What can be learned about possible hidden assets in an interview with the accusing spouse?In the normal course of a divorce hidden asset investigation, one spouse (usually, but not always, the wife) makes a claim that assets have been taken by the other spouse or not disclosed as required by the divorce process. In this situation, the accusing party will hire an investigator or ask his or her attorney to make inquiries. The accusing party can be an invaluable source of information during these investigations. Below is a mock interview with a wife in a divorce proceeding in which both parties accuse one another of hiding assets. Note that the investigator is seeking limits. That is, he is attempting to limit the scope of what has to be reviewed. The investigator also is seeking direction. A key part of this inquiry, and perhaps all inquiries of this type is, “Follow the money.” Investigator: You have told your attorney that your husband is hiding assets. Wife: Yes, and my husband says that I’m hiding assets. Investigator: Are you hiding assets? Wife: Well, there are some things my grandmother gave me that I haven’t listed. They are keepsakes. There are some figurines and some costume jewelry -- nothing of any significant value. Investigator: What makes you think your husband is hiding assets? Wife: He makes a lot of money, but when we disclosed our assets there is hardly anything. I’m going to walk away with nothing. Investigator: If your husband is hiding assets, do you know where he might be hiding them? Wife: No, I don’t know. Investigator: What does your husband do for a living? Wife: He’s a branch manager for a communications company. Investigator: Do you work? Wife: Not since we moved here when my husband took the new position. Investigator: Does the family have any other source of income, other than what your husband makes from the communications company? Wife: No. Investigator: Does your husband have any hobbies? How does he spend his time off? Wife: He shoots in contests. Investigator: Like trap shooting? Wife: Trap shooting, black powder, quick draw. You name it. Investigator: What caused the divorce? Wife: My husband is having an affair. Investigator: When did you know you were getting a divorce? Wife: When I caught my husband and the girlfriend together. Investigator: How long ago was that? Wife: About a year-and-a-half. Investigator: Do you know how long the affair had been going on before you discovered it? Wife: I’m not sure, but I think about three months. Investigator: How was the marriage before the affair? Wife: We had our ups and downs, but I thought everything was going pretty well. My husband got promoted to branch manager, so we had a lot more money. Investigator: Tell me about your lifestyle. Did you take expensive vacations? Do you have domestic help? What kind of a house do you live in? Do you eat out or did you mostly cook for you and your husband? Wife: We had taken trips to Europe and the Grand Caymans in the two years before we separated. I had a housekeeper who came in three times a week. I had to have help; the house is huge. She would prepare an ethnic meal for us at least once a week. We would eat at a restaurant two or three times a week. Investigator: Tell me how you and your husband handled your finances. Wife: His check would be deposited directly into our checking account. I would then write checks for the house. Any major expenditures that had to be made, we would decide together. We both had ATM cards and would take about a hundred dollars a week out for lunches and miscellaneous things. Investigator: What kind of financial information do you have? Do you have the bank statements or the check registers? How about tax returns? Wife: I have the bank statements for forever. He has the tax returns. What are the check registers? Investigator: They are where you recorded each check that you wrote. They include the date, the payee, and the amount. Wife: We had duplicate checks. Every time I wrote a check, a carbon copy was created. I don’t think I threw anything out. Investigator: Bring them in for the last two years. We’re going to put you to work. Wife: Okay. Investigator: Is your attorney getting the tax returns? Wife: Yes, but it’s going to take some time. Investigator: If they are joint tax returns, you had to sign them. You can go to your CPA and get copies. It might help to speed things up. Wife: Okay. As noted above, in this example the investigator is seeking general information in order to create a framework in which to conduct an investigation. The information gathered not only gives the investigation direction, but also limits it to those areas most likely to produce results. Let’s see how this information helped to shape the investigation.
Where does the money come from?The investigator questions the source of the couple’s income. The wife’s response limits the investigation to the fiscal relationship between the husband and the employer. This relationship would include his base earnings and might include bonuses, perquisites, stock ownership plans, commissions, expense accounts, or any of the huge variety of fiscal incentives that employers offer to employees. The investigator learns that it is unnecessary to review the wife’s sources of income because she is not employed outside of the home. The investigator also discovers that the husband does not own a business that generates income, does not have a trust fund that is supplementing his income, and does not hold a second job.
Where does the money go?The investigator attempts to develop a sense of the couple’s lifestyle, including hobbies and leisure activities. He recognizes that comfortable living is expensive, and that the wife may have an inaccurate perception of how expensive the couple’s lifestyle was. Therefore, the possibility exists that the wife’s claims are without foundation. Assets cannot be hidden if they have been spent. The wife also provides the investigator with a clue in the form of the girlfriend. The investigator is aware that husbands often spend considerable sums of money to conduct affairs of this type. He also knows that husbands usually try to conceal these expenditures from their wives. Therefore, it is possible that there was a means of funding the affair that did not involve the couple’s joint checking account. Finally, the investigator discovers that the husband’s hobby, guns and competitive shooting, could serve as a repository for hidden assets. Competitive firearms can be incredibly expensive. The failure to disclose or the undervaluing of these assets could materially misstate the value of the marital estate.
Who was in control?The investigator understands that in order to misdirect or conceal assets, a party must have control of those assets. Through this interview, the investigator discovers that the husband had control of his earnings until they were deposited in the couple’s joint checking account. After the earnings were deposited, both parties had equal access to the funds. This means that a misappropriation may have happened either before or after the funds were deposited, but only the husband could have misdirected funds before the earnings were deposited.
What is the date of first indication?The investigator learns that the affair which destroyed the marriage was discovered about eighteen months ago. He also learns that the wife suspected that the affair had been going on for three months prior to that. If the investigator assumes that the date of first indication is eighteen months ago, then he knows it was highly likely that any activity detrimental to the martial estate occurred since that time. However, he also knows that the affair had been going on for some time before its discovery. Therefore, the husband may have had considerable incentive for misdirecting marital funds prior to the date the affair was discovered. Armed with this information, the investigator can initially limit his investigation to the previous two years. Following their first meeting, both the investigator and the wife do some digging. When they meet a second time, the interview proceeds as follows: Investigator: I asked you to go through your bank statements looking for unusual items like transfers to other accounts or anything unusual that you didn’t understand. Did you find anything that we should ask about? Wife: No, everything looked pretty normal. Investigator: I didn’t see anything, either. How about the check registers? Did you see any expenditures that you didn’t understand or that we should look into? Wife: No. I wrote virtually all of the checks. All of them were for living expenses. It looks like we spent everything that came in. We spent a lot more than I thought. Investigator: If everything that was deposited in the checking account was spent on living expenses and that was your only source of money, how were you able to take any money from the marital estate and hide it? Wife: I couldn’t. Investigator: So what is your husband’s basis for claiming that you are hiding assets? Wife: He hasn’t told us. Investigator: Was there any evidence that your husband took money from the joint checking account? Wife: No. Any checks he wrote were for things we both knew about. Investigator: Let’s review what we know. You and I both went through the bank statements and the check registers. Neither one of us found anything unusual. That means that whatever went into the account was spent on living expenses for you and your husband. This means that if assets or income are being taken or hidden, it isn’t being done through the checking account. Wife: So we spent everything that he made? Investigator: It’s possible, but we haven’t confirmed the income side of the equation. Wife: How do we do that? Investigator: We know that the only source of income was from your husband’s salary. Did you get the tax returns? Wife: Yes. Investigator: The tax return shows income for last year of $205,000. Does that agree with what you know? Wife: I didn’t even look at it, I just signed it, but he never told me that he made that much. Investigator: Let’s do a quick calculation on what we have for last year:
|Medicare wages (Box 5 W-2)||||205,000|
|Federal taxes (Federal return)||||(43,144)|
|State taxes (State return)||||(12,137)|
|Social Security (Box 4 W-2)||||(5,841)|
|Medicare (Box 6 W-2)||||(2,973)|
|Total deposits from bank statements||115,456|
|Deposit to checking||4,456||115,868|