The full episode is shown below, and is well worth the time spent watching. John Oliver mentions companies like Mary Kay, Herbalife, Market America (Shop.com), Jeunesse, and Youngevi. The producers did an excellent job of honing in on the important facts about an industry that is made intentionally confusing (in order to conceal their fraud, of course).
Fifteen or twenty years ago, it may have been far-fetched to suggest that a simple internet search could help you win a case in front of a jury. Those immersed in the world of data mining knew it was possible, even then. Today, the sources of information on the internet have grown exponentially, and these can be used strategically in litigation.
The work of a financial investigator and expert witness is focused on financial documents and numeric evidence. Much of the information in fraud cases or contract litigation is found in private records, such as income tax returns, accounting records, bank statements, and financial statements.
In addition, public records can enhance a case. Traditional public records include real estate records, civil and criminal court files, probate court files, vital records, corporate registrations, intellectual property documentation, and professional licensing records.
Publicly Available Information
One source of information that is sometimes overlooked by counsel is publicly available information. The data includes everything else that is readily available to the public, if one knows where to look and how to get there.Continue reading
In divorce and child support cases, one party may attempt to hide income and assets to deprive the spouse or children of their rightful support. It can be difficult to prove hidden earnings or assets, particularly if the other party owns a business, owns assets within corporations or partnerships, or has other financial vehicles that could be used to conceal wealth.
However, there are ways to discover the existence of assets or reasonably estimate the person’s level of earnings. One such way is a lifestyle analysis, which calculates the earnings necessary to live the known lifestyle of the target.
The logic is simple: Life costs money. We can calculate how much you’re spending based on what we know about your mortgage, car payment, eating habits, utilities, toys, vacations, and other expenses. The money to fund these expenses has to come from somewhere, so we can infer that the cost of your lifestyle equals your earnings.
This type of analysis can be done in several different ways, or through a combination of these methods:Continue reading
When the Internal Revenue Services suspects that a taxpayer has unreported income, the agents can use one of several methods to uncover that income. These methods can also be used to help calculate hidden income in a divorce or child support case. One such method used to determine unreported income is the bank deposits method, in which the forensic accountant analyzes bank deposits. In the video below, Tracy explains how this is done.
In the early stages of divorce, clients are required to complete financial affidavits, financial declarations, or other similarly titled disclosures. The importance of an accurate disclosure of assets, liabilities, and income is obvious. Yet many clients are unable to accurately prepare this financial information.
Particularly in high net worth divorces, it may be difficult for the husband or wife to report these financial details because of a large volume of data and/or an inability to compute the numbers. The financial declaration will be a primary piece of information used to divide assets, calculate alimony, and calculate child support. Errors can therefore be very costly.
Some companies think they are protected against employee fraud because they have strong internal controls. Often, that’s the case. Good controls mean the rules are followed and the money is properly accounted for.
Sometimes, however, good controls are meaningless. What about the controls over the controls? All the rules and designated procedures in the world are meaningless if management has the ability to override them at will. When these overrides go unchecked, the company is often no better off than if they didn’t have any controls in place.
Indeed, the risk that management will override controls established to prevent fraud and ensure accurate financial statements is great. It is a constant risk as executives are in a position to manipulate numbers and direct employees to aid the manipulation. They can easily fabricate transactions or modify numbers to craft the financial statements to report whatever their hearts desire.
In order to calculate child support or spousal support (alimony), we must determine the income available for support. Tracy Coenen talks about some of the issues encountered in trying to evaluate income.
Divorcing spouses who own one or more businesses need a detailed financial analysis in order to properly evaluate these interests. A Business Lifestyle Analysis may be performed to determine the true income of the company and find out where the money is really going. Tracy Coenen talks about how she analyzes the detailed accounting records of a business.
Do you think your spouse may be attempting to hide income or assets in your divorce? One spouse commonly has control over the money in the marriage, either by virtue of being the major breadwinner, or by controlling spending, or both. The spouse in the lesser financial position should take immediate proactive steps to protect herself or himself in the divorce. ex-spouse will have with them. By being aware of some of the most common schemes used to hide income and assets, you may be more likely to see the signs.
Some of the more common schemes used to hide money in divorces include:
Stashing cash – It is not uncommon for an estranged spouse to start stashing money around the house, in a safe deposit box, or with trusted friends or relatives. By not keeping the funds in a bank or brokerage account, the spouse is hoping you won’t know of the money’s existence. Pay close attention to transactions that involve cash vaporizing into thin air: large ATM withdrawals, depositing checks but receiving a large amount of cash back, the sale of assets with no paper trail or no deposit to known accounts.
Purchasing items that are easily overlooked or undervalued – Everyone notices a new home or a new car, but who is paying attention to works of art, valuable home furnishings, or technological toys? While some spouses are paying close attention to these types of things, many are not, and this is one great way to reduce cash while secretly increasing hidden assets.
Financial expert witnesses are the key to helping judges understand complex financial issues. It is imperative that the judge understand accounting and finance scenarios if you are to succeed in court. Tracy Coenen and Miles Mason discuss how your expert witness can help judges understand.