View Presentation SlidesHow to Break Through an Asset Protection Plan Presented by: TOOLS FOR RECOVERING ASSETS Paul Brown, Karr TuDle Campbell
Common Misconceptions
• Victim should rush to file suit/obtain a judgment
• Pre-judgment discovery is unlikely/unavailable
• Focus should be on tracing assets
• Can only freeze and seize assets after a judgment
• Judgments easily cross borders
• Laws of each country offer the same amount of protection
• Criminal proceedings and restitution orders will help a victim to
recover its loss
• Bankruptcy will enable a victim to more efficiently recover its loss
• RICO claims are a forceful way to achieve a recovery
Legal – procedural obstacle: Asset recovery involves working across borders, which is tough at best of times. Legal disharmony and restrictions can make accessing documents difficult. Individuals have rights and amongst them, in most societies, are rights to privacy, due process, protection of private property and equal and fair treatment under the law. The informal and financial obstacle: Investigators are trying to find money that has been deliberately concealed by a disciplined, well-funded, well-informed individual with access to state power, global banks and smart lawyers. And money can be moved very rapidly. It is becoming harder to hide money because of changes in the way secrecy jurisdictions are regarded, because of the spread of due diligence, and because of the trend towards greater transparency, but many challenges still remain. The vast majority of asset recoveries involve overseas accounts, trusts and companies. In particular, offshore jurisdictions frequently have regulatory set-ups that are perfect to obscure links to money, with shell companies, nominee directors, and secrecy. The political obstacle: In countries where assets have been transferred, there will also be politics. Some country’s governments are more supportive of private action than others. Depending upon the targets of the investigation, the political process could be a difficult barrier to overcome.
• Thorough understanding of asset protection schemes • Appreciation of legal restrictions • Judicial and investigative devices available in relevant jurisdictions • Time, experience, and flexibility to handle changing facts • Well-conceived plan including asset freeze/asset recovery, carried out in three phases Recovery Requires
The Approach Phase I: Investigating Phase II: Discovery - Starting the Process and Locating the Assets Phase III: Freezing the Assets Seizing the Assets Repatriating the Assets Determine who, where, jurisdictions and amount. Inves,gators trace assets via documents, electronic data, informants, accounting, and information from banks and other third parties. Some may be available locally or via open sources; much will require help from foreign courts. Once the assets have been located, they must be frozen in place by a court. Different jurisdictions have different rules. Again, it will be critical to maintain confidentiality until the freeze is in place.
The assets must now be taken through a confiscation or seizure
order. There are different routes depending on jurisdiction and
circumstance which requires working with other jurisdictions to get
orders and to enforce them.
Assets must be transferred back to where they came from. This
raises a number of issues like: costs to other jurisdictions,
compensating those who may have lost out in other ways, and
ensuring that the proceeds go to the right place (and don’t get
embezzled again).
Phase I – Investigation and Scheme Development 1. Evaluate strengths/weaknesses of case for damages and misappropriated funds. 2. Develop profile of fraudsters 3. Analyze jurisdictions involved. Determine if they are favorable for recovery. 4. Evaluate issues of legal reciprocity and mutual assistance between jurisdictions. Decide most suitable forum(s) for recovery. 5. Identify location of accessible assets. Determine what evidence will be necessary for access and seizure. 6. Identify concealment techniques utilized • Laundering money through local and international banks • Transfers to corporations, family members or friendly nominees • Transfers to discretionary trusts guarded by protectors • Payments into insurance policies held by captive insurance companies • Mortgage pay downs on assets held by family members • Purchases of cashiers or travelers checks • Purchases of art or jewelry
Phase I – Investigation and Scheme Development (cont'd)
7. Multiple related parties – individuals and entities
8. Multiple accounts and financial instruments to hold and move assets
9. Variety of asset holdings, both as to the kind of assets and where and
how held
10. Understand tiered holdings
11. Understand the function of knowing parties-facilitators
12. To constitute fraudulent transfer, many bank secrecy and tax havens
require that you must prove beyond reasonable doubt that:
– Trust was established with principal intent to defraud
– SeDler insolvent or without assets to satisfy creditor’s claim
Where does the money go? • Belize: Caribbean nation; eight banks, one insurance company, 23 trust companies and 38,741 registered offshore corporations • British Virgin Islands: United Kingdom territory; 500,000+ registered offshore corporations • Cayman Islands: United Kingdom territory; 500+ banks and trust companies, 7,100 mutual and hedge funds • Isle of Man: Crown dependency of U.K.; 171 offshore service providers • Switzerland: Bank secrecy, stable currency and political system, recipient of most flight assets • Panama: Central American nation; 34 offshore banks, 350,000+ offshore companies These jurisdictions require a high burden of proof to establish fraudulent intent.
United States • Discovery Action - Used to iden,fy poten,al defendants and theories of liability - Cannot be a fishing expedition • LeTers Rogatory - 28 USC §1782(a), allows interested persons access to discovery orders to obtain evidence in the U.S. for use in foreign litigation - Party must be physically present in jurisdiction - Does not require pending proceeding - Judicial request to foreign tribunal, narrow in scope, cumbersome and slow English Common Law • Norwich Pharmacal: Seeks informa,on from innocent third party holding information to assist victim to identify wrongdoers • Mareva Injunction: Allows complimentary discovery and enables seizure of assets to preserve for benefit of creditor until subsequent adjudication. • Anton Piller: Preserves evidence that could be destroyed. Needs to show strong prima facie case and that respondent is in possession or control of evidence. 10 Phase II – Discovery (cont’d) • Hague Convention - Request to Central Authority that is transmiDed to foreign tribunal - Court conducts evidentiary proceeding, sends results back to U.S. court - Most member nations limit scope and extent of discovery • Compelled Consent Directives - Compel defendant to authorize third party to turn over documents and financial informa,on that might exist • Federal Rules - Compel one in possession, custody or control of documents to produce them - Control means has legal right, authority and prac,cal ability to obtain documents
Statutory Freezing Orders • France - Existence of threat to ability to recover - Bailiff executes order - Must bring action against debtor within one month of order • Panama - Need proof of assets transferred to Panamanian party - Requires lawsuit to recover filed within six days of freeze • Switzerland - Criminal proceeding by public prosecutor - Seizure of assets is immediate Phase III – Freezing the Assets 12 Phase III – Freezing the Assets (cont’d) U.S. Asset Seizure Devices • Prejudgment ATachment - Legal right where assets are conveyed, concealed or removed to hinder, delay or defraud creditors - Assets present in jurisdiction if jurisdiction over defendant, can prohibit defendant from disposing of foreign assets and for unconscionable conduct, order repatria,on of foreign assets • Prejudgment Injunction - Only applicable when asserting equitable claims