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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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A pre-litigation asset search can provide you or your client with valuable information to determine if a lawsuit is worth filing or to gain leverage in the course of negotiations prior to filing a lawsuit.

Going through litigation is expensive.  There is nothing worse than racking up tens of thousands of dollars in attorney’s fees only to find the person or company you are suing doesn’t have anything of value.  In other cases, you may be in the midst of negotiating a settlement prior to filing a lawsuit and want to see how far you can push the negotiations, or if you should cut your losses and settle.

In pre-litigation mode, attorneys don’t have the luxury of having the legal authority to access information about liquid assets such as bank accounts and investment accounts.  Attorneys need information quickly, discreetly and most importantly, legally.

What to consider?

Determining whether you should sue a person or a company has two parts – what they may own and what other potential liabilities they may have.  Of course there may be a whole host of hidden assets, but here are a few key assets and potential liabilities that can be identified quickly, discreetly and legally in a pre-litigation asset search:

Assets

  • Personal Assets – The most significant asset that people own is typically their home, but other assets that can be identified through open sources include motor vehicles, boats and airplanes.  Beyond the obvious assets held directly by a person, assets may also be held by a close associate, family trust, family member or shell company.  Real property assets may have also been recently transferred to other related parties or held overseas.
  • Business Assets – In addition to holding individual assets, assets may also be held in a corporate entity.   Identifying corporate affiliations through secretary of state filings and other research is an important step in identifying assets held by affiliated companies which may not be held by the subject directly.

Liabilities

  • Bankruptcy – Obviously, if the person or company has filed for bankruptcy protection, you will eventually be notified and you can file a claim in the bankruptcy proceeding.  What if you haven’t been notified yet?  If the person or company has a history of filing for bankruptcy protection, wouldn’t you want to know?
  • Civil Litigation – If other civil litigation has already been initiated against the person or company you are about to sue, you may be in a long line of creditors once your lawsuit has finally been settled.  It may also be a sign that you should settle fast.
  • Judgments/Liens – If the person or company has been subject to recent judgments and/or lien filings, this may be a sign that the company is already heading for trouble.

Final thought

Conducting a pre-litigation asset search can quickly identify assets and potential liabilities that can help you make a more informed decision about whether you should file a lawsuit or if you should cut your losses and settle prior to filing a lawsuit.

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Investigative firms are often called upon to conduct an asset search in the context of litigation; whether a law firm is in pre-litigation mode and wants to see if a case is worth filing or to potentially gain leverage in the course of negotiations.  In most cases, attorneys don’t have the luxury of having the legal authority to access information about liquid assets such as bank accounts and investment accounts. Legally conducting an asset investigation through open sources is one of an investigator’s most difficult tasks. Privacy laws prevent investigators from identifying the most obvious assets (i.e. bank accounts) and people are willing to take extreme measures to hide their financial interests and defraud creditors.

Below are 5 not-so-obvious areas that an asset search can identify records through open source records:

1Real Property

You may be thinking that real property is pretty obvious, considering that for most people it is the most significant asset held in their lifetime.  But identifying the ownership and true net worth (including outstanding loan obligations) of real property may not be so easy.  Assets may not be held in the individual’s name –  they may be held by a close associate, family trust, family member or shell company.  Real property assets may also be held overseas.  One of the best ways to locate any hidden property assets is through investigator interviews with former colleagues, associates or neighbors.

2Shell Companies

Identifying corporate affiliations through secretary of state filings and other research is an important step in identifying assets held by affiliated companies which may not be held by the subject directly.  Assets are often transferred into shell companies to hide them under a corporate umbrella.

3UCC Filings

UCC filings, which are filed with a designated state government agency, are financing agreements between a corporation and a financial institution and typically require an individual or corporation to post some type of collateral in order for the bank to accept the loan.  A review of the UCC filings can identify collateral such as merchandise and equipment, and in certain instances individuals or corporations will use rare art collections, vintage cars or valuable jewelry as collateral.

4Civil Litigation

A review of court filings relating to civil litigation involving a corporation or individual may not be the most obvious place to identify potential assets.  However, in certain situations an individual or company may have been awarded a large financial settlement as part of the litigation.  In other situations, parties may have had to supply financial statements or asset information as part of the litigation and that information will be preserved in the public record.  Litigation can also develop a web of professionals, such as attorneys or accountants, who the subject could have utilized to hide assets.

5Divorce Filings

Although divorce records are not available publicly in every jurisdiction ( e.g. New York), in many of the most populated states (e.g. Illinois, Connecticut, Florida and California), divorce cases are available to the public.  Identification of assets is a typical part of the divorce proceedings and publicly-available documents may contain a wealth of information relating to bank accounts, employment information, investment income and other sources of income.

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An attorney may think that they do not have any need for an experienced private investigator because of the variety of skills and resources that they employ.  But have you ever found yourself staring at a computer screen and asking:

I know the answer is out there…Where do we go from here?

Although law school and career experience provide an attorney with a number of useful research techniques and litigation skill, they do have limits.

Consulting with a professional private investigator can help attorney’s to leverage your position and find creative and efficient ways to come out ahead of your adversary.

Here are 10 ways that an attorney can use a professional private investigator:

1 Locate People
It may be a witness or an heir. Perhaps it’s a former employee who can shed light on corporate misconduct. Or maybe you need to locate a witness in possession of the proverbial “smoking gun.” Whether you would like to interview, serve, or investigate someone, an investigator can help you to identify and locate the individual.

2 Locate Assets
Investigators are skilled at locating assets such as real estate, valuable property (artwork, antiques, collectibles, etc.), and vehicles (motor vehicles, aircraft, vessels, etc.). An investigator can also help attorneys to identify the location both domestic and offshore bank accounts (though the details of these assets may not necessarily be disclosed by banking institutions without court order or permission from the account holder – see our post 5 Myths: What a Private Investigator Cannot (Legally) Get.

3 Leverage for Negotiations
An investigator can pull together key sources and intelligence to inform your side during litigation, an M &A deal, internal investigation, or any other adversarial situation that can make the difference between a favorable settlement.

4 Enforce Judgments
A judgment is only useful if you are able to enforce it. An investigator can help attorneys to identify current assets and any efforts to hide or misrepresent them through the transfer to family members, friends or other parties.

5 Connect the Dots
Investigators can help you to know who is actually sitting on the other side of the table during litigation or a potential business deal. You can gain immeasurable negotiation power by identifying who is actually behind a faceless corporation or tying together undisclosed connections.

6 Predict Your Opponent’s Next Move
Through an investigation, you can learn your opponent’s history and patterns of behaviors so as to best predict how they will react under pressure. This will help you to be successful in litigation strategizing, during cross examination, or at the deal table.

7 Prep For Cross Examination
During preparation for a deposition or courtroom testimony, an investigator’s report detailing your witnesses’ weaknesses, background, and behavioral tendencies may be one of your most valuable tools. This can also be useful in identifying information against your client, so you can be prepared for what may come up during the course of the litigation.

8 Collect and review electronic evidence
Whether it is an adversarial matter or an internal investigation, investigators may be used to efficiently recover electronic files – including those that a subject believes he or she has successfully deleted. Investigators are frequently used to identify and analyze a subject’s emails, documents, or other files.

9 Trademark and Intellectual Property Monitoring
Investigators can be used to successfully police a company’s products throughout the world. Counterfeiting and improper diversion of products onto the grey market are just two of the most common areas where an investigator can provide intelligence and assistance.

10 Reconstruction
A historical reconstruction may be helpful in a number of different areas. Perhaps you need to review the history of a family to locate heirs. It could be a corporate history or a chain of title issue in a real estate matter. Whatever the issue, an investigator can help to identify and piece together long lost documents, facts and witnesses.

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