Law Office of Stephen W. Penn and Associates

What is financial fraud during a divorce?

If you are a California resident going through a divorce, this is a very difficult time in your life. The issues between you and your soon-to-be former spouse at times seem never-ending. Which of you will have custody of your children? Which of you will have visitation and how much? How will you divide your marital property between you?

This latter issue becomes even more troublesome if you suspect that your spouse is hiding assets from you, thereby committing financial fraud so as to retain a greater portion of the assets than the law allows and deprive you of your rightful share.

Fraud red flags

As the Huffington Post points out, you should watch forĀ red flags such as the following that often indicate financial fraud:

  • Your spouse changes his or her habitual behavior.
  • (S)he receives mail from new and/or unidentified sources
  • (S)he reroutes mail to his or her office.
  • (S)he gets phone calls during which (s)he is secretive and/or noncommittal
  • (S)he changes his or her normal level of confidentiality with you.
  • You discover that (s)he is having an affair.

Possible hiding places

If you and your spouse are a high-asset couple, the hiding places where your spouse can stash various of those assets are virtually unlimited, including the following:

  • Safe deposit boxes
  • Hidden brokerage and/or online financial accounts
  • Shell corporations
  • Unfunded trusts
  • Life insurance vehicles

In addition, your spouse could convince his or her family or friends to help in the asset hiding by falsely telling them that you are depleting bank accounts and/or racking up debts.

Need for a forensic accountant

If you suspect that your spouse is engaging in financial fraud, talk with your attorney about hiring a forensic accountant. This professional can examine such documents as the following:

  • Tax returns
  • Bank statements
  • Credit card statements
  • Employment documents such as retirement accounts, deferred compensation plans, expense accounts, stock options and other fringe benefits

In this way, (s)he can trace whatever paper trails exist. Depending on the extent and complexity of your spouse's financial dealings, this forensic accounting may take awhile and may cost you a substantial sum. However, it may be the only way that a truthful picture of your marital assets can emerge. This information is provided for educational purposes, and should not be interpreted as legal advice.

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