MOLM Partner Benjamin Valencia II explains why it’s always a bad idea to hide money or assets when going through a divorce.
Hiding funds during a divorce is a morally objectionable and highly illegal practice. That doesn't mean people don't try.
An unraveling marriage is not unlike a sinking ship. Everyone is scrambling, trying to salvage whatever they can while, in the wheelhouse, everyone is pointing fingers and figuring out who’s to blame. And, just like on a sinking ship, there are always a few people who set aside their scruples in favor of saving their own skins. This usually means hiding money in hopes that, when the dust settles, they’ll have a little nest egg for themselves.
Ask any divorce lawyer and they’ll tell you that hiding money is never, ever, the right move. “It is always a bad idea to hide money or assets,” says Benjamin Valencia II, a partner and certified family law specialist at Meyer, Olson, Lowy and Meyers, who says that, in California, where his practice is located, “ if you are caught committing fraud in failing to disclose an asset, the court has the ability to award too percent of the asset to the other party as a sanction.”
Consequences aside, it’s also just a really shady thing to do. Nevertheless, people still try and keep their assets under wraps in all sorts of ways, ranging from the mundane to the totally outrageous.
Christina Previte, a divorce lawyer and the CEO of NJ Divorce Solutions has seen quite a lot of money-hiding schemes in her 15 years of experience. Some of the more pedestrian ones include making regular ATM withdrawals that aren’t large enough to draw attention but frequent enough that the cash is likely being pocketed rather than spent, or earning cash from a cash-heavy business and then neglecting to report or deposit the funds.
Previte also said that she’s encountered those who’ve planned out their cash-stashing well in advance and taken withdrawals from various assets either holding them as cash or putting the withdrawals in someone else’s name. This way, when the discovery process begins, she explains, the withdrawals don’t show up as being recent transactions.
“One egregious but very clever one I heard from an accountant once,” she says, “was overpaying on the credit card accounts so that the bank issues a refund in the form of a check, which the spouse then cashes and pockets.”
Another shocker Previte also recalled was one partner forming a limited liability corporation and then funneling all of her earnings through the LLC. “That was particularly egregious and required a tremendous amount of trust in the other party holding the LLC,” she says.
Then there are the really crazy stories, the ones that sound like they were penned by a script writer.
“The craziest one I’ve had was an opposing party who hid diamonds in his father’s prosthetic leg,” says Valencia. “He then sent his father to Israel to sell them so wife could not track them. His father was detained at the airport when the diamonds were detected and we found out.” The wife, Valencia says, was awarded all of the diamonds as a sanction against the husband for his fraudulent conduct.
Valencia also recounted a story in which a husband hid a $350,000 recreational vehicle in a hangar in Arizona.
“We only knew it was in Arizona because we saw an invoice for a gas purchase in Arizona accidentally produced in discovery,” he says. “At trial he was ordered to disclose where the RV was hidden and refused. The judge charged him with 150 percent of the value (there was money owed on it) as a sanction against his interest in the family residence.”
Previte, too, has seen more than her share of oddball schemes. One guy, she says, siphoned off millions of dollars over a five-year period from various assets. “He gave them to his foreign escort who was apparently part of a drug cartel and absconded with the money.”
As long as there is divorce, there are going to be people thinking that they can put one over on either the spouse, the courts or both. However, both Valencia and Previte advise strongly against it. “I hope you are not planning on using these in your own divorce,” Previte cautions. For one, it’s a morally objectionable — and illegal practice. For another, she says, you’ll almost never get away with them.
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