A judgment debtor who comes into a large payment may look for ways to keep this asset from being visible to creditors. Let’s examine three methods, and also how a professional investigator can discover each of them.
1. Cashiers check shuffle. The subject takes the check, which is made out to him, directly to the financial institution from where it is drawn. He instructs the teller to convert it to a cashiers check under the pretense that he wants to verify the validity of the check and available balance. The cashier creates a cashiers check or teller check in the same amount, made out to the subject.
The subject can now use the cashiers check like a virtual savings account. Each time he needs to make a “withdrawal,” he can visit any branch of the bank, and get cash plus a new cashiers check for the remaining balance. If the check is $15,000 he can ask for $500 in cash, and a new $14,500 cashiers check. He can even get multiple cashiers checks made out to new payees in order to send payment to third parties. None of this activity appears on any financial statement, bank account records for the subject, or tax return.
The subject can continue this shuffling of reducing the cashiers checks until the sum is depleted with no paper trail connected to any account or social security number. There is a slight risk of a bank employee submitting a Suspicious Activity Report (SAR) if there are frequent visits to the same branch, and the subject is remembered. However, this record is only submitted to the US Treasury Department and is not discoverable by the private sector.
Uncovering the method: A private investigator should look at the source of funds for all transactions and payments benefiting the subject debtor. Payments for cell phone bills, utilities, and even loan payments should be examined to see what account they come from. Any payments made came from checks broken off from the original cashiers check, they can be traced back to the teller instrument.
“Withdrawals” for spending cash can be discovered through surveillance. The subject will have to physically visit locations of the issuing financial institution to break down the check and get cash. This creates a record at the bank level which can be subpoenaed after the activity is observed. In many cases surveillance is recommended when a subject appears to be using more cash than he should have available. Bank or ATM visits are usually observed which turn into revealing the source of cash.
2. Third party conversion. In this method the subject endorses the check instrument directly to a trusted third party. Since there is no payment from any account held by the debtor, a simple account search by a private investigator would not reveal any transfer. The asset conversion went directly from the payee to the third party, skipping over the debtor. The third party can dole out funds to the debtor on request.
Uncovering the method: It is usually simple to determine the 5 or 6 most trusted colleagues of a subject. Close friends business associates, relatives, and spouses are the most common. A private investigator makes a direct contact with the most probable subjects and directly asks if they have received any payments from the debtor. These parties are usually unsophisticated to fraud and will either reveal the payment (with some excuse for why it was made) or hedge their answer in a way that an investigator will recognize as deceptive. In some cases the third party is not even aware that the payment is improper, and will have been told by the debtor some story as to why it is being made.
In any case it will likely result in the third party wanting to distance them self from the fraud and will prevent any other colleagues from replacing the first “trustee.”
3. Casino Royale. As legalized gambling is more ubiquitous, debtors no longer have to travel to Las Vegas or Atlantic City to access casino financial systems. A third party check made out to the subject may be able to be used to purchase casino chips or to guarantee a marker. Not all casinos do this but there are mechanisms to make this happen. As long as the amount does not exceed $10,000, there is no need for an 8300 form.
The subject an retain the chips and return to the casino to cash in amounts for expenditures as needed.
Uncovering the method: Start with casino loyalty accounts. Even though the subject is concealing assets, it might be tempting to get more comps from their casino card. Trash pulls can help with this method. A recent high dollar transaction can initiate marketing from the casino. After that an investigator can resort to the surveillance method from the Cashiers Check Shuffle.
4. Debt Shadow. We came across this scenario a few years back. A subject had received payment of $8000+ from a client at about the same time he was being divorced. In order to shield the money from the divorce settlement, he created a new out of state corporation and endorsed the check to that corporate bank account. He could have simply withdrawn fund from that account but to further distort his financial picture for the divorce, he obtained a personal loan secured by the funds in the corporate account. This way his personal net worth was reduced by the loan amount, and he did not report the asset on the PFS.
Uncovering the fraud: This one was more complicated than it was sophisticated. A checklist for a private investigator should always include reviewing credit applications for any loans, leases, or lending activity within the past 12 months. The application itself had the “Secured Account” box checked off on the form. Even if that was not the case, an inquiry to how the loan was underwritten, and also the source of payments would have discovered the scam.
Conclusion: The movement of money always leaves a permanent record of the activity. It is the role of a private investigator to know how to discover each of the subtle signs of asset motion. In all of these methods, it is also important for the private investigator to be aware of what payments should be expected to the subject. Reviewing a prior history of vendor payments, commissions, contractual due dates, and historical bonus’ will make it obvious when a payment does not show up when it should have, or in the same amount is has previously. A professional private investigator skilled in asset recovery can discover any asset, any time given the proper investigative resources.