Divorce Fraud

She Can Have It If She Can Find It!

     She can have it if she can find it!  These are words often heard by the financially dominant spouse while in their divorce attorney’s office.  If you are the forensic accountant for the “out-spouse”, the spouse who has nothing to do with the family finances, this becomes a challenge to you to make sure your client does not become a victim of divorce fraud.

     Whenever I am asked to look for hidden assets or value a business in a divorce case for an “out-spouse”, my first question is always “when did you begin to feel that the marriage was falling apart”.  The reason I ask this question is because this is usually the time the financially dominant spouse begins the process of committing divorce fraud by hiding assets and reducing income.

      There are several ways for the financially dominant spouse to “cheat” his spouse out of a fair settlement.  This is especially true when the financially dominant spouse owns or is a partner in their own business.

An example of Divorce Fraud    

    Bob is a dentist who is divorcing his wife, Mary.  Mary is entitled is 50% of the marital assets which include part of Bob’s dental practice.  But, Bob has been planning this divorce for over two years.  He has his girlfriend on the payroll of the dentist office and has been siphoning money out of their joint brokerage account for the last two years totaling $150,000 while telling his wife they have been losing money in the market.

     What are the ramifications of these actions if they are not discovered by a forensic accountant on Mary’s behalf?

     First, Bob’s dental practice is not as profitable as it could be because his girlfriend is on the payroll and because he is deducting personal expenses from the business.  This affects the value of the business because the value is based on the profitability of the practice.  This means Mary gets less actual dollars in the settlement unless you have a forensic accountant review the books and value the business correctly by adding the girlfriend’s salary and personal expense back into profits prior to valuation.

     Second, if nobody reviews the statements of the brokerage account to figure out that Bob has stolen $150,000, then Mary is going to get less money than she is entitled to because there is going to be less money in the joint brokerage account to split.

     In the big picture, there are literally hundreds of ways for a financially dominant spouse to cheat his spouse in a divorce.  It is up to the “out-spouse”  to hire the forensic accountant to figure out how he is doing it, to find the hidden assets and to value the business correctly so that your client gets the settlement they are entitled to.

Ted Lanzaro is the founder of Forensic Accounting and Investigative Services with offices in Cheshire, CT.  Mr. Lanzaro is a Certified Public Accountant, Certified Fraud Examiner and Certified Forensic Accountant in Connecticut specializing in small business fraud investigations, divorce litigation, business valuations, economic damage calculations, litigation support and expert witness services.  For more information, check out his website at www.ct-forensic-accounting.com or call his office at 203-922-1742.