March 4, 2024 • 51 mins
Hi, welcome to MediatorPodcast.com, a podcast and video series about mediation, negotiation, and collaboration. My name is Melissa Gragg, and I'm a Valuation Expert and Divorce Financial Mediator in St. Louis, Missouri.
Today we're speaking with Krista Shelton, a Certified Fraud Examiner and Former Special Agent for the IRS. She has her own firm, Focused Forensic Solutions, where she and her team aids clients in uncovering facts, decoding details, and finding resolution during challenging financial crime investigations. Welcome, Krista.
What type of financial fraud is typically seen in divorce?
What signs or patterns raise concern for fraud or hidden assets?
What are the first signs your clients notice when they suspect fraud or hidden assets?What steps can individuals take on their own if there is suspected fraud or hidden assets?
What is Red Flag Analysis?
What is the Red Flag Analysis process?
How do you work with divorce attorneys in the divorce process?
What is the timeline of this process?
Melissa Gragg
CVA, MAFF
Expert testimony for financial and valuation issues
Bridge Valuation Partners, LLC
melissa@bridgevaluation.com
http://www.BridgeValuation.com
http://www.ValuationPodcast.com
http://www.MediatorPodcast.com
https://www.valuationmediation.com
Cell: (314) 541-8163
Krista Shelton, CFE
krista@focusedforensic.com
www.FocusedForensic.com
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Hi, welcome to mediator podcast.com, a podcast
and video series aboutmediation, negotiation, and
collaboration. My name isMelissa Greg , and I'm a
valuation expert and divorcefinancial mediator in St.
Louis, Missouri. Today we'respeaking with Krista Shelton, a
certified fraud examiner andformer special agent for the
IRS. She has her own firmfocused forensic solutions
(00:21):
where she and her team aidsclients in uncovering facts,
decoding details, and findingresolution during challenging
financial crime investigations.
Welcome, Krista . How are you?
Speaker 2 (00:32):
Hi , thank you. I'm great. How are you?
Speaker 1 (00:34):
Well, this was , um, you know, I've been doing a lot
of forensic work forcorporations and businesses,
usually in a business valuationcontext. Mm-Hmm.
. But your experience andknowledge is like far beyond my
comprehension. Can you justgive us a little bit of
background, because I thinkeverybody's always kind of
(00:56):
interested in like, what isbeing a special agent for the
IRS mean?
Speaker 2 (01:00):
Sure. Um, so I actually started working at the
IRS just out of college. Andwhen I started, I was a revenue
agent, so I was responsible forperforming audits on small
business taxpayers. And so Idid that for a couple years and
actually came across two fraudcases where I started working
with the special agents , um,on the, on the fraud cases, and
(01:20):
immediately knew that that waswhere I, I needed to be. So in
2010, I switched over and wentand became a special agent with
the Internal Revenue Service.
So I was working, you know,financial crimes
investigations, like taxevasion, money laundering , um,
even bank secrecy actviolations, and did that for
about 10 years before decidingto start my own firm.
Speaker 1 (01:41):
Nobody can even understand the amount of
experience or the things thatyou see when you're dealing
with really high financialcrimes or these, these kind of
, um, crazy schemes. And quitefrankly, today we're gonna talk
about hidden assets and incomeand how we uncover financial
fraud and divorce. And it's alittle, you know, like you're
(02:03):
probably not seeing the mostdramatic things, right. But it
does, we do see kind of generalthemes happen in divorce. And
so maybe if we just start outwith some simple things, you
know, like we're not talkingabout espionage or, or, you
know , um, trafficking and likeall of these kind of things
(02:24):
that people think are these bigcrime things. You know, we're
seeing some financial fraud anddivorce, but what do you
normally see , um, comingthrough this space?
Speaker 2 (02:36):
So, you know, the, the typical scenario where we
get involved is when there's asmall business involved. So if
the opposing spouse owns orcontrols any kind of small
business, that's the scenariowhere people have the most
ability to manipulate theirincome. And so some of the
very, I mean, the, the typicalthings that we see are either
unreported income, so, youknow, we see a lot more
(02:58):
deposits going into thebusiness account than what's
claimed on a tax return. Sothat's, that's an indication
that there's , uh, you know,unreported income. Um, the
other really common scenariothat we see is when people put
personal expenses through thebusiness, and we see this on
personal credit cards, but wealso see it just in the bank
accounts . So they could bepaying their mortgage, they
could be putting all theirgrocery receipts , um, through
(03:20):
the business. And, and so itdoesn't, when that happens, you
are changing, you know, theirincome. It could be $20,000 a
year, it could be a hundredthousand dollars a year. And so
if you've got any kind ofspousal maintenance or child
support that's based on anincome figure, then it's a ,
it's appropriate to determinewhat the actual income is that
somebody earns every year. Um,so that's probably, you know,
(03:42):
the, the most typical thingthat we see. But in our
analysis, we always look forhidden bank accounts. Um, you
know, if there's a, a one checkfor a hundred dollars that goes
to a different bank, that's anindication that there's another
bank account out there. And so, um, you know, again, we, we,
we do comparisons on taxreturns to look for , um, you
(04:02):
know, anything that's changed,you know, right before diver
divorce, all of a suddenthere's meals and entertainment
for $10,000 on a tax return.
That's an indication thatthey've started to shift a
bunch of their personalexpenses over
Speaker 1 (04:15):
Well, and I think obviously that is where we see
the majority of, and I, I wouldsay we don't call it fraud, we
call it discretionary spendingand things like that. Um, but I
would say a lot of timesbusiness owners are
underreporting their income and, um, you know, trying to claim
(04:38):
that there's no income for taxpurposes. Um, but that's
something that you could see onthe tax return, you know, what
other signs or patterns wouldmaybe give a person concern for
fraud or hidden assets? And canthey look at , you know, like
are there documents they shouldlook at or some of their own
(05:01):
forensic work that they shoulddo?
Speaker 2 (05:03):
Well, sure. And, you know, to start off , uh, if
you're going through a divorce,you should always be looking at
bank accounts. So, you know, intypical situations there seems
like there's always a lot ofcontrol by one spouse over all
the financial aspects of the,of the marriage, including
maybe small businesses. So ifyou're not having access to
bank statements, then, then Iwould absolutely, you know, get
(05:25):
on there and start looking at'em. Just scroll through there
and see if you see anythingthat's unusual to you, because
you're gonna be, you know, thefirst person that's gonna
notice some of this. Um , youknow, some of the things that
we'll see , um, you know, someof the other things that we, we
look for is if, if a company isoverly complex, if they have
set up, you know, a ton ofshell companies, if they're
(05:46):
using trusts , um, if they're,you know, offshore accounts,
things like that , um, are ,you know, can often be
indications that somethingnefarious is going on. Um, you
know, same with the bankstatements. This is one thing
that we always look for is ifyou know where all of your
properties are, but you arescrolling through a bank
statement and you happen to seea tax payment that goes to a
different county that you don'tknow any assets belong to,
(06:08):
that's something that you canabsolutely follow up on. And,
you know, go Google searches,even look on Facebook. Um, I
mean, there's, there's loads ofinformation out there and, and
just having a , an idea of kindof the things to look for can
really make a huge difference.
Speaker 1 (06:23):
Well, in the bank statements, we usually talk
about, you know, round numbers.
Mm-Hmm . bignumbers, you know, things going
in and out that you don'trecognize. Sometimes it could
be on the business bankstatements, and a lot of times
those are going to the businessor something like that. One
thing that you said though, isabout trusts, and I think that
(06:45):
more often , uh, a couple who'sgetting divorced may have a
trust or a prior trust. Um,what are you seeing in some of
that capacity? You know, what,what are you seeing they use
the trust for, or what shouldwe be mindful of?
Speaker 2 (07:03):
Well, for one, if, if a spouse is the trustee of
another individual's trust,that is something, you know, I
just got a call this morningwith somebody who realized that
their sister, who's the trusteeand and guardian of their
mother has been taking moneyout of, out of the trust
accounts. And, you know, andagain, that is, at the end of
(07:26):
the day, that is becomes incometo the person who's stealing
the money. And so, you know,any, I mean, you know, most of
the time in trust, the bankaccounts end up being in the
trust name. Mm-Hmm .
you , a lot oftimes the assets are put into
trust names. And so, you know,we do , um, we get a
comprehensive report. We workreally closely with a, a
(07:47):
private investigative company,and so we get a standard
comprehensive report on everycase that we work, which lists
off any properties that areowned, vehicles that are owned.
And so, you know, again, thetrust is, is becomes difficult.
And you probably realize thistoo, because it's, it's really
hard to get information and,and, you know, I don't even
(08:07):
think we could subpoena,
Speaker 1 (08:09):
Right.
Speaker 2 (08:10):
Is that, is that true? I mean, I, I ,
Speaker 1 (08:12):
Well, it depends on who owns it, right? Right. So
if you have a trust that's nota party to the marriage or a
trust that's owned, and theyare just a trustee, but they're
not the beneficiary, or thereare other things, or, you know
, there's complications , um,yeah. You might not be able to
pierce that veil if it's theparents' trust Mm-Hmm.
(08:32):
, um, you know,and that money is separate
money or hasn't come through.
Right. You could have an issue.
So I like to tell people, like,everybody who goes through
divorce is like going through atrust issue, right? Yes . You
know, a communication issuesometimes and a trust factor.
(08:54):
And there's, since that's soheightened that everybody
assumes like, oh, I sawsomething that looked
suspicious, like they're hidingmoney. Like everybody thinks
that it's easy to hide money.
Offshores , everybody thinksthat they're diverting funds.
Um, but what are some of thefirst things that you should
(09:14):
really pay attention to , um,to notice if you should suspect
it? Because just because theyhave a business doesn't, you
know, and they put somepersonal expenses that's not
the same as hiding money fromyou. So what should they, what
are some of the first likespidey senses that, that happen
?
Speaker 2 (09:33):
Well, so I'll tell you this. So when I, when I
worked , first started workingat the IRSI was a revenue
agent. And so I'm just doingaudits on small business tax
returns. The very first thingthat we always did was kind of
a cash flow analysis. Is thisperson able to pay for normal
living expenses based on theamount of income that they're
(09:53):
reporting? And I always use theexample of, you know, if, if ,
if I'm looking at a tax returnwhere somebody's claiming
$30,000 in income every year,but then their house is over a
million dollars, that's a clue.
Right? That's a red flag thatmaybe something something's not
quite being reportedaccurately. Mm-Hmm .
. And so, youknow, there are pretty standard
(10:14):
living, you know, personalliving expenses, calculations
based on what area of thecountry you are. Um, you know,
so you can get a really goodidea on whether, you know,
whether somebody's, whether itmakes sense that somebody would
be able to report that thatamount of income or that little
amount of income.
Speaker 1 (10:30):
Well, and I, and I think that, you know, the
assumption that like , likelet's say somebody is doing
something , um, or hiding somemoney or shifting it off, you
know, are you typically seeinga trail , um, in the documents?
Because a lot of times, unlessit's a cash based business, you
(10:53):
know, there's a trail, you usea debit card, you use a credit
card, you are paying by Zelle,or, you know, online payments
are not as easy to get from adiscovery standpoint. Um, so
how are you dealing with someof those types of issues?
Speaker 2 (11:09):
Yeah. Um, again, when we start with the bank,
bank accounts and the taxreturns, and the first thing
that we always do is a taxreturn comparison where we
take, you know, you may have anentire folder that is hundreds
of pages of tax returns andflipping through one page after
another isn't, you know, you'renot gonna be able to comprehend
it the same way as if you havea spreadsheet, which we're
really good at spreadsheets,right? And if you have a
(11:31):
spreadsheet where it hascolumns per year, and so you
can see that their income wentfrom a hundred thousand dollars
and then the next year it wasonly 50, and that year happens
to be the one that they're inthe divorce, well, that would
be an indication that there'ssomething to do, right? Mm-Hmm
. . And so, but ,but the bank statements always,
I mean, unless there's just alot of cash , just like you
said there , every transactioncan be traced, every
(11:54):
transaction can be categorized,can be grouped together , um,
to see if it matches on a taxreturn. You know, we follow up
on any kind of payments toother financial institutions,
that's an indication thatthere's something else out
there. Um, you know, we , um, Imean, which is
Speaker 1 (12:12):
Kind of like fictitious vendors, you know,
all of these things Yes. Thattalking about have very
specific terms to them, butwe're trying to make it easier
to understand , um, for people,it , and one of the things that
I think is important to know islike, this kind of analysis can
be very expensive. Like, whenwe were doing forensics, we
(12:35):
were going in for kickbacks andother types of things and big
corporations, and they werepaying a lot of money. But even
in a divorce, you could pay 10,20, $30,000 for somebody to
trace every dollar. And it's anemotional thing, right? Right .
It's an emotional, they screwedme over. Whereas I don't think
(12:56):
you can always, you know, likechasing every dollar isn't
gonna be as beneficial. And thereason why we kind of had you
on here is because you have away of looking at and kind of
going after some of the , um,inherent worries about one of
(13:17):
the parties, you know,addressing. Yes, we're worried
that there's somethinghappening, but is it to the
level of millions or 10,000 or1000? And in my mind it's
really doing that in acontainer like saying, okay,
we're gonna look at, you know,like a couple years or a couple
(13:39):
accounts or a couple things,but you have an , an amazing
process that you can go a lotdeeper and you call it the red
flag analysis. Yes . So I wouldlove for you to tell us more
about this, because thisactually probably helps people
get the answers that they want,but in a, in, in , in a tighter
(14:01):
cost, right. So that, that'sjust not an unlimited cost.
Right. Exactly. Tell us moreabout this.
Speaker 2 (14:07):
So, so the red flag analysis is for a situation
where there's a complicateddivorce and you have just a ton
of financial information, andmaybe your gut feeling is that
something's not quite right,but you can't put your finger
on it and you're , you know ,you're not sure where to look.
And so we have developed thisunique process where we analyze
standard first round discoverydocuments in a divorce. And so,
(14:30):
you know, we're focusing on thebank statements and the tax
returns, but we're also lookingat all the interrogatories.
We're also, you know, startingoff by just analyzing whether
you've received all of theinformation that you've
requested. Um , we're lookingfor missing statements , um,
things like that. And so we doa complete analysis on every
single document that youprovide us in these cases. And
(14:52):
we look for suspiciousactivity. So we're looking for
red flags, like hidden bankaccounts, like unreported
income, personal expensesthrough the business. And, you
know, there's basically twoscenarios that would happen. We
either find red flags, which weidentify, and then we help
develop a , a tailored planthat will fit the needs of the
case. And so whether that beadditional discovery that it
(15:13):
should be requested, or ifthere's witnesses that should
be contacted , um, you know,helping a , an attorney come up
with deposition questions,things like that. And, and
then, you know, and again, ifwe don't find red flags, then
we provide peace of mind. And Ican tell you a specific example
and , and that I love talkingabout because you know, this,
this client was convinced thatsomething nefarious was going
(15:36):
on with her spouse's business.
And we looked at it, we did ourstandard analysis on it, and we
really, there weren't any redflags that we were identifying.
And when we first disclosedthat to her, she was really
upset. I mean, she was reallyfrustrated that we didn't find
anything. She called me twoweeks later and expressed so
much gratitude for being ableto give her that peace of mind,
(15:57):
knowing that she was gonna geta fair deal. And at the end of
the day, that's what we'retrying to do. We wanna make
sure that it's fair foreverybody, that people are ,
are accurately reporting whatthey should. Um, and, and, you
know, we just wanna help ourclients get to the bottom of
that
Speaker 1 (16:11):
Mm-Hmm.
. And again ,well then I , I like the
concept of a red flag analysis,because what I would assume
happens is that if there's onearea, so let's say you do the
red flag analysis and there's ,um, or maybe we should
, you know, like maybe we talkabout the process, but like,
(16:32):
you , you do this process,right? And then something
triggers Mm-Hmm.like, then what, because I
think that, you know , inlitigation or in mediation,
there could be two differentways to deal with that. But you
know, so you do find a couplered flags. How, how does that,
(16:52):
how do you give thatinformation? Is it a report?
You know, do they then takesome steps next?
Speaker 2 (16:59):
So what we typically do is if we just , if we
determine that there are redflags and we wanna bring those
to the attention of theattorney and or the clients ,
um, then we actually do it . Weput together a PowerPoint
presentation and, and presentthe information to both the
parties , um, you know, whetherit be Zoom or even in person.
And so what we do is we startoff with like, here's all all
of the information that welooked at, and then we start
(17:22):
breaking it down into, youknow, we see an issue here. One
of the most common things thatwe find is personal credit
cards that are paid out of abusiness. And so, you know, in
a , in a case that we just had,there were two credit card
accounts , um, you know, achase at a Capital One, and
there , out of the businessthere were between 300,000 and
(17:43):
$400,000 worth of ex paymentsmade from the business account
to these personal credit cards.
And the opposition tried sohard to fight providing those
credit card statements, but atthe end of the day, there's no
way for anybody to be able toverify that the expenses paid
on that credit card are in factbusiness expenses. And in that
(18:03):
specific case, we determinedthat there were personal
expenses paid to the tune of ahundred thousand dollars a
year. Mm-Hmm . .
And that's, you know, that'sreal income. That if a personal
expense is paid by a businessthat is income to the
individual.
Speaker 1 (18:18):
Mm-Hmm.
. Mm-Hmm.
Well, in alsolooking at income and cashflow,
you know, there's a way that inmediation and even dealing with
a business valuation that wecan make adjustments for some
of these things. You know, wedon't necessarily have to go
(18:40):
refile with the IRS. So whenyou find things, are you also,
you know, basically having totell the IRS that these things
are happening? Or is this justa confidential thing that
you're kind of giving thecouple this information or one
of the parties? How does thatwork?
Speaker 2 (18:59):
Right. Um, you know, we're under no obligation to
turn over any information tothe IRS and, and our standard
procedures are to keep all ofthat information confidential.
Um, the only time that we wouldever turn anything over is if
we were court ordered to do so,in which case, you know, we
would comply with that. Um, butI will say, you know, there are
situations where there's, youknow, fraud found or
(19:22):
discrepancies in, in IRS issueswhere, you know, the opposing
spouse wants to turn it over tothe IRS mm-Hmm .
. And so, you know, we willhelp , um, in those scenarios
because there are things thatpeople need to pay attention
to. Number one, if you'refiling a joint return and you
turn over information to theIRS, then potentially you're,
you're adding a liability toyour own, you know, that you
(19:44):
would be personally responsiblefor Mm-Hmm . .
And so there's, you know,procedures that you can claim
innocent spouse, and so we, wecould help, you know, and, and
even if we do find fraud and ,um, and you know, maybe that
they don't wanna turn it over,but you wanna protect your
clients Mm-Hmm ., then we can help establish
those innocent spouseprocedures with the IRS to , to
ensure that they're protectedin the future. Mm-Hmm.
(20:06):
. Um, so, but,but I will say on the other
side of that, there is a formthat you can file with the IRS
and claim an award for turningover information. And so, you
know, we, we don't necessarilysuggest that that happens, but
, um, but that is somethingthat can be done
Speaker 1 (20:21):
Well, and that kind of gets us to, you know, how do
you work with divorce attorneysin this process? Because in my
mind, one person could hire youbecause they're really
concerned. And typically in alitigation, that's what would
happen is you'd hire a forensicperson to look at some accounts
, um, and do this kind ofanalysis. Right? Mm-Hmm.
(20:45):
, um, for themost part though, you don't
have to disclose theinformation. It's confidential.
I think that sometimes peopleuse the fact that there could
be an IRS issue , um, to try tokind of negotiate or try to use
that as leverage. Yes . Um, areyou seeing very many people
(21:06):
kind of jointly hire you or to,to dispel that issue? Or are
you really just seeing theperson that assumes that
something is happening? Um,looking into it further?
Speaker 2 (21:19):
Yes. I mean, that, that is typically how that
happens is somebody assumes andthen they want, you know,
someone to verify or, you know,take a look at the information.
But in a scenario where therewere two people and maybe one
did have a concern, we wouldcertainly get involved in a
case to be able to explain toone or the other. Um, you know,
if there isn't anything to beconcerned about and we are
comfortable , um, you know,making that statement to the,
(21:41):
to the other spouse, then wewould certainly, you know, get
involved in a case like that.
Um , but at the end of the day,you know, we're, we're trying
to take the burden off ofsomebody who doesn't have the
financial expertise in thisarea. I mean, forensic
accounting is not, it's notjust adding one plus one equals
two. I mean , we , you know, wehave a lot of experience
looking forward this nefariousactivities and this suspicious
(22:03):
activity.
Speaker 1 (22:04):
Yeah. There's very few, I mean, I've been doing
this for 20 years. There's veryfew people that will do, you
know, and you guys do somefixed fee analysis in order to
do this red flag analysis. AndI don't see a lot of people
around the country offeringthis because this is, this is
still a lot of review ofinformation and, you know,
(22:29):
it's, it's sort of like we do avery similar process, but we
have a valu, you know, like abusiness involved and we're
doing the actual valuation . Um, but I think that they should
keep in mind that, you know, Ihave had one situation where ,
um, a business owner filed thetax return based on numbers
(22:54):
that we knew were wrong becausethey were our calculation for
nine months of income from theprior hearing in the
litigation. And then they filedtheir tax returns using that
income number, and we were ableto say, okay, , it's
wrong. Because it was only ninemonths and it's the , it was
the exact dollar. And in thatcase, the judge did stop the
(23:17):
court and ask for the attorneysto come to chambers, and then
came back out. I think two morequestions were asked of me, and
we were very much at thebeginning Mm-Hmm.
. And then I was told I was not, you know , and that case
settled because I think thejudge, you know, you have to
understand that this is still alegal system. The courts are
(23:39):
connected to the IRS, they'reall government entities. So if
you get to the courtroom , thatjudge could theoretically
disclose it to the IRS. Um, andso a lot of this is
understanding how often do youreally find the needles in the
(24:00):
haystack, right? Like, I willgive you my, like, you do this
a lot more, but I would say,you know, 75% of the time that
somebody thinks something isbeing mishandled or mismanaged,
there might be mismanagement ofthe money. Mm-Hmm.
. But I don'talways see it hidden like in
secret bank accounts and, andthings like that. So where do
(24:26):
you normally, you know, likewhat are you seeing the
percentage that you're findingthe red flags? Um, or that
there's nothing, right?
Speaker 2 (24:35):
Um, yeah, to be honest, it's probably some , I
mean, 75% of the time if, ifsomebody is coming to us
because they believe or theysuspect something is not right,
then 75% of the time we arefinding red flags that we
identify Mm-Hmm.. And that, that's pretty,
that's a pretty highpercentage. And, you know,
going back to your, you know,recent trial, I mean, we just
(24:55):
had one, my, my team and I didwhere we , uh, you know,
stepped in because we dididentify what we considered tax
fraud. And we had, you know,emails that were evidence of
their intent to defraud theIRS. And so we stepped in, met
with the opposing side to, youknow, to let them know that the
fraud was there. But to alsotell them like, if your client
(25:18):
testifies, or if his businesspartner testifies, there's two
things that are gonna happen.
They're either gonna perjurethemselves on the stand or
they're gonna admit to taxfraud. Yeah . And so in that
scenario that that forced thatother side to, you know,
understand what they were doingto come to terms with it, and
they had been doing this foryears and years and years and,
(25:40):
and, you know, it resulted in asettlement that day because
they, they, you know, they ,the other, the other attorney
had to protect their clientsfrom going on that stand.
Speaker 1 (25:48):
Mm-Hmm.
. Mm-Hmm.
. So , well, andsometimes, you know, you detect
the fraud and you see it andthe, the, it's still in the
negotiations to sign a jointtax return for that given year.
Right. Yeah . And I think theconcern is sometimes, at least
from the lawyer's perspective,and I don't know if we have an
(26:10):
answer to this 'cause it reallyis a legal thing, but you know
what, what can be done? Like,are you an innocent spouse at
that point because you'veidentified it, you know what's
happening, and now you're goingto consciously sign on that
next tax return. You know ,there's there like, this is,
(26:30):
this type of stuff happens inalmost a lot of the cases that
I work on because there's abusiness, right . And that's
usually the conduit to be ableto do some of these things.
Right? Right . Or you ownproperty. Do you think you see
more things hidden in companieswith tangible properties or
(26:52):
operational kind of cash flow ?
Speaker 2 (26:54):
Um , most of what we've seen has been in the, in
the operational side. Yeah .
Um, but you know, it , it'salso a matter of looking at,
you know, there , we just had ascenario and, and this was one
of those exciting, like, youknow, we finally broke the case
open and I got to call theattorney and tell 'em like, oh,
I figured out what's going on.
And it was a matter where, youknow, there was management fees
being paid and it was like, youknow, let's say, let's say it
(27:17):
was a plumbing business, likethere, it's not typical for a
plumbing business to pay 50,000a year in management fees.
Right? Well, the managementfees happened to be paid to a
company that he owned with hiscousin, who also ended up
owning another similar, youknow, construction trade
business. And so what it lookedlike was both the individual
(27:38):
businesses were payingmanagement fees to this jointly
owned partnership, and then allof that income was just wiped
out. Mm-Hmm . .
And there was other things, youknow, other little tidbits
about this, like they were, youknow, the , the , uh, the
partnership that was receivingthe management fees was a
trucking company with verylittle gross receipt , but all
management fee income. I mean,so those are the types of
(27:59):
things that somebody might notrecognize, except that we have
the experience of, of workingthese IRS cases , um, you know,
that we're able to shed lighton. And, you know, one of the
other things that I reallywanna point out is the first
thing we do in any case is welook for what was requested
from the opposing side and whatwas received. Mm-Hmm .
(28:19):
. And so ifyou've requested three years of
bank statements and you onlyget one, then we identify that.
And that's something that,that, you know, you as the
attorney or your or yourattorney can immediately go to
the other side and requestthose records. Mm-Hmm .
, we also lookfor missing bank statements.
And I can't tell you how commonit is that we get, you know, a,
a , a dump of discovery, youknow , uh, on us. And then we
(28:43):
look at the three years of taxreturns or , or sorry, the
three years of bank statementsthat we have. And then there's
just like every once in a whilethere's a missing bank
statements. Mm-Hmm.
. So that'ssomething that maybe you
wouldn't notice if you're,again, if you're not doing the
kind of detailed analysis thatwe are Mm-Hmm . .
But there's so many times it,it could be a matter of that
one bank statement that'smissing, had a transfer to a
(29:05):
different bank. Right. Or itcould even be like, there was,
we , we just had one recentlywhere it was a missing credit
card statement and he didn'twanna provide it because there
was a $3,500 chair charged to adating site. Mm-Hmm .
, I mean, sothere's, you know, generally
reasons for information notmissing. And I'm gonna say this
too , because if in today'sworld, if you can't go to your
online banking and get a copyof your bank statements, that
(29:27):
is a red , I'm sorry, that is ared flag. Yeah . That does not
make any sense. And so if I askfive times for one big
statement and keep getting, youknow, pushback on that, then,
you know , that's, that's not ,that's a red flag. That's
something that we wouldabsolutely look into even
further, further.
Speaker 1 (29:42):
Well, and it's a red flag if your name's not on the
bank statements.
Speaker 2 (29:45):
Exactly.
Speaker 1 (29:46):
You know, a red flag. If you've never had a
conversation with youraccountant, it's a red flag. If
you've never had a conversationwith your financial planner,
but your spouse does, you know,I think there are a lot of
issues and maybe, you know, wecan at least give some advice
on, you know, things that theycan do. Um, I know that when
(30:08):
we're talking to people, youknow, if we're gonna look at 20
a a year, you know, 20, 22, 2023, 20 24, we wanna look at
bank statements, tax returns,business tax returns, credit
card statements. Yes .
Everything in a given year.
Like, I will almost start withlike the most recent year and
(30:29):
then go backwards and, and takea whole year. Because I think
what people don't understand isyou can't just look at one
piece of it and assume thatit's the whole picture. You
have to look at all of thesepieces and say, oh, okay, this
went over here and then thiswent over here, and then this,
or we come in and double countand we're showing something
(30:52):
that is not accurate. But arethere steps that like the
people could take , um, to lookat things or collect data or
sleuthing around if they sususpected some of this stuff?
Speaker 2 (31:06):
Absolutely. I mean, if you've got bank statements
at your house that you keep ata file file cabinet, look
through those. Make sure thatyou, that you can identify
every account that you'refinding, whether it be a
financial , uh, you know, a , a, a financial institution, a
credit card company , um, youknow, any kind of financial
document I would take a look atand make sure you at least
(31:27):
write down the account numberand who's on it. Um, you know,
it may be a matter of accountsthat are , uh, you know, and ,
and the parents' names that arebeing used by your spouse. Um ,
things like that. If, if it's asmall business and you've got
QuickBooks on your homecomputer, I mean, I Why , and
if you have a login , whywouldn't you get on there and
(31:47):
download a backup copy of theQuickBooks or get on there and
, and you can Google, I mean,it's , you know, Google how to
run a report in QuickBooks andyou'll get step-by-step , um,
you know, instructions on that.
Mm-Hmm . . And sothere's things that may be at
the house that you can identifythat you can go ahead and grab
just to make sure that you havethat information. You know,
even if you know it's a yearfrom now that you end up
(32:08):
getting divorced. Mm-Hmm .
. Um, you know,so those are the, those are the
, uh, the other thing I wouldsay is like paying attention to
the mail that comes in thehouse. So, you know, or is all
the mail being sent to thebusiness and is there a reason
for that? If is , are yourpersonal bank statements, if
you notice that those are beingsent to, you know, your
husband's or your spouse'sbusiness address, then that
(32:28):
would be something that I wouldidentify.
Speaker 1 (32:31):
Yeah . And the reason why that's a red flag,
because people wouldn'tunderstand that, is that most
accountants tell businessowners to send their business
statements to their home. Yes.
So that you don't have yourstaff opening it up and you
have a separate, you know, likeyou can know if somebody's
stealing from you. Mm-Hmm.
. So , um, one ofthe other things that I think
(32:53):
is interesting is that youcould go to your spouse's
office and, you know, evenlooking around at what the, the
envelopes are coming from Bankof America or Chase or
something like that, we havephones. I mean, I would
definitely recommend, I mean,writing down things is great,
but if you know your spousewell enough, they will destroy
(33:16):
documents. Yes . And so, takingpictures of things that have
some, you know, a lot of timesthey will paint the person to
be crazy, you know, so you'llbe like, no, I saw this
account. Well, if you at leasthave a picture, it doesn't mean
that it's totally admissible,but it has the account number,
it has tangible proof that thatstatement and some of that
(33:40):
information you can use. Right.
Right.
Speaker 2 (33:43):
Right. No, that's absolutely correct.
Speaker 1 (33:45):
Now, at what point should they really step back
because they can do more harmthan good?
Speaker 2 (33:54):
Well, we would obviously never suspect or
suggest , uh, that somebodycommit any or do anything
illegal. Right . So, you know ,don't break into your spouse's
business and then stealdocuments. We would never
suggest that you do that. Um, Imean, what , what kinds of
things do you see? Have you
Speaker 1 (34:10):
Well, I think that, I think that it's brilliant to
just take a dive into there tosee if you really think what
you think. Right. The other ,the , the other thing that
people have to keep in mind iswhat is the end result that
you're gonna use in court? Youknow, so if this goes all the
(34:31):
way to court, can you use thatinformation? Is it moving the
needle? A lot of people getvery concerned about spending
money on a , um, girlfriend orboyfriend.
Speaker 2 (34:43):
Yes.
Speaker 1 (34:44):
Or, you know , uh, squandering marital assets. And
I think what I've seen in someof really high net worth
divorces where you could havehundreds of thousands of
dollars every month being spentby one person and the other
person's locked out of thefinancials. You know, those
(35:05):
types of situations , um, areobviously there's something
going on, but you are gonnaassume that there's way more
than there is. Mm-Hmm.
. And so, andyou, it may be very hard, like
you gave an example of thecredit card. So they're running
one credit card with businessand personal expenses. Like I
(35:30):
can't always tell it. I can seethe patterns, right . We'll see
the patterns of behavior, andwe're looking for breaks in the
patterns. Um, but I think that,how am I gonna, how is that
spouse gonna prove that thatmeal was business and that meal
was not right? You know , soyou can almost get like a ,
(35:51):
it's almost better to get abigger picture than to assume
that you can get so specific inthe numbers. I think. Yes .
Speaker 2 (35:59):
And, and again, with the red flag analysis, we're
trying to identify, you know,bigger items. We're not looking
for the $500 discrepancies hereand there. Now if it's, you
know, a hundred dollars check,that could potentially lead to
something bigger than we wouldfollow up on it. But, but we're
really trying to identifythings that are going to make a
difference in a divorce.
Speaker 1 (36:18):
Okay. So what is the timeline? Like, let's say, I
think that there's something,because what I believe is if if
you see something, you thinkthat something's there, there's
gonna be a , a , some morethings there. Right ? Right.
Um, but what is the ti , likewhat is the ti And I think that
(36:41):
this is a sanity check. Likethis is you coming in and
saying, I believe that they'regoing and taking all my money.
Are they really doing it ? Yes. You know, like,
so what's the timeline involvedin something like this? And are
you just getting like thediscovery documents basically,
(37:01):
or do you also requestadditional information?
Speaker 2 (37:05):
So , um, you know, we, we definitely like to get
involved. The earlier thebetter because it gives us more
time to be able to follow up onthings that we do identify. So
I do wanna say that to start.
Um, but you know, when wereceive all of the standard
first round discovery documents, um, within a month we have ,
we will go through them, wewill do our comparisons, we
will do our analyses, and thenput together a list of either
(37:28):
we've got red flags here theyare, or, or we don't. And so
usually within a month, we'reable to meet with, meet with
our clients and, and at leastgive them an idea of, of what
we're, what we're seeing. Or ifthere are, you know, lots of
missing records, then we wouldidentify that. Um, and so at
that point we start to , youknow, as soon as we identify
red flags, we start developingour plan. And so we're coming
(37:50):
up with, you know, whether itbe deposition questions that,
that should be answered , um,whether it be, you know,
following up on additionalcredit card , uh, records that
we don't have. Um, and so weput together a list of all the
kinds of different discoverythat we , that you know, that
the opposing side should ask orthat you should be asking your
opposing side . And so, youknow, we wanna make sure that
we're still within thatdiscovery window where we still
(38:13):
have the ability to go ask foradditional records.
Speaker 1 (38:17):
Now, let's say you find something like, let's say,
and it's in a certain accountor it's a certain type of
analysis, are you then comingin at this red flag analysis
and saying, okay, we saw A, B,and C , um, and would you like
to go down any of thosepipelines?
Speaker 2 (38:40):
Correct. Yes. Okay.
And, and it generally startswith, you know, it almost
always it starts with here'sthe additional stuff you need
to be asking for. And so as, aspieces start coming in, you
know, at that point we would,you know, enter into a contract
and, and work on an hourly rate, um, at that point. 'cause
that , at that point we knowthat there are some issues that
need to be identified. Um,generally speaking, by the time
(39:02):
that we have our, we'vecompleted our red flag
analysis, we also have an ideaof amounts. So it's not just,
here's, here's kind of anissue. It's like, you know,
here's $300,000 worth ofpersonal credit cards put
through our business. We needto get those credit card
statements. Analysis needs tobe done on those. And so here's
the additional records, here'swhat you should be looking for.
And so, you know, obviously wewould love to, you know, help
(39:24):
in continue in that process,but we're also going to give
the attorney and or the clientlike, here's what, you know,
you're gonna get theseadditional records. Here's what
you should be looking for onthose Mm-Hmm..
And so it may be a matterwhere, you know, they get those
credit card records and theylook through 'em and it is all
business. Well, then youwouldn't wanna hire us, you
know, to, to do that analysisif you could look through it
yourself and, and identifythat. Mm-Hmm. .
(39:45):
Um, so again, we're looking atbig things, giving you very
specific instructions on , um,what records would help resolve
that issue. Um, and then how todo that.
Speaker 1 (39:55):
Well, and I think that anybody who has some
worry, 'cause this is really anemotional worry. And I think
that if you don't address it,sometimes you will just
continue to like hyper focus oneven after the divorce is done.
And in my mind, this type ofanalysis could actually help
(40:17):
get things settled. Yes.
Because you are coming in andsaying, okay, here are these
three red flags, this, it mightbe in this range for something
realistically that person andthat attorney can take that
information and utilize it andsay, Hey, you want us to go
further down this pipeline ornot?
Speaker 2 (40:38):
Yes. Because
Speaker 1 (40:39):
If you're giving ,
Speaker 2 (40:41):
We find leverage.
We're trying to give you guysleverage to the other side to
make sure that you're gettingyour fair share.
Speaker 1 (40:47):
Mm-Hmm, .
Speaker 2 (40:47):
Mm-Hmm,
Speaker 1 (40:48):
. Yeah
. And if they're not willing to
have that conversation, thenyou are going forward and
you're going forward in acapacity to present it to
court. Yes . Or to testify.
Mm-Hmm. . And noteverybody has that capability.
Like they can come in and dothe analysis, but they may not,
and it does, it shifts. Likethen you're producing how do
(41:11):
you support it in court? Right.
And you could be insignificant,you know, then you're still
looking at the cost benefitanalysis. If it's millions of
dollars, if's a no brainer. Ifit's hundreds of thousands of
dollars, it's probably still ano-brainer. Um, I think when
it's smaller amounts, you mightbe able to, you know, do some
(41:31):
additional analysis and thenuse that for leverage as well.
Right. Um, but I think thatpeople need to be mindful that
not always is the court soresponsive to it. You know ,
sometimes in high net worthdivorces and we come and say,
oh, they've spent a couplehundred thousand on , um,
girlfriends are boyfriends. Thecourt will be like , uh, okay.
(41:57):
You know, like there's not asmuch of, you know, like, it ,
it , it does become relevanthow big the issue is, don't you
think? Yeah , that's,
Speaker 2 (42:07):
That's absolutely true. And, and I , you know, on
these bigger issues, you know,we can put together an expert
witness report that goes to theother side where we lay out all
of the evidence that we have.
We attach the copy of our, ourcv, our resume, which shows,
you know, we've been workingfor the IRS for 13 years, we
know what we're talking about.
Mm-Hmm . , um,you know, and then, and then if
(42:28):
it's ends up being necessary,then we'll be expert testimony
in a , in a court proceeding.
Speaker 1 (42:34):
Well, I want you to tell us a little bit more about
your company and some of thethings that you can also do,
because I, I find it veryfascinating that a lot of what
you're doing, we are also doingin the context of a business
valuation. But if they don'thave a business valuation,
they're not doing this type of,you know, like this is very
(42:56):
important analysis and you havea financial eye Right . On
those documents. So even ifyou're not having other
experts, in my mind, you're,you kind of, you're a resource
for attorneys Yes . And theclients. Really. That's
Speaker 2 (43:14):
True. Yes.
Speaker 1 (43:15):
Okay. Yes .
Speaker 2 (43:16):
I mean , again, you know, we've got 13, I I
personally have 13 and a halfyears experience with the IRS ,
um, on top of another, youknow, four since I've opened
this company. And, you know,there's just nothing that can
give you, you know, I, duringthat 14 years or 13 years at
the IRSI was inside and out ofbusinesses and, you know,
(43:38):
interviewing them , um, ontheir procedures. Um, you know,
one of the things that Iactually do, I don't know if
most people probably know this,but when the IRS decides when
they're going to audit a taxreturn, it's, so every return
that gets filed is given ascore, it's called a diff
score. And that score is basedon the probability that
something's not right. Andthat, that, that the analysis
(43:59):
that's done, the computeranalysis that's done is, is
from years and years and yearsof IRS data. Right. But those
tax returns then go to a, anoffice in Cincinnati where
revenue agents sit down andthey'll be like 10 at a time,
and for eight hours a day,they're gonna look at all the
returns that got pulled becauseof their score. And then they
go through and they actuallyidentify, oh, that looks weird.
(44:21):
They should audit that. Oh,meals and entertainment looks
really high for this type ofbusiness. We're gonna audit
that one. And then they getsent out to the field. And so,
so again, knowing, you know,having the ability to look at
different industries, you know,financial records, it doesn't
matter if I've, if I'm lookingat a restaurant or if I'm
looking at a trucking company ,um, you know, the , the tax
(44:41):
returns in the bank accountsare still gonna give us that
same kind of information. Buthaving an idea of what is
normal in an industry , uh, youknow, having, having our
experience of looking at everysingle type of business you can
imagine, and being able toidentify what looks weird for,
you know, a specific kind ofbusiness. For instance, the
trucking company that claimsmanagement fee income, you
know, that's, that wassomething that was, that stood
(45:02):
out right away. Um, but youknow, on top of that, my team
is , uh, has, has combined 89years of experience working in
financial investigations forthe Internal Revenue Service.
So we've got former revenueofficers who were on the
collection side. We've gotmultiple , uh, former special
agents , um, you know, that areretired that, you know, have
decided that they wanna helppeople instead of, you know,
(45:26):
using the victim as thegovernment. Mm-Hmm.
. And so, youknow, again, we, and , and then
Maggie is my new employee andshe's got 16 years as in the
banking industry. Mm-Hmm .
. And so our ,all of our experience is all in
financial information andspecifically related to small
businesses. And so if ifsomething's going on, then,
then, you know, we're, we'retrained to find that
(45:46):
information.
Speaker 1 (45:47):
Yeah. And well, and it's, again, it's just like so
mind blowing to me becausepeople might go and get a
business valuation and reallythey might say, oh, I wanna , I
, I want the businessvaluation, but like, what ,
what are they doing in there?
Right. And I almost feel likeyour process, you know, like if
(46:09):
you're really more concernedabout something weird happening
in the business, your processis really identify, like it's
doing some of the same work tolook at the discovery, but it's
from a different lens, youknow, and the attorneys look at
discovery from a differentlens. You know, a forensic
person looks from a differentlens, and a business evaluator
(46:30):
looks from a different lens.
And I think that that's theimportant , uh, pieces of it is
that you have another set ofeyes that's looking, you know,
even to tell the attorney,like, Hey, you need to get more
information here, ask thesequestions. Like that is very
much worth, you know, what Iknow you're charging for right
(46:53):
now. And it is a fixed fee, andit is, I think, very
reasonable, if not low , um,for the work that you're
providing. So I would encouragepeople to reach out to you ,
um, if they have some of thatconcerns, because I think they
come to business valuationpeople. What ? Like, Hey, are
you gonna go look for that? Andlike, seriously, our engagement
(47:14):
letter, our work literally sayswe are not there to detect
fraud. Yes. You know? Mm-Hmm .
. So, I mean,what about tracing assets?
That's another area that, likewhat if you have separate
assets from 20 years ago andyou're trying to figure out is
it still mine?
Speaker 2 (47:33):
Uh , sure. I mean, look it , you, financial
institutions are required tokeep records for five years.
Right. Um, most times ifsomebody's, you know, if
there's a file cabinet at ahouse, there's the likelihood
that there's probably 20 yearsin there is, is very possible.
Mm-Hmm . . Andso, you know, if you give us
financial information, we willdo whatever we can to, you
know, to trace those in , tracethose assets to look for
(47:55):
additional assets, you know, tolook for the hidden bank
accounts and all that kind ofstuff.
Speaker 1 (47:59):
Yeah. This was awesome. All right . Well,
Krista , I appreciate all ofthis information. Is there
anything else that you wouldrecommend or can they reach out
to you? Do you do like aninitial call or what
Speaker 2 (48:14):
We do, we do a free consultation. Um, and, you
know, you'll, you'll talkdirectly to me and, and we will
, um, you know, if, if there'sa scenario where I'm not
understanding that there'sprobably a need for it, I'm,
I'm not going to take yourmoney. Right. Right. So I'm ,
I'm only gonna do it if I thinkthat there's, there's an
absolute need for it. Mm-Hmm .
. Um, I do wannasay you just , uh, reminded me
(48:35):
of something and, and it's whenyou're getting business
records, so many times peoplewill just provide a profit and
loss statement, incomestatement, you know, or balance
sheet or the tax returns. And,and if you just have solid
numbers for a year, there's noway to determine what makes up
that number. And so that's whyit's always important in these
cases if there's a smallbusiness to get a general
(48:56):
ledger to get the, the actualbusiness bank statements. And
so I just, I wanted to makesure that I said that before,
before we ended this.
Speaker 1 (49:04):
Yeah. I think definitely getting the, the
right documents is gonna beimportant. Most people don't
know what a general ledger is,but it's a basically a record
of every transaction in thebusiness income and expense.
And it gives you the detailsabout what goes into the meals
and entertainment. Um, and it'stypically not always requested.
(49:25):
Right . But it's a pretty easydocument to even download out
of QuickBooks into Excel. So wetry to ask for it in Excel as
Speaker 2 (49:33):
Well. Yes. That's so true. So true.
Speaker 1 (49:36):
All right , well this is awesome, Krista . We're
probably gonna have you onagain to talk about more about
what we see in businessvaluations. 'cause I bet you we
have some good stories toshare. Yes . Um , or maybe we
just have a storytellingsession.
Speaker 2 (49:49):
I would love that because I, I, when I was
preparing for this, I wastrying to think of various
cases and kind of how, youknow, 'cause there are, there's
lots of stories and when peoplestart hearing how it actually
happens, it'll also, it mighttrigger just things in your
head. Like, Ooh , wait aminute. You know, that was
something that I experienced.
Um, and so, you know, and onething I will say, you know, I'm
not saying that every scenariothere is something there, but I
(50:12):
would encourage people to trustyour gut. I mean, your gut,
your gut says something for areason. And so if we can help
bring clarity to that, youknow, if your gut is saying
that something that's not rightand you can't figure it out,
that's what we wanna do. And sowe wanna eliminate that
uncertainty for you. Um, andagain, at a flat rate so you
know exactly what you'regetting. And, and we, at , at
the end of the day, we wannamake sure that it's accurate
(50:33):
and that's fair.
Speaker 1 (50:35):
Yeah. And, and the flat rate is very reasonable as
like a retainer that you wouldbe paying to an expert anyway
and you get a lot more from it.
Yeah . So in my mind, I, as Ihope that you find nothing, but
it really, at some point youhave to look at it as it is a
small cost for peace of mind.
(50:56):
Yes. And whether you go forwardon any of the, you know,
sleuthing and getting moreinformation about them, you
don't have to like, you mightjust be like, oh, okay, I knew
there was something there. Oh ,okay, it's at this level.
Great, now we can put it tobed. Right . You know, like
we're not dictating what you dowith the information, but it is
(51:18):
for your own peace of mind. Andto come as an attorney, it
would also move your client offof that position because
sometimes the clients are justkind of like a broken record.
Yes . Um , and if they don'tget some clarity on that,
they're just gonna continue toassume and as the proceedings
go, assume that it gets worse.
(51:38):
Yes . You know , so. Well, thisis so great. Thank you so
Speaker 2 (51:42):
Much . Thank you for having me .
Speaker 1 (51:44):
Alright , we'll see you soon .
Hi, welcome to mediator podcast.com, a podcast
and video series aboutmediation, negotiation, and
collaboration. My name isMelissa Greg , and I'm a
valuation expert and divorcefinancial mediator in St.
Louis, Missouri. Today we'respeaking with Krista Shelton, a
certified fraud examiner andformer special agent for the
IRS. She has her own firmfocused forensic solutions
(00:21):
where she and her team aidsclients in uncovering facts,
decoding details, and findingresolution during challenging
financial crime investigations.
Welcome, Krista . How are you?
Speaker 2 (00:32):
Hi , thank you. I'm great. How are you?
Speaker 1 (00:34):
Well, this was , um, you know, I've been doing a lot
of forensic work forcorporations and businesses,
usually in a business valuationcontext. Mm-Hmm.
. But your experience andknowledge is like far beyond my
comprehension. Can you justgive us a little bit of
background, because I thinkeverybody's always kind of
(00:56):
interested in like, what isbeing a special agent for the
IRS mean?
Speaker 2 (01:00):
Sure. Um, so I actually started working at the
IRS just out of college. Andwhen I started, I was a revenue
agent, so I was responsible forperforming audits on small
business taxpayers. And so Idid that for a couple years and
actually came across two fraudcases where I started working
with the special agents , um,on the, on the fraud cases, and
(01:20):
immediately knew that that waswhere I, I needed to be. So in
2010, I switched over and wentand became a special agent with
the Internal Revenue Service.
So I was working, you know,financial crimes
investigations, like taxevasion, money laundering , um,
even bank secrecy actviolations, and did that for
about 10 years before decidingto start my own firm.
Speaker 1 (01:41):
Nobody can even understand the amount of
experience or the things thatyou see when you're dealing
with really high financialcrimes or these, these kind of
, um, crazy schemes. And quitefrankly, today we're gonna talk
about hidden assets and incomeand how we uncover financial
fraud and divorce. And it's alittle, you know, like you're
(02:03):
probably not seeing the mostdramatic things, right. But it
does, we do see kind of generalthemes happen in divorce. And
so maybe if we just start outwith some simple things, you
know, like we're not talkingabout espionage or, or, you
know , um, trafficking and likeall of these kind of things
(02:24):
that people think are these bigcrime things. You know, we're
seeing some financial fraud anddivorce, but what do you
normally see , um, comingthrough this space?
Speaker 2 (02:36):
So, you know, the, the typical scenario where we
get involved is when there's asmall business involved. So if
the opposing spouse owns orcontrols any kind of small
business, that's the scenariowhere people have the most
ability to manipulate theirincome. And so some of the
very, I mean, the, the typicalthings that we see are either
unreported income, so, youknow, we see a lot more
(02:58):
deposits going into thebusiness account than what's
claimed on a tax return. Sothat's, that's an indication
that there's , uh, you know,unreported income. Um, the
other really common scenariothat we see is when people put
personal expenses through thebusiness, and we see this on
personal credit cards, but wealso see it just in the bank
accounts . So they could bepaying their mortgage, they
could be putting all theirgrocery receipts , um, through
(03:20):
the business. And, and so itdoesn't, when that happens, you
are changing, you know, theirincome. It could be $20,000 a
year, it could be a hundredthousand dollars a year. And so
if you've got any kind ofspousal maintenance or child
support that's based on anincome figure, then it's a ,
it's appropriate to determinewhat the actual income is that
somebody earns every year. Um,so that's probably, you know,
(03:42):
the, the most typical thingthat we see. But in our
analysis, we always look forhidden bank accounts. Um, you
know, if there's a, a one checkfor a hundred dollars that goes
to a different bank, that's anindication that there's another
bank account out there. And so, um, you know, again, we, we,
we do comparisons on taxreturns to look for , um, you
(04:02):
know, anything that's changed,you know, right before diver
divorce, all of a suddenthere's meals and entertainment
for $10,000 on a tax return.
That's an indication thatthey've started to shift a
bunch of their personalexpenses over
Speaker 1 (04:15):
Well, and I think obviously that is where we see
the majority of, and I, I wouldsay we don't call it fraud, we
call it discretionary spendingand things like that. Um, but I
would say a lot of timesbusiness owners are
underreporting their income and, um, you know, trying to claim
(04:38):
that there's no income for taxpurposes. Um, but that's
something that you could see onthe tax return, you know, what
other signs or patterns wouldmaybe give a person concern for
fraud or hidden assets? And canthey look at , you know, like
are there documents they shouldlook at or some of their own
(05:01):
forensic work that they shoulddo?
Speaker 2 (05:03):
Well, sure. And, you know, to start off , uh, if
you're going through a divorce,you should always be looking at
bank accounts. So, you know, intypical situations there seems
like there's always a lot ofcontrol by one spouse over all
the financial aspects of the,of the marriage, including
maybe small businesses. So ifyou're not having access to
bank statements, then, then Iwould absolutely, you know, get
(05:25):
on there and start looking at'em. Just scroll through there
and see if you see anythingthat's unusual to you, because
you're gonna be, you know, thefirst person that's gonna
notice some of this. Um , youknow, some of the things that
we'll see , um, you know, someof the other things that we, we
look for is if, if a company isoverly complex, if they have
set up, you know, a ton ofshell companies, if they're
(05:46):
using trusts , um, if they're,you know, offshore accounts,
things like that , um, are ,you know, can often be
indications that somethingnefarious is going on. Um, you
know, same with the bankstatements. This is one thing
that we always look for is ifyou know where all of your
properties are, but you arescrolling through a bank
statement and you happen to seea tax payment that goes to a
different county that you don'tknow any assets belong to,
(06:08):
that's something that you canabsolutely follow up on. And,
you know, go Google searches,even look on Facebook. Um, I
mean, there's, there's loads ofinformation out there and, and
just having a , an idea of kindof the things to look for can
really make a huge difference.
Speaker 1 (06:23):
Well, in the bank statements, we usually talk
about, you know, round numbers.
Mm-Hmm .
in and out that you don'trecognize. Sometimes it could
be on the business bankstatements, and a lot of times
those are going to the businessor something like that. One
thing that you said though, isabout trusts, and I think that
(06:45):
more often , uh, a couple who'sgetting divorced may have a
trust or a prior trust. Um,what are you seeing in some of
that capacity? You know, what,what are you seeing they use
the trust for, or what shouldwe be mindful of?
Speaker 2 (07:03):
Well, for one, if, if a spouse is the trustee of
another individual's trust,that is something, you know, I
just got a call this morningwith somebody who realized that
their sister, who's the trusteeand and guardian of their
mother has been taking moneyout of, out of the trust
accounts. And, you know, andagain, that is, at the end of
(07:26):
the day, that is becomes incometo the person who's stealing
the money. And so, you know,any, I mean, you know, most of
the time in trust, the bankaccounts end up being in the
trust name. Mm-Hmm .
trust names. And so, you know,we do , um, we get a
comprehensive report. We workreally closely with a, a
(07:47):
private investigative company,and so we get a standard
comprehensive report on everycase that we work, which lists
off any properties that areowned, vehicles that are owned.
And so, you know, again, thetrust is, is becomes difficult.
And you probably realize thistoo, because it's, it's really
hard to get information and,and, you know, I don't even
(08:07):
think we could subpoena,
Speaker 1 (08:09):
Right.
Speaker 2 (08:10):
Is that, is that true? I mean, I, I ,
Speaker 1 (08:12):
Well, it depends on who owns it, right? Right. So
if you have a trust that's nota party to the marriage or a
trust that's owned, and theyare just a trustee, but they're
not the beneficiary, or thereare other things, or, you know
, there's complications , um,yeah. You might not be able to
pierce that veil if it's theparents' trust Mm-Hmm.
(08:32):
money or hasn't come through.
Right. You could have an issue.
So I like to tell people, like,everybody who goes through
divorce is like going through atrust issue, right? Yes . You
know, a communication issuesometimes and a trust factor.
(08:54):
And there's, since that's soheightened that everybody
assumes like, oh, I sawsomething that looked
suspicious, like they're hidingmoney. Like everybody thinks
that it's easy to hide money.
Offshores , everybody thinksthat they're diverting funds.
Um, but what are some of thefirst things that you should
(09:14):
really pay attention to , um,to notice if you should suspect
it? Because just because theyhave a business doesn't, you
know, and they put somepersonal expenses that's not
the same as hiding money fromyou. So what should they, what
are some of the first likespidey senses that, that happen
?
Speaker 2 (09:33):
Well, so I'll tell you this. So when I, when I
worked , first started workingat the IRSI was a revenue
agent. And so I'm just doingaudits on small business tax
returns. The very first thingthat we always did was kind of
a cash flow analysis. Is thisperson able to pay for normal
living expenses based on theamount of income that they're
(09:53):
reporting? And I always use theexample of, you know, if, if ,
if I'm looking at a tax returnwhere somebody's claiming
$30,000 in income every year,but then their house is over a
million dollars, that's a clue.
Right? That's a red flag thatmaybe something something's not
quite being reportedaccurately. Mm-Hmm .
(10:14):
living, you know, personalliving expenses, calculations
based on what area of thecountry you are. Um, you know,
so you can get a really goodidea on whether, you know,
whether somebody's, whether itmakes sense that somebody would
be able to report that thatamount of income or that little
amount of income.
Speaker 1 (10:30):
Well, and I, and I think that, you know, the
assumption that like , likelet's say somebody is doing
something , um, or hiding somemoney or shifting it off, you
know, are you typically seeinga trail , um, in the documents?
Because a lot of times, unlessit's a cash based business, you
(10:53):
know, there's a trail, you usea debit card, you use a credit
card, you are paying by Zelle,or, you know, online payments
are not as easy to get from adiscovery standpoint. Um, so
how are you dealing with someof those types of issues?
Speaker 2 (11:09):
Yeah. Um, again, when we start with the bank,
bank accounts and the taxreturns, and the first thing
that we always do is a taxreturn comparison where we
take, you know, you may have anentire folder that is hundreds
of pages of tax returns andflipping through one page after
another isn't, you know, you'renot gonna be able to comprehend
it the same way as if you havea spreadsheet, which we're
really good at spreadsheets,right? And if you have a
(11:31):
spreadsheet where it hascolumns per year, and so you
can see that their income wentfrom a hundred thousand dollars
and then the next year it wasonly 50, and that year happens
to be the one that they're inthe divorce, well, that would
be an indication that there'ssomething to do, right? Mm-Hmm
.
I mean, unless there's just alot of cash , just like you
said there , every transactioncan be traced, every
(11:54):
transaction can be categorized,can be grouped together , um,
to see if it matches on a taxreturn. You know, we follow up
on any kind of payments toother financial institutions,
that's an indication thatthere's something else out
there. Um, you know, we , um, Imean, which is
Speaker 1 (12:12):
Kind of like fictitious vendors, you know,
all of these things Yes. Thattalking about have very
specific terms to them, butwe're trying to make it easier
to understand , um, for people,it , and one of the things that
I think is important to know islike, this kind of analysis can
be very expensive. Like, whenwe were doing forensics, we
(12:35):
were going in for kickbacks andother types of things and big
corporations, and they werepaying a lot of money. But even
in a divorce, you could pay 10,20, $30,000 for somebody to
trace every dollar. And it's anemotional thing, right? Right .
It's an emotional, they screwedme over. Whereas I don't think
(12:56):
you can always, you know, likechasing every dollar isn't
gonna be as beneficial. And thereason why we kind of had you
on here is because you have away of looking at and kind of
going after some of the , um,inherent worries about one of
(13:17):
the parties, you know,addressing. Yes, we're worried
that there's somethinghappening, but is it to the
level of millions or 10,000 or1000? And in my mind it's
really doing that in acontainer like saying, okay,
we're gonna look at, you know,like a couple years or a couple
(13:39):
accounts or a couple things,but you have an , an amazing
process that you can go a lotdeeper and you call it the red
flag analysis. Yes . So I wouldlove for you to tell us more
about this, because thisactually probably helps people
get the answers that they want,but in a, in, in , in a tighter
(14:01):
cost, right. So that, that'sjust not an unlimited cost.
Right. Exactly. Tell us moreabout this.
Speaker 2 (14:07):
So, so the red flag analysis is for a situation
where there's a complicateddivorce and you have just a ton
of financial information, andmaybe your gut feeling is that
something's not quite right,but you can't put your finger
on it and you're , you know ,you're not sure where to look.
And so we have developed thisunique process where we analyze
standard first round discoverydocuments in a divorce. And so,
(14:30):
you know, we're focusing on thebank statements and the tax
returns, but we're also lookingat all the interrogatories.
We're also, you know, startingoff by just analyzing whether
you've received all of theinformation that you've
requested. Um , we're lookingfor missing statements , um,
things like that. And so we doa complete analysis on every
single document that youprovide us in these cases. And
(14:52):
we look for suspiciousactivity. So we're looking for
red flags, like hidden bankaccounts, like unreported
income, personal expensesthrough the business. And, you
know, there's basically twoscenarios that would happen. We
either find red flags, which weidentify, and then we help
develop a , a tailored planthat will fit the needs of the
case. And so whether that beadditional discovery that it
(15:13):
should be requested, or ifthere's witnesses that should
be contacted , um, you know,helping a , an attorney come up
with deposition questions,things like that. And, and
then, you know, and again, ifwe don't find red flags, then
we provide peace of mind. And Ican tell you a specific example
and , and that I love talkingabout because you know, this,
this client was convinced thatsomething nefarious was going
(15:36):
on with her spouse's business.
And we looked at it, we did ourstandard analysis on it, and we
really, there weren't any redflags that we were identifying.
And when we first disclosedthat to her, she was really
upset. I mean, she was reallyfrustrated that we didn't find
anything. She called me twoweeks later and expressed so
much gratitude for being ableto give her that peace of mind,
(15:57):
knowing that she was gonna geta fair deal. And at the end of
the day, that's what we'retrying to do. We wanna make
sure that it's fair foreverybody, that people are ,
are accurately reporting whatthey should. Um, and, and, you
know, we just wanna help ourclients get to the bottom of
that
Speaker 1 (16:11):
Mm-Hmm.
concept of a red flag analysis,because what I would assume
happens is that if there's onearea, so let's say you do the
red flag analysis and there's ,um, or maybe we should
, you know, like maybe we talkabout the process, but like,
(16:32):
you , you do this process,right? And then something
triggers Mm-Hmm.
think that, you know , inlitigation or in mediation,
there could be two differentways to deal with that. But you
know, so you do find a couplered flags. How, how does that,
(16:52):
how do you give thatinformation? Is it a report?
You know, do they then takesome steps next?
Speaker 2 (16:59):
So what we typically do is if we just , if we
determine that there are redflags and we wanna bring those
to the attention of theattorney and or the clients ,
um, then we actually do it . Weput together a PowerPoint
presentation and, and presentthe information to both the
parties , um, you know, whetherit be Zoom or even in person.
And so what we do is we startoff with like, here's all all
of the information that welooked at, and then we start
(17:22):
breaking it down into, youknow, we see an issue here. One
of the most common things thatwe find is personal credit
cards that are paid out of abusiness. And so, you know, in
a , in a case that we just had,there were two credit card
accounts , um, you know, achase at a Capital One, and
there , out of the businessthere were between 300,000 and
(17:43):
$400,000 worth of ex paymentsmade from the business account
to these personal credit cards.
And the opposition tried sohard to fight providing those
credit card statements, but atthe end of the day, there's no
way for anybody to be able toverify that the expenses paid
on that credit card are in factbusiness expenses. And in that
(18:03):
specific case, we determinedthat there were personal
expenses paid to the tune of ahundred thousand dollars a
year. Mm-Hmm .
And that's, you know, that'sreal income. That if a personal
expense is paid by a businessthat is income to the
individual.
Speaker 1 (18:18):
Mm-Hmm.
you know, there's a way that inmediation and even dealing with
a business valuation that wecan make adjustments for some
of these things. You know, wedon't necessarily have to go
(18:40):
refile with the IRS. So whenyou find things, are you also,
you know, basically having totell the IRS that these things
are happening? Or is this justa confidential thing that
you're kind of giving thecouple this information or one
of the parties? How does thatwork?
Speaker 2 (18:59):
Right. Um, you know, we're under no obligation to
turn over any information tothe IRS and, and our standard
procedures are to keep all ofthat information confidential.
Um, the only time that we wouldever turn anything over is if
we were court ordered to do so,in which case, you know, we
would comply with that. Um, butI will say, you know, there are
situations where there's, youknow, fraud found or
(19:22):
discrepancies in, in IRS issueswhere, you know, the opposing
spouse wants to turn it over tothe IRS mm-Hmm .
. And so, you know, we willhelp , um, in those scenarios
because there are things thatpeople need to pay attention
to. Number one, if you'refiling a joint return and you
turn over information to theIRS, then potentially you're,
you're adding a liability toyour own, you know, that you
(19:44):
would be personally responsiblefor Mm-Hmm .
And so there's, you know,procedures that you can claim
innocent spouse, and so we, wecould help, you know, and, and
even if we do find fraud and ,um, and you know, maybe that
they don't wanna turn it over,but you wanna protect your
clients Mm-Hmm .
those innocent spouseprocedures with the IRS to , to
ensure that they're protectedin the future. Mm-Hmm.
(20:06):
side of that, there is a formthat you can file with the IRS
and claim an award for turningover information. And so, you
know, we, we don't necessarilysuggest that that happens, but
, um, but that is somethingthat can be done
Speaker 1 (20:21):
Well, and that kind of gets us to, you know, how do
you work with divorce attorneysin this process? Because in my
mind, one person could hire youbecause they're really
concerned. And typically in alitigation, that's what would
happen is you'd hire a forensicperson to look at some accounts
, um, and do this kind ofanalysis. Right? Mm-Hmm.
(20:45):
have to disclose theinformation. It's confidential.
I think that sometimes peopleuse the fact that there could
be an IRS issue , um, to try tokind of negotiate or try to use
that as leverage. Yes . Um, areyou seeing very many people
(21:06):
kind of jointly hire you or to,to dispel that issue? Or are
you really just seeing theperson that assumes that
something is happening? Um,looking into it further?
Speaker 2 (21:19):
Yes. I mean, that, that is typically how that
happens is somebody assumes andthen they want, you know,
someone to verify or, you know,take a look at the information.
But in a scenario where therewere two people and maybe one
did have a concern, we wouldcertainly get involved in a
case to be able to explain toone or the other. Um, you know,
if there isn't anything to beconcerned about and we are
comfortable , um, you know,making that statement to the,
(21:41):
to the other spouse, then wewould certainly, you know, get
involved in a case like that.
Um , but at the end of the day,you know, we're, we're trying
to take the burden off ofsomebody who doesn't have the
financial expertise in thisarea. I mean, forensic
accounting is not, it's notjust adding one plus one equals
two. I mean , we , you know, wehave a lot of experience
looking forward this nefariousactivities and this suspicious
(22:03):
activity.
Speaker 1 (22:04):
Yeah. There's very few, I mean, I've been doing
this for 20 years. There's veryfew people that will do, you
know, and you guys do somefixed fee analysis in order to
do this red flag analysis. AndI don't see a lot of people
around the country offeringthis because this is, this is
still a lot of review ofinformation and, you know,
(22:29):
it's, it's sort of like we do avery similar process, but we
have a valu, you know, like abusiness involved and we're
doing the actual valuation . Um, but I think that they should
keep in mind that, you know, Ihave had one situation where ,
um, a business owner filed thetax return based on numbers
(22:54):
that we knew were wrong becausethey were our calculation for
nine months of income from theprior hearing in the
litigation. And then they filedtheir tax returns using that
income number, and we were ableto say, okay,
wrong. Because it was only ninemonths and it's the , it was
the exact dollar. And in thatcase, the judge did stop the
(23:17):
court and ask for the attorneysto come to chambers, and then
came back out. I think two morequestions were asked of me, and
we were very much at thebeginning Mm-Hmm.
. And then I was told I was not, you know , and that case
settled because I think thejudge, you know, you have to
understand that this is still alegal system. The courts are
(23:39):
connected to the IRS, they'reall government entities. So if
you get to the courtroom , thatjudge could theoretically
disclose it to the IRS. Um, andso a lot of this is
understanding how often do youreally find the needles in the
(24:00):
haystack, right? Like, I willgive you my, like, you do this
a lot more, but I would say,you know, 75% of the time that
somebody thinks something isbeing mishandled or mismanaged,
there might be mismanagement ofthe money. Mm-Hmm.
secret bank accounts and, andthings like that. So where do
(24:26):
you normally, you know, likewhat are you seeing the
percentage that you're findingthe red flags? Um, or that
there's nothing, right?
Speaker 2 (24:35):
Um, yeah, to be honest, it's probably some , I
mean, 75% of the time if, ifsomebody is coming to us
because they believe or theysuspect something is not right,
then 75% of the time we arefinding red flags that we
identify Mm-Hmm.
that's a pretty highpercentage. And, you know,
going back to your, you know,recent trial, I mean, we just
(24:55):
had one, my, my team and I didwhere we , uh, you know,
stepped in because we dididentify what we considered tax
fraud. And we had, you know,emails that were evidence of
their intent to defraud theIRS. And so we stepped in, met
with the opposing side to, youknow, to let them know that the
fraud was there. But to alsotell them like, if your client
(25:18):
testifies, or if his businesspartner testifies, there's two
things that are gonna happen.
They're either gonna perjurethemselves on the stand or
they're gonna admit to taxfraud. Yeah . And so in that
scenario that that forced thatother side to, you know,
understand what they were doingto come to terms with it, and
they had been doing this foryears and years and years and,
(25:40):
and, you know, it resulted in asettlement that day because
they, they, you know, they ,the other, the other attorney
had to protect their clientsfrom going on that stand.
Speaker 1 (25:48):
Mm-Hmm.
the fraud and you see it andthe, the, it's still in the
negotiations to sign a jointtax return for that given year.
Right. Yeah . And I think theconcern is sometimes, at least
from the lawyer's perspective,and I don't know if we have an
(26:10):
answer to this 'cause it reallyis a legal thing, but you know
what, what can be done? Like,are you an innocent spouse at
that point because you'veidentified it, you know what's
happening, and now you're goingto consciously sign on that
next tax return. You know ,there's there like, this is,
(26:30):
this type of stuff happens inalmost a lot of the cases that
I work on because there's abusiness, right . And that's
usually the conduit to be ableto do some of these things.
Right? Right . Or you ownproperty. Do you think you see
more things hidden in companieswith tangible properties or
(26:52):
operational kind of cash flow ?
Speaker 2 (26:54):
Um , most of what we've seen has been in the, in
the operational side. Yeah .
Um, but you know, it , it'salso a matter of looking at,
you know, there , we just had ascenario and, and this was one
of those exciting, like, youknow, we finally broke the case
open and I got to call theattorney and tell 'em like, oh,
I figured out what's going on.
And it was a matter where, youknow, there was management fees
being paid and it was like, youknow, let's say, let's say it
(27:17):
was a plumbing business, likethere, it's not typical for a
plumbing business to pay 50,000a year in management fees.
Right? Well, the managementfees happened to be paid to a
company that he owned with hiscousin, who also ended up
owning another similar, youknow, construction trade
business. And so what it lookedlike was both the individual
(27:38):
businesses were payingmanagement fees to this jointly
owned partnership, and then allof that income was just wiped
out. Mm-Hmm .
And there was other things, youknow, other little tidbits
about this, like they were, youknow, the , the , uh, the
partnership that was receivingthe management fees was a
trucking company with verylittle gross receipt , but all
management fee income. I mean,so those are the types of
(27:59):
things that somebody might notrecognize, except that we have
the experience of, of workingthese IRS cases , um, you know,
that we're able to shed lighton. And, you know, one of the
other things that I reallywanna point out is the first
thing we do in any case is welook for what was requested
from the opposing side and whatwas received. Mm-Hmm .
(28:19):
bank statements and you onlyget one, then we identify that.
And that's something that,that, you know, you as the
attorney or your or yourattorney can immediately go to
the other side and requestthose records. Mm-Hmm .
And I can't tell you how commonit is that we get, you know, a,
a , a dump of discovery, youknow , uh, on us. And then we
(28:43):
look at the three years of taxreturns or , or sorry, the
three years of bank statementsthat we have. And then there's
just like every once in a whilethere's a missing bank
statements. Mm-Hmm.
wouldn't notice if you're,again, if you're not doing the
kind of detailed analysis thatwe are Mm-Hmm .
But there's so many times it,it could be a matter of that
one bank statement that'smissing, had a transfer to a
(29:05):
different bank. Right. Or itcould even be like, there was,
we , we just had one recentlywhere it was a missing credit
card statement and he didn'twanna provide it because there
was a $3,500 chair charged to adating site. Mm-Hmm .
reasons for information notmissing. And I'm gonna say this
too , because if in today'sworld, if you can't go to your
online banking and get a copyof your bank statements, that
(29:27):
is a red , I'm sorry, that is ared flag. Yeah . That does not
make any sense. And so if I askfive times for one big
statement and keep getting, youknow, pushback on that, then,
you know , that's, that's not ,that's a red flag. That's
something that we wouldabsolutely look into even
further, further.
Speaker 1 (29:42):
Well, and it's a red flag if your name's not on the
bank statements.
Speaker 2 (29:45):
Exactly.
Speaker 1 (29:46):
You know, a red flag. If you've never had a
conversation with youraccountant, it's a red flag. If
you've never had a conversationwith your financial planner,
but your spouse does, you know,I think there are a lot of
issues and maybe, you know, wecan at least give some advice
on, you know, things that theycan do. Um, I know that when
(30:08):
we're talking to people, youknow, if we're gonna look at 20
a a year, you know, 20, 22, 2023, 20 24, we wanna look at
bank statements, tax returns,business tax returns, credit
card statements. Yes .
Everything in a given year.
Like, I will almost start withlike the most recent year and
(30:29):
then go backwards and, and takea whole year. Because I think
what people don't understand isyou can't just look at one
piece of it and assume thatit's the whole picture. You
have to look at all of thesepieces and say, oh, okay, this
went over here and then thiswent over here, and then this,
or we come in and double countand we're showing something
(30:52):
that is not accurate. But arethere steps that like the
people could take , um, to lookat things or collect data or
sleuthing around if they sususpected some of this stuff?
Speaker 2 (31:06):
Absolutely. I mean, if you've got bank statements
at your house that you keep ata file file cabinet, look
through those. Make sure thatyou, that you can identify
every account that you'refinding, whether it be a
financial , uh, you know, a , a, a financial institution, a
credit card company , um, youknow, any kind of financial
document I would take a look atand make sure you at least
(31:27):
write down the account numberand who's on it. Um, you know,
it may be a matter of accountsthat are , uh, you know, and ,
and the parents' names that arebeing used by your spouse. Um ,
things like that. If, if it's asmall business and you've got
QuickBooks on your homecomputer, I mean, I Why , and
if you have a login , whywouldn't you get on there and
(31:47):
download a backup copy of theQuickBooks or get on there and
, and you can Google, I mean,it's , you know, Google how to
run a report in QuickBooks andyou'll get step-by-step , um,
you know, instructions on that.
Mm-Hmm .
the house that you can identifythat you can go ahead and grab
just to make sure that you havethat information. You know,
even if you know it's a yearfrom now that you end up
(32:08):
getting divorced. Mm-Hmm .
, uh, the other thing I wouldsay is like paying attention to
the mail that comes in thehouse. So, you know, or is all
the mail being sent to thebusiness and is there a reason
for that? If is , are yourpersonal bank statements, if
you notice that those are beingsent to, you know, your
husband's or your spouse'sbusiness address, then that
(32:28):
would be something that I wouldidentify.
Speaker 1 (32:31):
Yeah . And the reason why that's a red flag,
because people wouldn'tunderstand that, is that most
accountants tell businessowners to send their business
statements to their home. Yes.
So that you don't have yourstaff opening it up and you
have a separate, you know, likeyou can know if somebody's
stealing from you. Mm-Hmm.
(32:53):
is interesting is that youcould go to your spouse's
office and, you know, evenlooking around at what the, the
envelopes are coming from Bankof America or Chase or
something like that, we havephones. I mean, I would
definitely recommend, I mean,writing down things is great,
but if you know your spousewell enough, they will destroy
(33:16):
documents. Yes . And so, takingpictures of things that have
some, you know, a lot of timesthey will paint the person to
be crazy, you know, so you'llbe like, no, I saw this
account. Well, if you at leasthave a picture, it doesn't mean
that it's totally admissible,but it has the account number,
it has tangible proof that thatstatement and some of that
(33:40):
information you can use. Right.
Right.
Speaker 2 (33:43):
Right. No, that's absolutely correct.
Speaker 1 (33:45):
Now, at what point should they really step back
because they can do more harmthan good?
Speaker 2 (33:54):
Well, we would obviously never suspect or
suggest , uh, that somebodycommit any or do anything
illegal. Right . So, you know ,don't break into your spouse's
business and then stealdocuments. We would never
suggest that you do that. Um, Imean, what , what kinds of
things do you see? Have you
Speaker 1 (34:10):
Well, I think that, I think that it's brilliant to
just take a dive into there tosee if you really think what
you think. Right. The other ,the , the other thing that
people have to keep in mind iswhat is the end result that
you're gonna use in court? Youknow, so if this goes all the
(34:31):
way to court, can you use thatinformation? Is it moving the
needle? A lot of people getvery concerned about spending
money on a , um, girlfriend orboyfriend.
Speaker 2 (34:43):
Yes.
Speaker 1 (34:44):
Or, you know , uh, squandering marital assets. And
I think what I've seen in someof really high net worth
divorces where you could havehundreds of thousands of
dollars every month being spentby one person and the other
person's locked out of thefinancials. You know, those
(35:05):
types of situations , um, areobviously there's something
going on, but you are gonnaassume that there's way more
than there is. Mm-Hmm.
you gave an example of thecredit card. So they're running
one credit card with businessand personal expenses. Like I
(35:30):
can't always tell it. I can seethe patterns, right . We'll see
the patterns of behavior, andwe're looking for breaks in the
patterns. Um, but I think that,how am I gonna, how is that
spouse gonna prove that thatmeal was business and that meal
was not right? You know , soyou can almost get like a ,
(35:51):
it's almost better to get abigger picture than to assume
that you can get so specific inthe numbers. I think. Yes .
Speaker 2 (35:59):
And, and again, with the red flag analysis, we're
trying to identify, you know,bigger items. We're not looking
for the $500 discrepancies hereand there. Now if it's, you
know, a hundred dollars check,that could potentially lead to
something bigger than we wouldfollow up on it. But, but we're
really trying to identifythings that are going to make a
difference in a divorce.
Speaker 1 (36:18):
Okay. So what is the timeline? Like, let's say, I
think that there's something,because what I believe is if if
you see something, you thinkthat something's there, there's
gonna be a , a , some morethings there. Right ? Right.
Um, but what is the ti , likewhat is the ti And I think that
(36:41):
this is a sanity check. Likethis is you coming in and
saying, I believe that they'regoing and taking all my money.
Are they really doing it
so what's the timeline involvedin something like this? And are
you just getting like thediscovery documents basically,
(37:01):
or do you also requestadditional information?
Speaker 2 (37:05):
So , um, you know, we, we definitely like to get
involved. The earlier thebetter because it gives us more
time to be able to follow up onthings that we do identify. So
I do wanna say that to start.
Um, but you know, when wereceive all of the standard
first round discovery documents, um, within a month we have ,
we will go through them, wewill do our comparisons, we
will do our analyses, and thenput together a list of either
(37:28):
we've got red flags here theyare, or, or we don't. And so
usually within a month, we'reable to meet with, meet with
our clients and, and at leastgive them an idea of, of what
we're, what we're seeing. Or ifthere are, you know, lots of
missing records, then we wouldidentify that. Um, and so at
that point we start to , youknow, as soon as we identify
red flags, we start developingour plan. And so we're coming
(37:50):
up with, you know, whether itbe deposition questions that,
that should be answered , um,whether it be, you know,
following up on additionalcredit card , uh, records that
we don't have. Um, and so weput together a list of all the
kinds of different discoverythat we , that you know, that
the opposing side should ask orthat you should be asking your
opposing side . And so, youknow, we wanna make sure that
we're still within thatdiscovery window where we still
(38:13):
have the ability to go ask foradditional records.
Speaker 1 (38:17):
Now, let's say you find something like, let's say,
and it's in a certain accountor it's a certain type of
analysis, are you then comingin at this red flag analysis
and saying, okay, we saw A, B,and C , um, and would you like
to go down any of thosepipelines?
Speaker 2 (38:40):
Correct. Yes. Okay.
And, and it generally startswith, you know, it almost
always it starts with here'sthe additional stuff you need
to be asking for. And so as, aspieces start coming in, you
know, at that point we would,you know, enter into a contract
and, and work on an hourly rate, um, at that point. 'cause
that , at that point we knowthat there are some issues that
need to be identified. Um,generally speaking, by the time
(39:02):
that we have our, we'vecompleted our red flag
analysis, we also have an ideaof amounts. So it's not just,
here's, here's kind of anissue. It's like, you know,
here's $300,000 worth ofpersonal credit cards put
through our business. We needto get those credit card
statements. Analysis needs tobe done on those. And so here's
the additional records, here'swhat you should be looking for.
And so, you know, obviously wewould love to, you know, help
(39:24):
in continue in that process,but we're also going to give
the attorney and or the clientlike, here's what, you know,
you're gonna get theseadditional records. Here's what
you should be looking for onthose Mm-Hmm.
And so it may be a matterwhere, you know, they get those
credit card records and theylook through 'em and it is all
business. Well, then youwouldn't wanna hire us, you
know, to, to do that analysisif you could look through it
yourself and, and identifythat. Mm-Hmm.
(39:45):
Um, so again, we're looking atbig things, giving you very
specific instructions on , um,what records would help resolve
that issue. Um, and then how todo that.
Speaker 1 (39:55):
Well, and I think that anybody who has some
worry, 'cause this is really anemotional worry. And I think
that if you don't address it,sometimes you will just
continue to like hyper focus oneven after the divorce is done.
And in my mind, this type ofanalysis could actually help
(40:17):
get things settled. Yes.
Because you are coming in andsaying, okay, here are these
three red flags, this, it mightbe in this range for something
realistically that person andthat attorney can take that
information and utilize it andsay, Hey, you want us to go
further down this pipeline ornot?
Speaker 2 (40:38):
Yes. Because
Speaker 1 (40:39):
If you're giving ,
Speaker 2 (40:41):
We find leverage.
We're trying to give you guysleverage to the other side to
make sure that you're gettingyour fair share.
Speaker 1 (40:47):
Mm-Hmm,
Speaker 2 (40:47):
Mm-Hmm,
Speaker 1 (40:48):
have that conversation, thenyou are going forward and
you're going forward in acapacity to present it to
court. Yes . Or to testify.
Mm-Hmm.
Like they can come in and dothe analysis, but they may not,
and it does, it shifts. Likethen you're producing how do
(41:11):
you support it in court? Right.
And you could be insignificant,you know, then you're still
looking at the cost benefitanalysis. If it's millions of
dollars, if's a no brainer. Ifit's hundreds of thousands of
dollars, it's probably still ano-brainer. Um, I think when
it's smaller amounts, you mightbe able to, you know, do some
(41:31):
additional analysis and thenuse that for leverage as well.
Right. Um, but I think thatpeople need to be mindful that
not always is the court soresponsive to it. You know ,
sometimes in high net worthdivorces and we come and say,
oh, they've spent a couplehundred thousand on , um,
girlfriends are boyfriends. Thecourt will be like , uh, okay.
(41:57):
You know, like there's not asmuch of, you know, like, it ,
it , it does become relevanthow big the issue is, don't you
think? Yeah , that's,
Speaker 2 (42:07):
That's absolutely true. And, and I , you know, on
these bigger issues, you know,we can put together an expert
witness report that goes to theother side where we lay out all
of the evidence that we have.
We attach the copy of our, ourcv, our resume, which shows,
you know, we've been workingfor the IRS for 13 years, we
know what we're talking about.
Mm-Hmm .
(42:28):
it's ends up being necessary,then we'll be expert testimony
in a , in a court proceeding.
Speaker 1 (42:34):
Well, I want you to tell us a little bit more about
your company and some of thethings that you can also do,
because I, I find it veryfascinating that a lot of what
you're doing, we are also doingin the context of a business
valuation. But if they don'thave a business valuation,
they're not doing this type of,you know, like this is very
(42:56):
important analysis and you havea financial eye Right . On
those documents. So even ifyou're not having other
experts, in my mind, you're,you kind of, you're a resource
for attorneys Yes . And theclients. Really. That's
Speaker 2 (43:14):
True. Yes.
Speaker 1 (43:15):
Okay. Yes .
Speaker 2 (43:16):
I mean , again, you know, we've got 13, I I
personally have 13 and a halfyears experience with the IRS ,
um, on top of another, youknow, four since I've opened
this company. And, you know,there's just nothing that can
give you, you know, I, duringthat 14 years or 13 years at
the IRSI was inside and out ofbusinesses and, you know,
(43:38):
interviewing them , um, ontheir procedures. Um, you know,
one of the things that Iactually do, I don't know if
most people probably know this,but when the IRS decides when
they're going to audit a taxreturn, it's, so every return
that gets filed is given ascore, it's called a diff
score. And that score is basedon the probability that
something's not right. Andthat, that, that the analysis
(43:59):
that's done, the computeranalysis that's done is, is
from years and years and yearsof IRS data. Right. But those
tax returns then go to a, anoffice in Cincinnati where
revenue agents sit down andthey'll be like 10 at a time,
and for eight hours a day,they're gonna look at all the
returns that got pulled becauseof their score. And then they
go through and they actuallyidentify, oh, that looks weird.
(44:21):
They should audit that. Oh,meals and entertainment looks
really high for this type ofbusiness. We're gonna audit
that one. And then they getsent out to the field. And so,
so again, knowing, you know,having the ability to look at
different industries, you know,financial records, it doesn't
matter if I've, if I'm lookingat a restaurant or if I'm
looking at a trucking company ,um, you know, the , the tax
(44:41):
returns in the bank accountsare still gonna give us that
same kind of information. Buthaving an idea of what is
normal in an industry , uh, youknow, having, having our
experience of looking at everysingle type of business you can
imagine, and being able toidentify what looks weird for,
you know, a specific kind ofbusiness. For instance, the
trucking company that claimsmanagement fee income, you
know, that's, that wassomething that was, that stood
(45:02):
out right away. Um, but youknow, on top of that, my team
is , uh, has, has combined 89years of experience working in
financial investigations forthe Internal Revenue Service.
So we've got former revenueofficers who were on the
collection side. We've gotmultiple , uh, former special
agents , um, you know, that areretired that, you know, have
decided that they wanna helppeople instead of, you know,
(45:26):
using the victim as thegovernment. Mm-Hmm.
Maggie is my new employee andshe's got 16 years as in the
banking industry. Mm-Hmm .
financial information andspecifically related to small
businesses. And so if ifsomething's going on, then,
then, you know, we're, we'retrained to find that
(45:46):
information.
Speaker 1 (45:47):
Yeah. And well, and it's, again, it's just like so
mind blowing to me becausepeople might go and get a
business valuation and reallythey might say, oh, I wanna , I
, I want the businessvaluation, but like, what ,
what are they doing in there?
Right. And I almost feel likeyour process, you know, like if
(46:09):
you're really more concernedabout something weird happening
in the business, your processis really identify, like it's
doing some of the same work tolook at the discovery, but it's
from a different lens, youknow, and the attorneys look at
discovery from a differentlens. You know, a forensic
person looks from a differentlens, and a business evaluator
(46:30):
looks from a different lens.
And I think that that's theimportant , uh, pieces of it is
that you have another set ofeyes that's looking, you know,
even to tell the attorney,like, Hey, you need to get more
information here, ask thesequestions. Like that is very
much worth, you know, what Iknow you're charging for right
(46:53):
now. And it is a fixed fee, andit is, I think, very
reasonable, if not low , um,for the work that you're
providing. So I would encouragepeople to reach out to you ,
um, if they have some of thatconcerns, because I think they
come to business valuationpeople. What ? Like, Hey, are
you gonna go look for that? Andlike, seriously, our engagement
(47:14):
letter, our work literally sayswe are not there to detect
fraud. Yes. You know? Mm-Hmm .
That's another area that, likewhat if you have separate
assets from 20 years ago andyou're trying to figure out is
it still mine?
Speaker 2 (47:33):
Uh , sure. I mean, look it , you, financial
institutions are required tokeep records for five years.
Right. Um, most times ifsomebody's, you know, if
there's a file cabinet at ahouse, there's the likelihood
that there's probably 20 yearsin there is, is very possible.
Mm-Hmm .
financial information, we willdo whatever we can to, you
know, to trace those in , tracethose assets to look for
(47:55):
additional assets, you know, tolook for the hidden bank
accounts and all that kind ofstuff.
Speaker 1 (47:59):
Yeah. This was awesome. All right . Well,
Krista , I appreciate all ofthis information. Is there
anything else that you wouldrecommend or can they reach out
to you? Do you do like aninitial call or what
Speaker 2 (48:14):
We do, we do a free consultation. Um, and, you
know, you'll, you'll talkdirectly to me and, and we will
, um, you know, if, if there'sa scenario where I'm not
understanding that there'sprobably a need for it, I'm,
I'm not going to take yourmoney. Right. Right. So I'm ,
I'm only gonna do it if I thinkthat there's, there's an
absolute need for it. Mm-Hmm .
(48:35):
of something and, and it's whenyou're getting business
records, so many times peoplewill just provide a profit and
loss statement, incomestatement, you know, or balance
sheet or the tax returns. And,and if you just have solid
numbers for a year, there's noway to determine what makes up
that number. And so that's whyit's always important in these
cases if there's a smallbusiness to get a general
(48:56):
ledger to get the, the actualbusiness bank statements. And
so I just, I wanted to makesure that I said that before,
before we ended this.
Speaker 1 (49:04):
Yeah. I think definitely getting the, the
right documents is gonna beimportant. Most people don't
know what a general ledger is,but it's a basically a record
of every transaction in thebusiness income and expense.
And it gives you the detailsabout what goes into the meals
and entertainment. Um, and it'stypically not always requested.
(49:25):
Right . But it's a pretty easydocument to even download out
of QuickBooks into Excel. So wetry to ask for it in Excel as
Speaker 2 (49:33):
Well. Yes. That's so true. So true.
Speaker 1 (49:36):
All right , well this is awesome, Krista . We're
probably gonna have you onagain to talk about more about
what we see in businessvaluations. 'cause I bet you we
have some good stories toshare. Yes . Um , or maybe we
just have a storytellingsession.
Speaker 2 (49:49):
I would love that because I, I, when I was
preparing for this, I wastrying to think of various
cases and kind of how, youknow, 'cause there are, there's
lots of stories and when peoplestart hearing how it actually
happens, it'll also, it mighttrigger just things in your
head. Like, Ooh , wait aminute. You know, that was
something that I experienced.
Um, and so, you know, and onething I will say, you know, I'm
not saying that every scenariothere is something there, but I
(50:12):
would encourage people to trustyour gut. I mean, your gut,
your gut says something for areason. And so if we can help
bring clarity to that, youknow, if your gut is saying
that something that's not rightand you can't figure it out,
that's what we wanna do. And sowe wanna eliminate that
uncertainty for you. Um, andagain, at a flat rate so you
know exactly what you'regetting. And, and we, at , at
the end of the day, we wannamake sure that it's accurate
(50:33):
and that's fair.
Speaker 1 (50:35):
Yeah. And, and the flat rate is very reasonable as
like a retainer that you wouldbe paying to an expert anyway
and you get a lot more from it.
Yeah . So in my mind, I, as Ihope that you find nothing, but
it really, at some point youhave to look at it as it is a
small cost for peace of mind.
(50:56):
Yes. And whether you go forwardon any of the, you know,
sleuthing and getting moreinformation about them, you
don't have to like, you mightjust be like, oh, okay, I knew
there was something there. Oh ,okay, it's at this level.
Great, now we can put it tobed. Right . You know, like
we're not dictating what you dowith the information, but it is
(51:18):
for your own peace of mind. Andto come as an attorney, it
would also move your client offof that position because
sometimes the clients are justkind of like a broken record.
Yes . Um , and if they don'tget some clarity on that,
they're just gonna continue toassume and as the proceedings
go, assume that it gets worse.
(51:38):
Yes . You know , so. Well, thisis so great. Thank you so
Speaker 2 (51:42):
Much . Thank you for having me .
Speaker 1 (51:44):
Alright , we'll see you soon .
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