A Hidden Treasure Chest

I represent a wife whose husband is in business with his brother. The wife believes that there is a lot of cash exchanged in the husband’s business. Even if she is correct that there is a substantial amount of cash exchanged in the husband’s business, there is still not a lot of money in that family. She does not have access to enough money to hire forensic accountants, private investigators and litigating attorneys to delve into these sorts of questions.

It is not so simple when money is tight. She wants to know how she can find out for herself whether he has cash hidden away or if there really is, as he claims, no cash. Or – even if there is not a stock pile of cash right now; is it possible that he can get paid off the books and avoid his financial obligations going forward?

I asked her to consider her husband’s purchases and lifestyle, and get a picture in her head of how much cash she thinks exists and is not being recorded.  My suggested equation to her is if she believes that going through the discovery process will net her more than the cost of the professionals involved.  She does not think so.

Here are some ideas for how to find money on your own, or with the help of a mediator.  The basic process is known as “Discovery” and every state has a set of laws which direct divorcing parties to show each other and the court pertinent requested documents.  Your mediator can help you request the documents.  But remember – whatever questions you ask, you should be prepared to answer, as well!  If you ask for bank account statements; be prepared to show all of your own bank account statements.

A stripped-down version of what a forensic accountant might do is to first request all of the records showing the jobs done by the business for the past year – calendars, receipts, invoices, work orders, materials ordered, etc.  on one hand, and the bank records showing income on the other.  Using this information, you would be able to draw a rough idea of how many jobs the company performed, when and where the jobs were done, and the approximate value of these jobs.

If, for example, the company averages 4 jobs per month at $5000 per job and you track that through the business records and income, but some months show the same number of purchases, the same timing of sub-contractors hired, and dispersed, but only 3 jobs’ worth of income, you could deduce that the fourth job was paid in cash, and pocketed.  A pattern of this sort of discrepancy would be of interest to a judge and could alter the financial awards in the matter.

In another matter I handled, the husband showed income of $50,000 per year on his tax returns, but when we looked at copies of his annual credit card and debit card statements, he was spending closer to $100,000 per year – without going into additional debt.

So, we have covered one question:  will a treasure hunt cost more than the amount of treasure you find?

The other question to consider is whether hiding assets is worth the suspicion it raises.   If the husband and his brother really do hide a $5000 job in cash once every month or so, and can each get themselves an extra $20,000 in cash that way; is it worth it once the Wife (or, worse – the IRS) – goes snooping?  Maybe just giving the wife more than she can prove will keep her from trying to prove the bigger questions?

What We Love:  Most decisions come down to the teeter-totter balancing of potential cost versus probable reward.  Adding weight to one side of that scale might be a good way to keep your own balances in check.

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Author: Sharon Oberst DeFala

Sharon Oberst DeFala has practiced low-impact safe divorce since 1992.

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