Trying to hide assets in a divorce very rarely pays. In fact, it can cost you dearly.
This was clearly illustrated in the recent case of a former oil company CEO who just pleaded guilty to tax evasion and is slated to serve a five-year federal prison term. As our Monmouth County divorce lawyers understand it, his schemes reportedly surfaced in the midst of his ex-Wife’s allegations that he tried to swindle her out of significant marital assets during their contentious divorce.
According to Bloomberg.com, the CEO founded his company in 2004, shortly after the start of the Iraq War. In 2007, he allegedly struck a deal to kick back major revenues to an Iraqi Kurdish politician - an arrangement later deemed illegal and voided under U.K.’s international anti-corruption laws. Nonetheless, these dealings apparently continued, with a federal Court later finding he’d unlawfully funneled millions to an offshore shell company. There was also evidence of insider trading.
What does all this have to do with his divorce? As the oil exec was becoming a very rich man, he met and became involved with a young Lithuanian student and model - an affair that ended his 18-year marriage. He later married his mistress.
Per the 2012 divorce settlement, the businessman agreed to give his Wife 23 million shares of the oil company, worth well over $100 million at that point. However, she alleged an intentional delay in delivering those shares - notable because their value plummeted by the time she actually received them. She alleged this was a premeditated attempt by her ex to stall - knowing the value of the shares was going to dip. She also alleged he put money away in a secretive Jersey trust with his new Wife.
She took him to Court - and won. He was ordered to pay her $38.5 million. But when he insisted he didn’t have the funds, her attorneys began digging around for traces of hidden money in offshore accounts. They uncovered substantial evidence not only that the businessman and his new Wife were living quite lavishly, but also that he was operating a shell firm allegedly used to siphon money from investors.
The story gets even more convoluted, but as the U.S. Justice Department explained, it ultimately resulted in an IRS criminal investigation into $20 million in federal tax liabilities that were owed - but never reported or paid - by the oil executive from at least 2004 until in or about 2014. He was convicted of using offshore structures, trusts, and bank accounts to conceal part of his undeclared income from the IRS.
Now, he’s starting a five-year federal prison term.
Would all of this have been discovered if he had simply paid his ex-Wife fairly? Maybe. Maybe not. But certainly, the divorce case appears to have accelerated that outcome, if nothing else.
Consequences of Hiding Assets
Although most of us don’t have hundreds of millions of dollars to be hiding in the first place, attempts to hide money and assets from soon-to-be-exes aren’t as rare as they should be in New Jersey divorce cases.
To state it plainly: Concealing assets in a divorce is illegal. Penalties for doing so can be severe. Not to mention, there are many ways to uncover it, no matter how much money you have. Hiding assets in a divorce can result in:
- Fines, jail, and/or imprisonment.
- Loss of credibility in the eye of the family law Court overseeing divorce proceedings.
- Resignation of your attorney from your case.
- The requirement to cover your ex’s legal bills.
- Forfeiture of the entire value of the assets you tried to hide.
As family law attorneys, some ways that we might go about uncovering hidden assets:
- Working with forensic experts and/or computer scientists to examine files on any jointly-owned computers.
- Requests for bank statements, canceled checks, and any other relevant records on all accounts.
- Loan and credit card statement requests.
- Discussions with the spouse’s employer for information about their stock, 401k accounts, etc.
- Examination of any financial information inconsistencies.
- Reviewing past income tax returns.
In addition to hidden assets, we’ll also be looking carefully at undervalued assets. Sometimes this can be just as detrimental in a divorce settlement if it isn’t caught.
If there are certain assets you feel strongly about keeping, there are ways a skilled family law attorney may be able to help negotiate that outcome in your favor. It could mean acquiescing on another asset or condition, but that’s better than potentially losing that and much more if you are caught trying to hide it from the Court altogether.