. The downside of casting a wide net is that it may catch many red herrings. Good investigators know how to sift through the data to distinguish trash from treasure and not waste time (and money) running down blind alleys.
The 21st century investigator also is proficient at mining social media for leads on assets. Consider the case of the deadbeat who bought an ultra-expensive home, disguising his ownership through a series of anonymous shell companies… only to have his son post photos on Facebook that revealed the location of the property.
Seasoned investigators may also have a network of personal contacts acquired in past investigations who can help ferret out hidden assets with a piece of local intelligence or industry gossip. So, when asking who should look for assets, consider retaining a professional investigator. It’s also worth noting that billing rates are lower for investigators than lawyers, and they are therefore more economical for clients.
2. When should I start the process?
By the time a court renders a judgment and issues an order of attachment, the judgment-debtor’s assets may have disappeared. The secreting of assets may have been initiated much earlier, even before the litigation was filed.
One of my recent cases is illustrative of the artifices a defendant may employ to shelter assets, and the advantages of beginning the investigation early.
A high-ranking officer at a Fortune 100 company had been convicted on charges of criminal misconduct. His company had a contractual obligation to pay the legal fees for his defense, with the proviso that the officer would reimburse the company if he were convicted. After the conviction, the company sought to recover the fees it had paid, which amounted to many millions. The disgraced officer pleaded poverty, whereupon the company hired FTI Consulting to investigate his assets.
Our investigation found that during the two-and-a-half years from his arrest to his conviction, the defendant had transferred valuable properties to the names of his in-laws. We also discovered that each of his young adult children had purchased multi-million dollar homes, paying in cash, raising the strong suspicion that the defendant had funded the purchases himself to shelter his liquid assets. By the time the defendant was ultimately convicted, he had placed most of his wealth in the hands of family members. But armed with this information, the company was able to confront the defendant with the facts and recoup a significant portion of the money it had laid out on his behalf.
The lesson is to start searching for assets at an early point in the legal process. Otherwise, you’re just giving someone time to play hide and cheat. There are also cases in which there are in fact no assets worth pursuing – a fact worth knowing before wasting time and money on expensive litigation.
3. How much information should I share with my investigator?
Attorneys are sometimes reluctant to share documents, either out of lawyerly discretion or because they’d rather not have the investigators burn up billable hours examining documents that were already reviewed by attorneys.
Professional investigators are acutely interested in everything that could possibly touch on an asset search. Investigators and attorneys may look at the same document differently. Investigators are looking for dots to connect. There have been cases in which an email address or fax header on a document provided the lead that broke the case open, or a notary stamp from a jurisdiction far away from the target’s usual environs led the investigator to assets in a previously unknown location.
In one recent case, a lawyer happened to mention (well into the investigation) that he had some of the target’s tax returns. He hadn’t thought to bring it up earlier, he said, as they were old and he did not believe they would be useful to me.
The past, however, is always useful. Most people don’t start out in life planning to hide their assets. That comes later, after they begin doing something they think will put those assets at risk. So, if you delve into someone’s past, it’s likely that the subject of the investigation was previously more transparent in his or her activities, which makes it easier for an investigator to pick up the trail.
4. How much time will it take?
The initial review of publicly available information can usually be accomplished in fairly short order.
However, in nearly every case where we’ve discovered a substantial amount of hidden assets, the difference between success and failure came down to locating a live source who was close to the target and (for whatever reason) decided to share his or her knowledge about the assets. That leads us to assets that do not appear on the public record, such as art and other collectibles, and business interests and real property owned by the judgement-debtor via shell companies.
Sources can be former employees, business associates or anyone else who has had firsthand contact with the target. The doorman of a Fifth Avenue apartment building once confirmed my theory about the ownership of an apartment in the building. A pilot who formerly flew our target’s private jet tipped us about a custom Gulfstream that was under construction.
It takes time to identify, track down, approach and develop a rapport with a potential source, and there is no guarantee that the source will possess useful information or be willing to cooperate. This is all the more reason to initiate the asset search sooner rather than later.
5. What are the chances of success?
If success is defined as the discovery of vast amounts of hidden assets, the hard truth is that this seldom happens. In some cases, the assets just aren’t there; in others, they have been transferred to one of the many offshore jurisdictions specializing in providing impenetrable financial secrecy.
However, an investigation that finds just enough to pressure the other side to sit down and settle can be considered a success. I once worked a case for a U.S. company attempting to recover a large fee paid to a Saudi prince. The client had no hope of winning a favorable judgement in a Saudi court, and the prince owned his European assets through opaque offshore companies. But the investigation found he’d made a fatal error: He owned several thoroughbred racehorses – in his own name – in the United States. The prince was such a passionate devotee of the sport of kings that, faced with the prospect of his beloved horses becoming subject to an order of attachment, he settled for an amount far above the total value of the thoroughbreds.
The best approach to begin a search for hidden assets is to start with a feasibility study to determine the most fertile areas for further investigation. The feasibility study entails a review of relevant documents from the client, supplemented by exploratory research in publicly available sources. Thereafter, the investigation should proceed in phases, with clearly defined budgets and objectives for each phase.
As noted earlier, asset searches don’t always find hidden assets, even after considerable expenditure of money and time. Careful consideration of these five questions will enable an attorney to make the most productive use of the funds available for an asset investigation.