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Divorce Fraud

This is a presentation I created for my Fraud Examination course on Divorce Fraud.
by

Tiffany Bell

on 18 April 2011

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Transcript of Divorce Fraud

Divorce Fraud Presented by: Tiffany Bell
Stephanie Burt What happens during a divorce? Rules depend on where you live
Texas is a community property state.
Assets accumulated by the couple during their marriage are considered to be owned 50/50.
Assets that were owned by one spouse before the marriage or that were received by one spouse as a gift or bequest during the marriage are generally considered to belong solely to that person. Types of Divorce Fraud • Marrying to get a divorce and benefit from the proceeds
- Lying to your partner can be grounds for annulment
• Hiding assets from your partner during the marriage or divorce proceedings.
• Understating the value of assets during divorce proceedings.
• Economic misconduct during the marriage or divorce proceedings.
• Hiding earnings/wages from your spouse
• Paternity Fraud Motivation "Most people treat each other honestly and are aware that there are kids and other factors they have to take into account, but there are certainly people that don't play fair. There's so much anger and bitterness in some divorces that people feel justified in committing fraud, because they feel this is their chance to get even. Even rational people sometimes do it in a divorce because they are in the grip of strong emotion."

- Lee Rosen, a North Carolina divorce attorney and family law specialist The charged emotions and financial stakes may push divorcing spouses to take unscrupulous actions they normally wouldn't dream of in order to secure assets or even simply to spite their former partners.

Sometimes, these actions rise to the level of fraud.

"Criminal attorneys represent bad people on their best behavior. Divorce attorneys represent good people on their worst behavior."
- California attorney and author Stacy Phillips "The fact is, everybody lies in a divorce, because it's all from their perspective. Everyone thinks they are the injured party, even if having an affair. There's always a justification. Ultimately, they justify their behavior because they can't live with themselves otherwise.
- Pennsylvania attorney Lynne Z. Gold-Bikin

"People think this is just a civil matter between them and their spouses. They think to themselves it's about keeping property they own rather than stealing. Actually, they are stealing from the spouse, but they don't see it that way."
- New York attorney Cynthia Rubin Types of Divorce in Texas Divorce by Publication
Contested Divorce
Uncontested Divorce Important Terms Alimony: A legal obligation to provide financial support to one's spouse from the other spouse after marital separation or from the ex-spouse upon divorce
Child Support: One parent is required to contribute to the support of their children by paying money to the child's other parent or guardian 15% of women are awarded alimony.
Of those, about 1/3 never receive a penny.
Less than 50% of women awarded child support receive the full amount. Divorce decreases wealth by an average of 77%
- Ohio State University Study Marrying to Get a Divorce! Marrying someone for financial gain or personal gain.

If you can marry a U.S. citizen or legal permanent resident (a "green card" holder), you're guaranteed permanent access to the USA.
Marriage-based immigration accounted for 37% of all legal immigration
Difficult to discover or pursue. Only 1% of marriage-based immigrations cases were investigated by Hoemland Security in 2004
- USAToday.com, "Marriage Fraud: Is Anyone Watching?" Hiding Assets During Divorce Understating Asset Value During Divorce Economic Misconduct During Divorce Paternity Fraud Case: Economic Misconduct John Dewey is the majority owner of a large public relations firm. His wife, Mary, recently filed for divorce and is asking for half John’s assets. Prior to being served, John took some trips to the Cayman Islands and Switzerland. During the divorce proceedings, Mary was shocked to learn that the value of the firm is $50,000. Prior to the divorce, John had given her $200,000 a year to cover their personal expenses. John and Sally have recently been experiencing serious marital problems. They are seeing a counselor in order to work things out. During the past several months, John has been selling their recreational assets including a boat, snow-mobiles, and a beautiful cabin in the Smoky Mountains to a friend for extremely low prices. Sally believes his story that he is selling them because they are need the money and that he is putting the money in their savings account. However, she does not know who has been purchasing the assets. She is shocked during the divorce to find out that there is very little money in the savings account. She had never paid much attention to their finances and had trusted John completely. Case 1: Hiding Assets Case 2: Hiding Assets Case 3: Hiding Assets Liz Clayton, supermodel and wife of Andrew Dyce, better known as Flash, lead guitarist and vocalist for the popular heavy metal band Flash Metal, is filing for divorce. Each cited that their careers kept them separated and that they have drifted apart over the 12 years of their marriage. The divorce settlement was quick, and both sides were pleased. Liz didn’t know that Flash had been concealing assets from her over the past year. When the marriage started to get rocky, Flash decided to hide some assets from Liz just in case of divorce. Over the past 6 months, Flash would take his concerts profits and make a check out to a past member to hide his income from Liz. After the divorce was settled, the checks were voided and Flash had successfully hidden $1.2 million from his unsuspecting wife. Bill and Sue were college students when they met. After a few short months, they got married. After a time of marital bliss, both Bill and Sue discovered the relationship was not what they had planned. Sue didn’t care for Bill’s habit of wasting money on lotto tickets among other things. The couple filed for divorce. Each agreed to split their assets 50-50. Due to Sue’s displeasure in seeing lotto tickets cluttering the house, Billy kept most of the tickets inside his desk. A few months before the divorce, one of Bill’s tickets hit the jackpot, winning $1 million. Instead of depositing the money in the couple’s joint account, he created a separate account. Bill never brought up the news to Sue and the court did not find out about the money during the proceedings. There are no legal ways to hide assets!
Paying a large amount of income tax and requesting a refund later
Contact business' customers to defer payments of accounts receivable until after the divorce is finalized. Then when the accounts are finally paid, the managing spouse gets the benefit of the cash, and also the increased value of the business now with current accounts. Devalue property over time so that when it comes to allocate the value of the asset, the managing spouse gets the benefit of the lower value. This may include allowing rental property to remain vacant or in disrepair
Understate the value of a business through various means including understating cash flows, overstating expenses, etc. Hiding Earnings/Wages
Done to reduce child support or alimony payments.

Resign your job in favor of a lower paid cash in hand job.
Get fired and collect unemployment, but continue to work for your company through a back door method.
Have your salary reduced and have it increased with the missing reduction after the lawsuits are complete. Spending money excessively just so that your partner can't have it.
Ruining or destroying shared assets. A mother names a man to be the biological father of a child, particularly for self-interest, when she knows or suspects that he is not the biological father
If married, the husband is presumed to be the father of all children during the marriage.
Most states require a man to pay child support whether or not he has shown that he is not the biological father.
Texas law allows ex-husbands four years from the time of a child's birth to rebut and disprove paternity.
Unwed fathers an unlimited amount of time to disprove paternity. Case: Paternity Fraud Sixteen months after his divorce, Richard Parker, a Florida resident, discovered via DNA testing that the child he was paying support for was not his. Florida justices ruled 7-0 against him, stating that Parker must continue to pay $1,200 a month in child support, because he had missed the one-year post divorce deadline for filing his lawsuit. His court-ordered payments total $216,000 over the next fifteen years. Questions? Preventing Fraud Use tax returns Ask you accountant questions Review bank statements Checks for safe deposit box Checks for property taxes Does your spouse own a business? Loan Applications Pay stubs and end of the year earnings statements Don't wait! Trust or brokerage accounts Foreign accounts What if Statements STOP coming? Types of Frauds
References
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