Victims of fraud and those who prevail in lawsuits are continually seeking monetary and other retribution in connection with their issues. How assets are located and recovered is determine by the nature of the proceedings which give rise for the need to locate and recover assets. Certainly venue (where the proceedings are held and where the assets to be recovered are located) has an impact on locating and recovering assets. The following dissertation merely scratches the surface of the subject and is intended only to provide food for thought.

LOCATING HIDDEN ASSETS

Identifying and locating hidden assets is a function of hard work, investigative perseverance and some luck. Certainly a review of all available public records pertaining to the target is essential. Sometimes the obvious is not so obvious. As and example, the the target of our efforts may live in a residence that is vested in the name of someone other than him/her. This could mean that the target is renting or that the target has vested the title to his/her residence in the name of someone else. This could provide a lead as to the vesting of other assets, including bank accounts, securities, business interests, etc. The proverbial “strawman” is alive and well, particularly in the fraudster world. Court records can also provide leads to assets held by targets of investigations. Divorce records could be a gold mine of information, particularly when the former spouse is interviewed.

The extensive use of surveillance and related covert activities is also essential in attempting to locate hidden assets. During extensive surveillance activity concentrating on an individual who had swindled thousand of elderly persons out of hundreds of millions of dollars, it was discovered that he had proprietary interests in multi-unit residential complexes, a high priced condominium and commercial buildings located in cities other than the city in which he lives. These properties had a collective value of in excess of one hundred million dollars! Some of the properties were in the name of his brother-in-law and some of the properties were in the name of his girlfriend. During our surveillance activities we also identified banking relationships and securities brokers.

Hand-in-hand with surveillance activity is the use of trash searches. Trash searches are legal in virtually all states. The key is where the trash is placed to be picked up. If the trash container is placed on public property, the contents can legally be taken. If the trash container is located on private property, the contents cannot be legally taken. There has been extensive litigation on the subject of the legality of trash searches and the resultant admissibility of items seized during trash searches. Most of the litigation has been in connection with criminal actions. Trash searches can be useful in identifying a variety of things. Remember, “Trash talks”.

In some instances court orders can be obtained to compel the production of records by third parties to assist in the identification and location of assets. In most cases in the United States court orders are only available after a judgment has been obtained. In an international copyright matter, the plaintiff was awarded a substantial judgment. The defendant, seeing the handwriting on the wall prior to the judgment being handed down, moved large sums of money from banks in New York to a bank in Gibraltar. The defendant also vested the Gibraltar bank accounts in the name of an unknown business entity that was registered in Nevis. The New York court, upon application by the plaintiff’s attorney and subsequent to issuing the judgment, issued production orders to several New York banks where the defendant’s funds were formerly held. After the court ordered bank records were obtained, it was discovered that the defendant had transferred large amounts of money to a certain Gibraltar bank. The New York court issued a request for judicial assistance to the appropriate Gibraltar court asking that the funds in the Gibraltar bank account relating to the defendant be frozen pending further litigation in Gibraltar. The Gibraltar attorney that was retained to further the interests of the New York action sought and obtained a Mareva Injunction compelling the Gibraltar bank to freeze all of the funds in the target bank accounts.

In most English common law countries an Anton Piller Order is available through the courts. This order is only issued when it can be shown that extraordinary efforts are justified in obtaining third party records to identify assets and obtain other evidence in furtherance of a legal action that has not actually commenced. The Anton Piller Order is a civil search warrant. Anton Piller Orders were obtained in connection with one of the fraud cases that was previously mentioned. These orders were executed on and records were seized from the personal residence of the target, the offices of his accountant and the offices of his attorney.

In the United States, in some cases a civil search warrant can be obtained in furtherance of a legal action that has been initiated. These orders are usually requested and granted in connection with trademark and copyright lawsuits. In a major fraud investigation in Florida, a civil search warrant was obtained from a court in which a lawsuit had been filed. The personal residence (a hotel room) of the target as well as public storage units rented by the target were searched pursuant to the civil search warrants.

Most assets are hidden in so called “bank secrecy off-shore locations.” Many of these areas are in the Caribbean and Europe. There is another tool that is available to require the production of records by financial institutions as well as other businesses. This tool is called the Norwich Pharmacal Order. This order resulted from a decision of the English House of Lords and has been upheld and expanded by the English Court of Appeals. This order requires the recipient of the order to disclose all material information and provide documentation pertaining to the whereabouts and manner of holding of misappropriated assets. These orders are usually served on financial institutions and other legitimate business entities. These orders are usually wrapped in gag orders, complete with remedies for violations of the gag orders.

RECOVERING HIDDEN ASSETS

How we recover assets, hidden or otherwise, is almost always a function of where the assets are located and what the assets are. To start with, once assets are located, it’s important to make sure that the assets that can be moved are not moved. Assets such as vehicles, boats, planes, etc. can be moved from one jurisdiction to another to frustrate recovery efforts. Also, funds in bank accounts can be moved with the stroke of a computer key. Here again, European countries have a judicial remedy in the form of a court order entitled the Mareva Injunction. When issued, this order freezes assets. This order is recognized almost worldwide, including the United States. In the United States though, the Supreme Court has held that Mareva cannot be used in a benign debtor/creditor situation where, for example, a debtor defaulted on a promissory note. It is available in the United States to creditors who were defrauded or deprived of assets due to criminal conduct. This remedy is a pre-litigation tool where it can be shown that assets are likely to disappear when the target knows that a lawsuit has been initiated and/or when a judgment against a target is obvious.

Certainly, any effort to recover assets, hidden or otherwise, is directly tied to the decisions of the courts of competent jurisdiction. In the United States assets are recovered through judgments obtained by the creditor and the accompanying writs of execution, liens, levies, etc. In most off shore locations, judgments from a U.S. court are not recognized as such. Most off shore courts recognize claims as a means of securing financial remedies for wrong doing. When pursuing assets in the international arena, claims cross borders more easily and for the most part are sufficiently recognized in most legal systems. Securing a claim does not preclude obtaining a judgment. It merely sets forth the issues of a contemplated court action and it provides tools to identify, locate and freeze assets that may ultimately be needed to satisfy a judicially decided issue. In rare but appropriate situations, claims, freezing orders, etc. can be obtained in an ex parte type atmosphere. In many cases, rushing to judgment without the claim being secured may be an exercise in futility. It cannot be emphasized enough that claims allow elasticity so that in foreign jurisdictions, moves for freezing assets (i.e. Mareva Injunction) can be argued using more than one issue. Again, claims are recognized in virtually every country. Judgments, although used routinely in the United States as a vehicle for financial remedy, are not easily moved across international borders.

Presenter is one of two principals at the Larsen AVR Group, Inc. located at 445 South Figueroa Street, Suite 3215, Los Angeles, CA 90071.  He is a certified fraud examiner who retired from the Criminal Investigation Division of the Internal Revenue Service where he enjoyed a twenty two year career as a Special Agent and Supervisory Special Agent.   www.LarsenAVRgroup.com