“His attorney told me that if I divorced him I would get nothing, and that I would never find his money. But if I stayed married to him, he would support me and the children as he had always done.”

The couple finally separated in 1995. When Lisa asked for a divorce, “his attorney told me that if I divorced him I would get nothing, and that I would never find his money,” she recalls. “But if I stayed married to him, he would support me and the children as he had always done.”

When Lisa finally began her divorce proceedings in 2000, she realized that she would need an exceptional lawyer. She suspected that her husband had concealed assets. “In 2002, he stopped supporting me, as we were beginning to discover his hidden assets,” she recalls. “In the process of discovery, we also learned about the millions of dollars he had in trusts in the Channel Islands.” Steiner and her team led the discovery process, but they also needed help from Lisa. Steiner explains, “We found the offshore assets because Lisa was saving bits and pieces of documents that showed that, at one time, [Barry’s] business had bank accounts in Guernsey.”

Tipped to his buried wealth, the team began digging more aggressively, searching for further details. They scoured court records and confirmed the existence of Barry’s offshore accounts in papers submitted when he was sued in the early 1990s, Steiner says. Meanwhile, Barry’s tax returns, which Steiner could access, showed interest payments from a grantor trust in the Channel Islands. “It took us a while to get those tax returns, but we were persistent,” Steiner says. “I deposed Barry five times and his accountant twice.”

As Worth was going to press in early December, Barry Marcus was in prison, with a trial date set for later in that month. “He has been in jail since the end of August for failing to pay support for me and our two children after two trial courts and the appellate division found he had the ability to pay,” Lisa says.

TOP VIEW Already complex and discordant divorces can be further complicated if one spouse suspects the other of hiding financial assets. By working with knowledgeable lawyers who can wield the power of the courts and engage investigators, plaintiffs can and do uncover concealed millions. But attorneys warn that the process can take years and cost hundreds of thousands of dollars.

“We know he has the money in offshore accounts, but he would rather sit in jail than pay his wife,” Steiner adds. “This is a man who had an apartment on Park Avenue, two Rolls-Royces, two Mercedes, a Porsche and a mink-lined cashmere coat when he married my client, and now he is sitting in jail. He will be kept there until he pays up, or until the court decides he doesn’t have the money.” Lisa will not say how much money she has spent so far pursuing her case, but Steiner hints at the high costs of cases like hers. “They can run into the hundreds of thousands of dollars,” she admits.

A wealthy spouse can attempt to hide his or her assets in any number of ways: stashing them in offshore trusts or bank accounts, hoarding undeclared profits from a business or even undervaluing equity in a company (see “Hidden-Asset Strategies”). Investigators recommend some cool-headed cost/benefit analysis, with the full realization that nothing may be retrieved, before embarking on a lengthy, expensive discovery process. “We’re not always successful,” Steiner admits. But for those who decide that the potential value of the hidden assets outweighs the costs, litigants and their attorneys generally follow a structured set of procedures.

The first step, which legal experts advise can be done even before a lawyer is hired, is to make copies of important documents that reflect joint assets or debts, such as tax returns dating back several years, bank statements and credit reports. “I tell clients to Xerox every piece of paper they can find and to put away some money,” says Ilene Zatkin-Butler, a New York attorney and divorce specialist. She advises her clients to put away enough money to cover legal fees and living expenses, which can amount to a vast amount of money.
 
After gathering as much documentary evidence as possible, most parties then hire a lawyer, who will subpoena more documents. “A good lawyer will generally recognize the issues early on, such as whether [a spouse] is not forthcoming in discovery or is delaying the discovery process,” says Carlton Marcyan, a senior partner at the Illinois law firm of Schiller, DuCanto and Fleck, which specializes in divorce litigation. Suspicious attorneys might then bring in a professional asset tracing and recovery firm to scour paperwork, computer files and even emails. Attorneys also turn to forensic accountants to dig deeper into a spouse’s finances. Although Lisa Marcus and her team did not use a forensic accountant, other experts believe they are indispensable. “It is better to bring in a forensic accountant as soon as possible so you can ask the court for additional money to assist in investigations,” Marcyan explains.

Lee Rosenberg, a family law attorney and principal at Saltzman Chetkof & Rosenberg in Garden City, N.Y., explains that forensic accountants “tend to be more expensive than asset tracing companies, but they will delve into financial statements and personal and corporate records.” Forensic accountants are skilled at valuing businesses and other assets, conducting lifestyle analyses to provide clients with a true picture of the earning power and income of a spouse and presenting such evidence as expert witnesses in court. Rosenberg’s partner, Michael Chetkof, recently hired a forensic accountant who discovered that his client’s husband had maintained a special account within his company to, essentially, funnel cash to himself unbeknownst to his wife. “This was additional millions of dollars that were not found on his personal tax returns,” Rosenberg says. “Finding that account and having the forensic accountant conduct an analysis of it was instrumental in arriving at an equitable settlement of the case.” By scrutinizing company records and applying proven accounting practices, forensic accountants can also ascertain if a spouse’s equity in a business is worth the amount he or she claims.

Cathy Fox, a divorcée in Chicago, spent three years in the mid-1990s fighting a battle with her husband, Jim, before settling. “I had spent over $300,000 on attorneys, and I had to settle or I would have lost everything,” she says. Although the final settlement awarded her several million dollars, she had to bring in Marcyan after the fact because she could not get the courts to enforce the terms of the settlement. “That’s when other assets were discovered,” says Marcyan.

Marcyan explains that he first issued a subpoena to a bank, based on a hunch that Jim Fox’s business had disbursed money to a previously unknown bank account. “From this thread, we discovered more undisclosed bank accounts, including—but not limited to—investments he had in Puerto Rico,” Marcyan says, along with hidden real estate and securities. Many attorneys estimate that a complex discovery process such as this can take 18 months to two years, but that timeline can vary widely.

“When I first meet with clients, they always ask, ‘How long will this take and how much will it cost me?’ ” Rosenberg says. “I tell them, ‘I don’t know and it depends.’ It depends on the facts of the case and the personalities of the litigants and attorneys involved. But unless you have a case wherein the parties are amicable in their relationship, be prepared for a long, drawn-out and expensive process.” 

John Ferry is an Edinburgh, Scotland-based journalist who specializes in writing about financial markets and investments for, among others, RISK and Worth magazines. john.ferry@blueyonder.co.uk

Additional Information
Hidden Asset Strategies