Litigation Support – White Collar Fraud Investigation – Corporate Fraud Investigation

There are many things to consider when a law firm is hiring a private investigator.

Below is a guide to some best practices.

Licensed and Insured

There has been a troubling trend of unlicensed private investigators, so the first thing that a law firm should do is confirm licensing status with the local regulatory body.

In the United States, 43 of the 50 states have statewide licensing requirements for private investigators/private detectives.

As of June 2011, there are no licensing requirements in Colorado, Idaho, Mississippi, South Dakota or Wyoming; Alabama and Alaska have requirements in certain cities.

Prior to commencing an assignment, the law firm should request proof of liability insurance to protect the firm in case something does go wrong.

Communicate Your Needs

It is critical to communicate to the private investigator as much information as possible from the outset, no matter how minute the details may be.

It is also important for the law firm to understand what information is potentially attainable and what may not be, within the confines of the law.

Subject Matter Expertise

The private investigator should have subject matter expertise relating to the situation at hand.

If the investigation calls for surveillance, finding a witnessintelligence gatheringdue diligence investigationcomprehensive background investigationasset investigation or an expert witness background investigation, a private investigator should be able to provide the law firm with examples of previous work done on similar matters.

Establish a Budget and Deliverables

The private investigator should prepare a descriptive agenda of your objectives and what efforts the investigative firm will make to accomplish those goals.

The investigation should be conducted in stages, with deliverables provided upon completion of each stage, so the law firm can have a measuring stick to gauge the progress of the assignment.

Engagement Letter

Included in the engagement letter should be an indemnity agreement in case the private investigator engages in professional misconduct or violates the law.

Additionally, the scope of the work, the agreed-upon budget, any agreed-upon retainer agreement and a termination clause should be included in the engagement letter.

Documentation of the parameters in an engagement letter can alleviate future disputes over objectives, timing and fees.

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Finding creative ways to locate hidden assets is no easy task; there are literally hundreds of ways to hide assets, such as stashing them under the mattress, prepaying an existing mortgage or buying a stamp collection and putting it in a safe deposit box.

Locating hidden assets under the mattress or finding that stamp collection is no easy task, but there are legal and legitimate ways to locate hidden assets that you may not have thought of before:

  • Surveillance – Follow anyone for a few days and you can find out quite a bit about them: where they eat, the people they meet, where they work and with whom they associate. It can also lead you to a yacht registered in the Cayman Islands, a vacation home listed in a relative’s name or a business that you didn’t know about.
  • Dumpster Diving – Depending on local laws and regulations, someone’s trash may be a perfectly legal and legitimate way to find bank statements, financial records or other records that can lead you to significant assets. It may be a little messy, but this may be the most effective (and legal) way to get financial details.
  • Interviews – As we chronicled earlier, there are numerous open sources/public records that can be reviewed and analyzed to find assets. In some cases, however, you may need to take it a step further and conduct interviews. Former business partners, opposing parties in litigation, former neighbors or co-workers may provide clues to locate hidden assets.
  • Business Affiliations – The individual for whom you are trying to locate hidden assets may not have any assets held directly in his or her name, but he or she may be holding assets under a corporate veil to insulate himself or herself or hide the assets from prying eyes. In addition to searching for corporate affiliations of the party you are looking into, corporations can be set up under the names of family members or close business associates, or in states such as Delaware where you can maintain anonymity.  In a recent case, we identified more than $3 million in government contracts that were recently awarded to an entity related to the subject company.
  • Family Members or Business Associates – In order to shield assets, parties who are in financial trouble may try to “park” hidden assets with immediate family members, close business associates or even distant relatives until the dust settles. In doing so, they can mask their true net worth with “trusted” associates until the coast is clear.
  • Overseas Assets – Parking assets overseas is a common way to hide assets. While banking regulations overseas may prohibit you from legally obtaining bank records, items such as real property, boats, corporations or, in some cases, income tax records may be publicly accessible. Before you get too excited, there is no comprehensive way to search for assets overseas. Knowing where to look, and the specific countries the party may be linked to, will be the keys to successfully identifying any assets held overseas.

This post is part of a series of posts titled The Anatomy of an Asset Investigation.

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The other side of identifying assets is determining what the other party’s current or potential liability may be. Perhaps you have identified a $2 million residence on Lake Tahoe, but it doesn’t do you any good if there are $3 million in outstanding loans or that the party owes millions of dollars in back-taxes to the government. (Rest assured, the government will be in line ahead of you to collect their money!) 

 So if you have found the assets, the next step is to understand the outstanding liabilities, or potential liabilities that may be down the road.

Civil Litigation

The key here is to identify any ongoing state or federal litigation that the party may ultimately be liable for. Recent or historical litigation may also provide a clue as to the mode of operation for the individual or business – if they are likely to settle or if they may be dragging things out for years.

Bankruptcy Filing

For obvious reasons, knowing if a party has already filed for bankruptcy would be a key part of your decision whether it’s worth pursuing legal means to retrieve assets. If the individual or business has a history of filing for bankruptcy, this may be a clue for the future.

Judgment and Lien Filings

Recent court judgments or state/federal tax liens may be a sign that financial trouble is very near. A history of judgments or liens may a glimpse of what may come down the road.

UCC Filings

In general, Uniform Commercial Code filings are made against a property to create a lien to secure private financing. Before you get too excited about that $200,000 piece of equipment that you have found in the opposing party’s possession, you should check with the appropriate Secretary of State to see if the equipment has been used as collateral in any financing agreements.

Property Liens

It’s great that you are aware of multiple properties owned by the party, but if those properties are highly leveraged, you are going to have a difficult time getting anything.This post is part of a series of posts entitled The Anatomy of an Asset Investigation. Our next post delve into some ways of identifying hidden assets that you may not have though of.

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Ask anyone how to find assets and the most likely answer you will get is “in the bank.” As we chronicled in a previous post titled Can a Private Investigator Get Bank Records or Account Information?, unless you are willing to break the law (or hire someone to break the law on your behalf), obtaining bank or financial records is completely off-limits unless you have either proper authorization or a court order.

Have no fear! Bank records are not the only source to find assets. There are many public record sources that you can also use to find assets.

Here is a list of the 13 most useful public records to find assets:

1Real Property

Property is typically the most significant asset that an individual will ever purchase. Not only can you find the main residence an individual calls home, but you can also identify land adjoining their main residence, out-of-state vacation homes and vacant land in the middle of nowhere.

2Motor Vehicle Registrations

Motor vehicle registrations will not only reveal what car he or she is currently driving, but you may also even find a motorcycle, a classic automobile or even an expensive car collection.

3Watercraft Registrations

Small watercraft or boats are typically registered in a state, but larger, more expensive boats must be registered with the US Coast Guard.

4Aircraft Registrations

All aircraft must be registered with the Federal Aviation Administration and can be registered by either individuals or companies.

5UCC Filings

UCC filings are public information and are filed with the respective secretary of state. UCC filings are typically backed by some sort of collateral that may include expensive equipment, business proceeds from a corporation you were not aware of or even a priceless art collection

6Civil Litigation

State or federal civil litigation may identify a significant financial award, a settlement from a former business partner or a class-action lawsuit that could disclose extensive stock holdings.

7Divorce Proceedings

While not all divorce filings are publicly available in every state (e.g., New York), divorce filings are available to the public in several of the most populous states including Connecticut, California and Florida. Typically, divorce filings contain a statement of assets that includes details of bank account holdings, retirement funds, a rare coin collection or priceless artwork.

8Probate Filings

An inheritance from a wealthy distant relative or a well-to-do grandparent can be identified in local probate filings. Identifying key family members and distant relatives who recently passed away can lead you to a significant inheritance.

9Corporate Filings

Ownership in a corporation, a limited liability company or a limited partnership may be the key to identifying assets not held directly in the party’s name. With private companies, it may be difficult to fully understand the value of the business because detailed financial information is not typically available on private entities. However, the business may also have real property, vehicles, equipment or patents registered in the individual’s name.

10SEC Filings

Publicly traded companies are required to make certain disclosures that private companies are not. These disclosures may include stock options to executives, significant stock holdings by third parties, compensation agreements or even independent contractor agreements with outside parties.

11Patents and Trademarks

While a party may not hold any significant “real” assets, he or she may hold a patent or trademark that could potentially be worth millions.

12Nonprofit Entities

You may not think of a nonprofit when you are thinking about assets. However, money may have been diverted to a nonprofit that is funneling money back to the target individual through expense payments or salary payments, such as the recent allegations against Greg Mortenson, author of Three Cups of Tea, who is allegedly using his nonprofit, the Central Asia Institute, as a “private ATM.”

13Small Business Retirement Funds

If the party you are looking into owns a business, he or she may have stashed a large portion of their earnings or assets into the company’s retirement plan. Small businesses are required to file an annual Form 5500 with the IRS that provides information about the plan, assets and its operation.

This post is part of a series of posts titled The Anatomy of an Asset Investigation. Our next post will discuss the other side to finding assets – how much do they owe?

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There are hundreds of reasons why you might consider hiring a private investigator to locate assets. Here are the 10 most common reasons clients contact us to locate assets:

1Prior to Filing Litigation

In preparing to file litigation against a party, the ultimate success of the case depends on whether the opposing party can pay for the damages. Prior to spending thousands of dollars in legal fees, you are better off understanding if the party has adequate assets to cover the potential damages.

2During the Course of Litigation

So you didn’t hire a private investigator to locate assets prior to filing litigation and now the opposing side is claiming poverty. A detailed asset search may confirm or deny the existence of any real assets or any hidden assets that may have been transferred to related parties.

3New Investment

One of the biggest red flags indicating an investment fraud is an investment manager living beyond his or her means. That oversized boat and expansive home may be an indication that the manager is taking an oversized “paycheck” from the proceeds due investors.

4Due Diligence

During the course of conducting a due diligence investigation on a possible acquisition, the party may have some reported assets, but do you know how much those assets are really worth or where the assets came from?

5Internal Corporate Investigations

Do you suspect that one of your employees is embezzling money or accepting kickbacks?  That money has to go somewhere, and it may be going into a newly built vacation home on the beach.

6Lending Money

Prior to a financial institution or private party providing a loan, identifying assets to support the financial health of the party may be the key to recovering assets down the road if the deal goes bad.

7Divorce Proceeding

While it may not always be the case, in some instances, joint assets may have been acquired without the other party’s knowledge.

8Judgment Recovery

Getting a court-ordered judgment is the first step, but then there’s finding the party from which to collect the judgment and actually receiving the proceeds from the judgment. Those are not always so easy.

9Leverage in Negotiations

Understanding the financial health of the party you are negotiating with may ultimately mean a favorable settlement. If you know that the other party was in serious financial trouble, you may want to consider settling quickly.

10Executive Background Screening

A newly hired executive living beyond his or her means or experiencing financial difficulties may raise a significant red flag warning of potential fraud down the road. A recent study by the Association of Certified Fraud Examiners showed two key warning signs of occupational fraud are living beyond one’s means (43 percent of cases) and experiencing financial difficulties (36 percent of cases).

This post is part of a series of posts titled The Anatomy of an Asset Investigation. Our next post dives into some open source records that you can utilize to find assets.

Your turn.  What are some of the reasons that you would want to locate assets?

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We are please to present an interview with Jason Frasca, a New York surveillance investigator from Davis Investigations to give some insight into the “day in the life” of a surveillance investigator.

Tell me a little about Davis Investigations.  How did it get started and where are you now?

Davis Investigations was started by my mother, Dorothy Frasca in 1989.  She had been previously working for another investigation firm in New York City on the surveillance team and just loved it and had a real passion for it so she decided to venture out and start her own company.

She decided early on video surveillance would be the only aspect of investigations she would provide. Our clients were impressed from the start, her passion shining through in her results. Word got around quickly and a business was born. We still provide video surveillance to our 3 original clients today.

The company has evolved into a family business. Adam Frasca joined the company in 2002.  He is our lead investigator for video surveillance. I would say he has taken his mothers passion for surveillance and refined it to a science and art form maximizing results for our clients.

I joined the company in 2004 learning all aspects of the business. I got a crash course in surveillance, standing on cold wet street corners watching doors, standing in hallways for hours waiting for the subjects to leave their doctors appointments.   My role now is spilt between operations and surveillance.

What types of surveillance services do you focus on?

Our primary focus is insurance fraud – major liability claims, medical malpractice and personal injury cases where the plaintiffs are suspected of exaggerating their claims to cash in on their lawsuit. We also do surveillance for general liability, matrimonial and disability.

In the end, surveillance is surveillance regardless of what type it is as long as you understand the objectives. Whether it be a subject building a rock wall or a spouse cheating – the video is the same. It’s about strategy and understanding human behavior.

With over 21 years of exclusive dedication to video surveillance, we have become experts in understanding human behavior, putting ourselves in the best possible position to achieve maximum results on behalf of our clients.

Describe what a day in the life of a surveillance investigator is typically like?

We start very early, typically no later than a 4 am wake-up as you have to be on location by 6 am before your subject starts their day.

Once on location you take your opening shot, with a date and time stamp to authenticate the video. The opening shot is important, as it is the “beginning” of the story.  Our surveillance videos tell a story, with a beginning, middle and an end.

After you take your opening shot you must establish your surveillance position accounting for the various circumstances each surveillance offers from a rural setting dealing with various routes to the main roads and to urban settings with tall buildings with hundreds of people exiting multiple exits.

Once you have all the logistics worked out, you sit and wait.  This is the hardest part of the job. To maintain your focus for hours waiting for the moment when your subject exit then you spring into action! The rush, the moment you got up in the morning for! It may happen at 6:10 am or 3:55 pm, 5 minutes before you cut off the surveillance.

The “middle” – now surveillance begins and you follow your subject discreetly to where ever they take you. Could be just to walk the dog or to the deli down the street for the newspaper, perhaps  to Foxwoods. You never know where you will end up on surveillance, you must be prepared for everything and anything.

We follow on foot, buses, taxi cabs, subways, cars, car services, sometimes all in the same hour. Hoping in out of our own vehicles, parking them, diving back in, only to park them again.  We do whatever it takes to get video of our subjects, making sure the video is steady and professional throughout.

Ultimately the subject gets to a destination.  Either back home after a series of errands and appointments or a destination like a friends house or a Foxwoods. This is the “end” of our story.

Of course there are days where you just sit there all day and nothing happens and at 4 pm you call the surveillance off and arrive home at 6pm. You get out of your vehicle for the first time in 13+ hours and your a bit stiff.

What is the most difficult part of a surveillance investigators job?

The hardest part of a  surveillance investigators job is that unlike the movies we get just one take to shoot our videos just right. There are no do overs or opportunities to go back and try again.

If a subject jumps over a puddle and you miss it on video the opportunity is lost forever.  If a plaintiff picks up a case of water on each shoulder in a Costco and carries it out and you are out of focus, the opportunity is gone. You can’t ask them to go back and carry it again. If your claimant carries a whirlpool across a parking lot and your battery dies you missed the home run shot.  You will never get that chance again to film that million dollar video.

This is not Hollywood. A private investigator on video surveillance has to be perfect to get the home run.

What are the keys to conducting a successful surveillance?

Preparation, Planning, Focus & Tenacity.

Preparation – It starts in the office, working up the case to ensure you have all the details on your subject before going into the field.  Confirming you are going to the right location and that your subject, to the best of your ability lives at that location.  Ensure that you have all your batteries charged and equipment prepared for the field before you arrive on-site and not fumbling with everything when you should be taking your opening shot and watching the door.

Planning – Have a solid plan to approach individual surveillance to maximize the results.  No two surveillance’s are the same. Each requires a plan all their own based on the characteristics of each individual. Work or school schedule, alleged injuries, where they live, age, relationships, modes of transportation available, etc.  Once on-site, the plan must be refined according to the environment. How close are they to any subways or bus stops.  Additional unknown vehicles in the driveway, can you see the house from the street? Can you park on the street anywhere near the home safely or undetected, number of exits from the building, etc.

Focus – Maintaining your focus throughout the course of a surveillance is paramount. It only takes a second for a door to open and close. Much can be learned or lost in that moment.

Tenacity – You must be tenacious day in and day out to constantly acquire video on your clients behalf. The environment, weather and location of the surveillance is constantly changing from moment to moment, place to place.  There are a multitude of outside factors trying to prevent you from acquiring great video – whether it be traffic, a school bus, a traffic cop, a nosy neighbor, a busy parking lot, a crowded subway or an empty subway.  You must be tenacious through it all and press on undetected to get great video… and we do.

What are your biggest challenges in conducting a surveillance investigation?

The biggest challenge we face on a surveillance is identifying a plaintiff or claimant. We are usually given a physical description of the plaintiff or claimant when we receive the case and that is all we have to go on.

When the subject lives in a one family home this is usually sufficient.  However, when there are multiple families living in one home or in an apartment building the chore of identifying the subject becomes a challenging task to say the least. Yet, we do overcome the obstacle through a variety of checks and balances.

What would you say is the key differentiation between you and other surveillance investigators?

I believe the number one thing that separates Davis Investigations, Inc. from other investigators is that we are exclusivity dedicated to video surveillance. We have been for over 21 years and will always be.  We are experts at video surveillance.  We live, eat and breath video surveillance. We constantly talk about the angles, strategies, setups, environments.  Any advantage we can to acquire video on a subject based on a specific surveillance’s unique challenges.

There is an art & science to video surveillance, which we have spent countless hours perfecting. You don’t just buy a video camera and start following someone and call it surveillance. The outcome will will not yield the same results as a trained dedicated professional.

Another key point that set Davis Investigations apart is that we shoot all of our surveillance videos in High Definition (HD) with a date and time stamp. We have been doing this for a while now and the quality of our videos is superior in this format. I do believe we pioneered surveillance video in (HD) and have received nothing but high praise from our clients since rolling it out.

Since the company was founded, what has changed about the surveillance business?

The 2011 surveillance landscape is much more competitive today than it was in 1989 due to the inexpensive nature of the cameras making it easy for anyone with a private investigators license to offer the service.

However, this does not mean they are experts or offering a quality product. In fact, I believe it spreads themselves thin from their core focus in which they originally started their business and ultimately diluting all of their offerings. Jack of all trades, master of none.

What type of technology do you use to help streamline your business?

In recent months we have upgraded our internal systems to allow for a paperless office. While it is the trendy environmentally friendly thing to do, it also allows us to update surveillance cases from any where pushing information through to our investigators immediately, regardless of where they are.

No more printing assignments and being bound to the “static” paper document.  We are now dynamic, on the fly. If new pictures of a subject are acquired they can be routed to the field investigator immediately, in real time along with new relevant search results or details that may have come in after the fact.  It has made a huge difference in our ability to react quickly to changing circumstances.

For people who are looking for a surveillance investigator, what should they be looking for?

If you are looking to hire a private investigator to conduct Video Surveillance you should look for  five things:

1) Insure that they are licensed in the state in which you intend to hire them.

2) Make sure that all of their videos are authenticated with a date and time stamp on every scene.  If there is no date and time stamp the video will not be admitted as evidence into court, it will be worthless.

3) Ask the private investigator you are hiring what type of plan they would implement for you’re specific surveillance scenario. Every surveillance is different and your potential investigator should have no problem sharing their ideas with you upfront.

4) Be leery of the cheapest price.  Like in all walks of life – you get what you pay for. Davis Investigations uses two surveillance investigators on every case.  This is not a corner that should ever be cut nor comprised for any reason.  You pay a bit more but the return pays for itself 100 fold in the results as the second most import thing after trying to obtain the video is avoiding getting made.

Once the  surveillance is compromised and a subject is aware they have been tailed you can never follow that person again with out them looking over their shoulder limiting all future success. Two investigators covering every possible exit, mode of transportation and the ability to follow long, short or quick and frequent stops is the best strategy for conducting surveillance undetected, allowing for multiple attempts and increasing your chance for success.

5) Finally, the most important credential to look for when hiring a private investigator to conduct  surveillance is their ability to testify on the stand.  Being an expert witness is the most overlooked aspect of hiring an investigator for video surveillance, yet it is the second half of the service you are hired for. Davis Investigations, Inc. has testified 100’s of times authenticating their video’s in court and are considered to be highly credible expert witnesses.

 

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Unless you have been hiding under a rock for the past couple of years, Angry Birds has become one of the most popular video games in history.  It’s been downloaded more than 2 billion times, so much so that Rovio, the game’s creator, went from relative obscurity to talks of going public in a few short years.

The concept of the game is that the “angry birds” are seeking revenge against the green pigs who have stolen the birds’ eggs. The birds use their unique destructive powers to destroy the pigs’ fortified castles and re-capture their eggs.  If you have never played it, this may sound completely ridiculous, but rest assured it’s witty, fun and can provide hours of entertainment.

So what can Angry Birds teach you about a private investigator?  Here are some overlapping principles between the game and the investigation profession:

1Don’t use the wrong bird for the wrong job

Each “angry bird” has its own unique destructive power to destroy the pigs’ fortified castles.   Yellow birds can cut through things with precision and accuracy, blue birds can shatter glass and the black birds use their explosive power to blow things up.  However, using the wrong bird for the wrong job can be a complete waste of time.

Professional Investigators have their own unique talents and specialties, but using the wrong investigator for the wrong task can doom a case from the start.

2There are different ways to knock down a fortress

In the game, there are many different ways to pass each level, using the various birds to destroy the pigs’ castle and move on to the next level. There is not one way to do it – no “right way”, no “wrong way.” There are just different approaches which often take multiple attempts to perfect a strategy and knock down the castle.

In comparison, there are several investigative techniques that a private investigator can use to achieve a particular objective, utilizing what we call “human” intelligence, open sources or public documents.  Some techniques can be more efficient than others and in some cases you have to try multiple techniques to achieve your objective. The point here is that there are many ways to skin a cat (or in this case pigs).

3“Three Stars” is the goal, but not always attainable

When you pass a level in Angry Birds, you get one, two or three stars depending on the amount of points accumulated.  A three star is like hitting a home run in baseball; it’s the perfect outcome.  Sometimes you pass the level on the first shot, but in other cases, it takes numerous  attempts to pass a level and even more attempts and effort to get three stars.

For a private investigator, we would love to get that “three stars” or get that proverbial “smoking gun” which could ultimately break the case open.  In a perfect situation, the most valuable information can be obtained early in the case, other times it can takes months of investigation.  As with anything though, the proverbial “smoking gun” doesn’t always exist.

Final Thought

It’s not often when a video game can be reflective of anything outside of pure entertainment, but in this case fans of Angry Birds can better appreciate some of the nuances of a private investigator.

Your turn. What do you think? Any other things that Angry Birds can teach you?  Let us know in the comments.

Photo courtesy of Rovio.

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