Divorce at Altitude: A Podcast on Colorado Family Law

What Happens When My Spouse is Hiding Assests | Episode 153

May 10, 2023 Ryan Kalamaya & Amy Goscha
Divorce at Altitude: A Podcast on Colorado Family Law
What Happens When My Spouse is Hiding Assests | Episode 153
Show Notes Transcript

One of the most common things we as divorce lawyers often hear is that a client thinks their spouse is potentially, and intentionally, hiding money. So today, we delve into what to do if you suspect your spouse might be hiding assets during a divorce. This is an interesting topic because, as we know, when people are going through a divorce, there is often not a lot of trust between the two parties. 

We start our conversation with an overview of asset hiding and why people sometimes do it, and we talk conceptually about what asset hiding could look like. You’ll hear insights into how lawyers recognize the red flags of asset hiding and potential implications, and we share thoughts on the cost/benefit analysis of hiring experts as part of the discovery process.

Key Points From This Episode:

  • Amy gives an overview of asset hiding and why people sometimes do it in a divorce.
  • We talk about some hypothetical asset-hiding scenarios. 
  • How divorce lawyers recognize the red flags of asset hiding, what they are, and what to do about them.
  • Why tax returns can be very telling.
  • Potential implications of hidden assets in a divorce.
  • The role of lawyers in asset tracing; experts in forensic accounting. 
  • Why Amy uses depositions as a discovery tool.
  • Amy goes deeper into hiring experts and how it can drive up costs (the cost/benefit analysis).
  • More about forensic accounting and developing technologies and AI.
  • What the law provides in terms of the discovery of hiding assets in divorce (Rule 16.2E10). 
  • Two things for listeners to walk away with: gather information and have a special master, arbitrator, or private judge.

What is Divorce at Altitude?

Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado.

To subscribe to Divorce at Altitude, click here and select your favorite podcast player. To subscribe to Kalamaya | Goscha's YouTube channel where many of the episodes will be posted as videos, click here. If you have additional questions or would like to speak to one of our attorneys, give us a call at 970-429-5784 or email us at info@kalamaya.law.



Ryan Kalamaya (3s):
Hey Everyone. I'm Ryan Kalamaya

Amy Goscha (6s):
And. I'm Amy Goscha.

Ryan Kalamaya (8s):
Welcome to the Divorce at Altitude A Podcast on Colorado. Family Law.

Amy Goscha (13s):
Divorce is not easy. It really sucks. Trust me I. know Besides. being an experienced divorce attorney, I'm also a Divorce client.

Ryan Kalamaya (20s):
Whether, you are someone considering Divorce or a fellow Family Law attorney. listen in for weekly tips and insight into topics related to Divorce co-parenting and Separation in Colorado. Welcome Back to another episode of Divorce at Altitude. This is Ryan Kalamaya This week. we are going to talk about what to do if you think your Spouse is hiding money in divorce. And. we are joined this week by my lovely co-host, Amy Goscha. Amy. How's it going?

Amy Goscha (57s):
Good. This is an interesting topic because you know, as people are getting divorced, there's not a lot of trust going on.

Ryan Kalamaya (1m 4s):
Indeed. I think one of the most common questions that we get, Eric and Melanie Wolf, our hypothetical Divorce clients, Melanie will schedule a consultation and she'll say, Amy, I don't trust Eric. I think he's hiding money. And so for those Listeners, can you give an overview of what asset Hiding is and why do people do it in a divorce?

Amy Goscha (1m 28s):
Well, I think that part of it is just being scared of the unknown. you know, like as you're going through a Divorce, a lot of times, you know, like when a party comes to talk to me, the first thing they say is, I don't want my Spouse to know, you know, but I want kind of a cushion of money. Should I open an account and should I, you know, put some money in there? you know, there's a lot of distrust as to if there's a joint account, is he just, or is she just going to, you know, drain the asset? you know, So I think it's just out of that. And also, you know, just being upset saying, I don't think that the other, my soon-to-be ex Spouse deserves half of my, my money.

Amy Goscha (2m 10s):

Ryan Kalamaya (2m 11s):
It boils down to why people do it, is they're greedy and there are people that are greedy, And, I. I'm not saying that everyone is, but in essence what some of the scenarios that can give people an idea is Eric Wolf will have a hundred thousand dollars that he'll be socking away and giving it to his brother or taking out money and putting it under his mattress, or just not disclosing money. And the simple reason is that it reduces the marital estate and means that Melanie in their Divorce is going to get less money and it boils down to greed.

Ryan Kalamaya (2m 53s):
So let's kind of switch gears Amy and talk about how we as Divorce lawyers recognize signs of Hiding assets. And if Eric and Melanie, you know, are concerned about the other, what are the things that they either should do or they're red flags for Hiding assets and hiding money?

Amy Goscha (3m 16s):
Well, I think the first like baseline is, you know, like if you're not the person that knows about the finances, like gather any kind of financial documents that you can't, you know, pull a credit report, see, you know, like make sure that you know, your Spouse hasn't opened up, you know, various credit cards, you know, so it's gathering that evidence, you know, like you have to gather evidence to see if you can see, you know, like if anything frankly not typical or normal is going on, you also see a lot of like cash withdrawals from, you know, from bank account. If you see that, that's a red flag. Foreign bank account, you know, like the best example I can give of that is as a law clerk, we had a case where the husband, it was like a two week tracing trial and it came out that he had 700,000 stashed away in a foreign account.

Amy Goscha (4m 10s):
So he was held in contempt of court until he paid essentially 700,000 to get outta jail. you know, so it's things like that lack of transparency, just saying you, you know, just trust me on this promissory note. Lack of deposits, you know, leading up to the Divorce, you know, changing someone's income, you know, and money that's going into joint accounts. I'm sure you can think of some other examples too. Ryan,

Ryan Kalamaya (4m 37s):
I mean people rely on their tax returns, they avoid taxes. And, we see those examples. I mean, like I said before, there are people that are greedy, but And, I think it's hard to, the gray area Amy is when Melanie Wolf, if she, in our Divorce story, if she's never really been involved in the financial decisions and she's always just trusted Eric, then there could be often a flashpoint where he could be having an affair or there could be, you know, he could say, I want a Divorce. That just completely surprises her. And you know, oftentimes we hear these stories where people are like, I don't feel like I know who this person is.

Ryan Kalamaya (5m 23s):
And that is really feeds into that lack of trust and transparency. But if Eric, you know, is like, just trust me, I'm not gonna give you any information or I'm not gonna, why do you wanna ask for the bank statements? That is the certainly a red flag because if Eric, you know, if, if he's running his business or he doesn't have anything to hide, then he should, you know, really lean into that transparency. At least in my observation, what we advise clients Amy is the cost of a Divorce goes through the roof when there's that lack of transparency. So, and we've talked about it on the show before. One of the jobs for me representing Eric is saying, listen, you, if they ask for three years of tax returns, you should provide five because then it starts getting really expensive.

Ryan Kalamaya (6m 14s):
But if he is Hiding, you know, assets and we'll talk a little bit more about how to recognize, you know, signs And. We'll also talk about later on about the remedies. But if someone's involved in a lot of cryptocurrency, if there's a lot of cash, those it, it doesn't mean that they are hiding money, it's just people need to understand it's easier in those particular, you know, ways of handling money. If people own their own business, that is a lot harder, especially if it's, there's no other business partners. If it's a solely operated business, it just is easier for people to, you know, cook the books, you know, so to speak.

Ryan Kalamaya (6m 56s):
But you know, you mentioned promissory notes. People can gin up, you know, debt and say, I don't owe any, or I don't own any money, or I don't own anything because it's all debt and people can, you know, create debts out of nothing seemingly. And then, you know, they just stop depositing money leaning up and they're doing that because they're saying to their business partners or other people that owe them money, Hey, hold off, I need to get through this Divorce And. we see those situations Amy and, and whether we represent Eric or represent Melanie, there's different ways that we handle that.

Amy Goscha (7m 34s):
Yeah, absolutely. I mean I think a lot is just looking at the cash flow and if there was major changes on the cash flow, you know, like that's something to look into. So if you look at a tax return, I had a situation where they're business partners, And I looked at the off, you know, the compensation to officers. And I realized that the other partner was getting more distributions, you know, like, and that had changed So I think, you know, the tax return is really telling, you know, like not just cash withdrawals, but maybe there's like a lot of transfers and transactions going back and forth. Like that's always, you know, a red flag as well.

Ryan Kalamaya (8m 12s):
And when you see the transfers and it's going to bank accounts that have not been disclosed, that is obviously a big red flag. But yeah, I agree. When you get into the books of a business and you we're a partnership and then all of a sudden the revenue has gone down or the expenses have gone up and there's not a reasonable explanation, right? Like Covid came and it really had a dramatic impact on businesses. So if a business owner, if Eric says, well this is why my business either increased or often, you know, he'll get divorced flu Eric and he'll say My business is worthless. I mean, how many times have you heard that Amy?

Amy Goscha (8m 54s):
Oh, every single one. Yeah, if it's the building party,

Ryan Kalamaya (8m 57s):
Right, and there's not a reasonable explanation for it, then you, you gotta kinda wonder. So let's talk about the Potential implications of hidden assets in a divorce. We'll talk about some of the remedies, but it isn't just that the business is worth less Amy, it also will impact other aspects. So can you tell our Listeners a little bit more about the kind of waterfall effect of a party trying to hide assets?

Amy Goscha (9m 26s):
Yeah, I mean I think you mentioned it earlier, but a party is siphoning out assets from the marital estate. There's less of a marital estate to divide equitably, you know, so that's one, you know, financial implication. And there's also, you know, if a party is just not paying themselves what they did before, they're gonna claim that they have less income. And so that's less spousal maintenance or child support to the Spouse that doesn't earn as much

Ryan Kalamaya (9m 54s):
And, and it really can matter for the income aspects that you just mentioned. And you know, So I think it's helpful for Listeners to understand The role of lawyers in asset tracing and recovery. You mentioned that earlier. I think it's really for us to work hand in hand with experts. There's a few things that we can do as lawyers, but one thing we'll talk about in terms of experts is, you know what they do in terms of forensic accounting, but really we can, the discovery process, which we've talked about before on other episodes, discovery can be very expensive, but we can do requests for production So, we can ask for more bank statements.

Ryan Kalamaya (10m 36s):
And at least for me, when people are trying to hide assets, they really are, you know, the bank statements can be very telling. I had a case where someone would go to Las Vegas, they would get a bunch of money because their parents would front them and then they would come back with suitcases of cash. And my client said, listen, you know, they make more money than I do. And they, you know, they, it was seemingly was like a stay-at-home parent. And, but then when you went through the bank statements like clockwork, there was like deposits of $9,000 And. we were able to kind of determine that the other party had been just kind of sitting on that cash.

Ryan Kalamaya (11m 16s):
So request for production. Any other kind of discovery tactic or mechanism worth mentioning? Amy, I

Amy Goscha (11m 24s):
Mean I think I use depositions, not in every case, but I think that's a really good discovery tool. I think you And I have talked about before. You can ask parties questions, interrogatories, but those might not be particularly helpful. you know, you might wanna set up a deposition, you know, to ask specific questions about various transactions.

Ryan Kalamaya (11m 46s):
This episode is brought to you by our law firm, Kalamaya Goscha, Amy, And I describe our law firm as an innovative and ambitious trial team that pushes the boundaries to discover new frontiers in family law, personal injuries and criminal defense in Colorado. We currently have offices in Aspen, Glenwood Springs, Edwards, Denver and Boulder. If you wanna find out more, visit our website, Kalamaya Law. Now Back to the show. You also think it's helpful if we have a scenario where Eric Wolff is trying to hide money, we need to get into the psychology and also the method by which he would try to hide money.

Ryan Kalamaya (12m 30s):
And so you get into the text messages, the emails, the internal communications, the electronically stored information. We, we looked at the books, the QuickBooks and other things, but I mean we just as the time of the recording we, you know, we had kind of a, a big news story where Tucker Carlson, he was let go by Fox News and it was because of the text messages that had come out in the litigation. And I, don't think that people understand how, like they can be really sneaky, but And, we can withdraw a bunch of money on our phone, but there's going to be a little paper trail or little digital, you know, chromes sprinkled and it's just knowing how to go after that.

Ryan Kalamaya (13m 12s):
But we can't do it alone. Oftentimes we'll need to bring in an expert that really specializes in that. So Amy, can you talk a little bit about forensic experts when it comes to financials?

Amy Goscha (13m 24s):
Yeah, So I think a lot of times when people hire like a business valuation expert, they also think that that expert is going to be a forensic expert and that's not the case. So forensic experts are very specific where they do a lot of tracing and it gets very, very, very expensive. So as the attorney you And, I have to weigh, you know, the expense with the need and what we're actually gonna, you know, what we're trying to prove, you know. But when I talk to business evaluation expert, you know, they're gonna look at the p and l and they're gonna take the p and l for what it is. Like they're not probably gonna match up every single transaction, you know, from the general ledger.

Amy Goscha (14m 7s):
Like they'll look through it if they have questions, but they're not, you know, the forensic expert.

Ryan Kalamaya (14m 12s):
It's helpful for people to understand that dynamic and if they wanna listen to the episode we've done before episode one 16 on forensic accounting and the Divorce money guide with Tracy Conan And, we Tracy And I talk about forensic accounting, but I think it, you know, it's helpful as I said before in terms of two scenarios, what you mentioned to Amy, the first is they, a lot of times if there's a business, cuz the business is, it provides an opportunity for people to, you know, launder money or hide money and to do all those things. And if we have an expert, often they're gonna rely on the books, the tax returns, the financial reports and assume that they are valid.

Ryan Kalamaya (14m 53s):
There can be circumstances. I had a case where, you know, my client was involved in the business and so she had a pretty good idea of the financials and you know, she thought that some of these expenses were personal or that, you know, they wasn't necessarily Hiding but it should be included in the business valuation in terms of, you know, snowmobiles or Lake Powell, you know, houseboat being run through the business. And that can be a form of Hiding and a Spouse can say this is how much I think they're kind of, you know, running through the business. That's that's personal and that is in stark contrast to the full on forensic accounting where people are, the experts are tracing the money going from one account to the other, going to the Swiss bank accounts and then the Cayman Islands and trying to really figure out where did this money go?

Ryan Kalamaya (15m 46s):
It can be incredibly complex. We mentioned, I mentioned on a previous podcast there was this AI service that I had mentioned in my episode on AI and lawyering with Ray Palmer. We're getting to the point now where there are AI programs that are able to scan bank accounts and bank information to look for deviations. That's the sort of thing that AI can be pretty efficient at. So it will be interesting in terms of seeing the technology with blockchain and some of these other technologies that are involved, but there's always gonna be some way that people try to hide money. So Amy, what happens or what are the risks or the things that Divorce lawyers or the law provides if someone's trying to hide money?

Ryan Kalamaya (16m 34s):
You mentioned contempt in your other scenario. What are the other things that people should know in terms of hiding money in a Divorce?

Amy Goscha (16m 44s):
So under rule 16.2 E 10, essentially we have what we call like a five year clawback. So if there's a material misstatement or omission, then essentially the Divorce could be reopened and property reallocated. I had a case where there was an omitted asset. The wife testified that she needed money to purchase a new house at permanent orders. She already had purchased a new house. My client found out that she had a new house after permanent orders And. so we had to reopen, you know, the marital stamp to figure out how that asset needed to be reallocated.

Amy Goscha (17m 24s):
you know, So I think we have that And I think that's why when clients fill out the sworn financial statements, it's very important to make sure that you disclose every single asset even if you put, you know, t B D on it, if it's the initial one,

Ryan Kalamaya (17m 38s):
Please Laura, on that rule, 16.2 E 10, you know, I call it Divorce remorse where someone later on, Eric and Melanie, they reach an agreement and then they move on and you know, three years later Melanie gets, you know, really angry because she feels like she got a raw deal in the Divorce and she'll go back and say, you know, Eric didn't actually disclose this or that. And there are examples of this happening. I mean some of the cases they have gone up on appeal where, you know, in one case a husband there was a business and they had experts and they were looking at it and then they settled and then a year later the husband sold it for something like seven x what they had agreed to.

Ryan Kalamaya (18m 23s):
And it had been that he had been talking with somebody about selling a business through the Divorce. And so the legal issue was whether or not that was an omission or, or a misstatement, a material misstatement. We've also had some other cases on, you know, if there's a disclosure or there's language in a Separation agreement that says you know that the people know what they're doing and that they release the claims against the other, can you waive that five year clawback and you know, can you essentially waive kind of fraud or the provisions? And you know, it really gets complex and tricky. And what I often tell people is, you know, you have this provision, I mean, under rule 16.2 you're supposed to have a duty of transparency.

Ryan Kalamaya (19m 9s):
That doesn't mean that you're necessarily gonna get candor and transparency from the other side and you're probably in the middle of your Divorce or you know, in your Divorce. That is the best opportunity for you really to find out all of the assets. It's difficult, you know, within five years for you to find out, I guess if, if it is a material, you know, someone has, you know, all of a sudden a hundred million dollars, you know, and especially if you have children, you probably are going to know that the other party's lifestyle has changed dramatically and it could have been from that, you know, non-disclosure. But it's hard.

Ryan Kalamaya (19m 49s):
And so people really need to understand what they're getting into. But I think the hardest thing for what we do Amy is walking Eric and Melanie through and saying, you know this, you didn't, you weren't involved in the financial decisions in your marriage. That doesn't mean that the other side was doing anything you know, funny or that they were Hiding anything. And really walking them through the cost benefit analysis of you know, is this a scratch that you need to to itch and, and how much is it gonna cost? Because if you wanna do a full on forensic accounting for a business that's generating $50,000, it's not worth it. But if you're talking about hundreds of thousands of dollars and millions of dollars, it can really make a difference in knowing what to look for I think is critical for parties going through a Divorce.

Amy Goscha (20m 39s):
Yeah, agreed. And I think that doing that during the Divorce is so much easier than trying to undo something later,

Ryan Kalamaya (20m 46s):
Which I think is hard for people to understand cuz it can get expensive already. And then the emotional bandwidth where they just say, I just want this to be done, I can't deal with this, the stress is just consuming me. I think it really kind of depends on the issues involved, but you know, those are the things that we need to go through as lawyers to understand the full financial picture and to understand do we need to bring in an expert because it does happen and it can be a significant impact on people's financial lives after their Divorce. So anything else Amy that you think people need to know if they think their Spouse is hiding money in a Divorce?

Amy Goscha (21m 27s):
I mean, I think just seek consultation from like a Divorce lawyer like you or I and to make sure that, you know, the Divorce lawyer is getting the right experts in place to figure it out.

Ryan Kalamaya (21m 38s):
Yeah. And I think there's two things that I'll leave Listeners with is one is at the very beginning to reiterate what Amy says is that, you know, people need to gather up information if you haven't separated or you haven't spoken about the D word, you know, Divorce and you know, you, there's an opportunity there to OBTAIN information and that information could go poof during the Divorce. And so people, when they're gathering up that information, I think that's really critical. They also need to be careful, however, because at least in Colorado there are various criminal laws that prevent people from hacking, you know, information from going into the other's computer and, and getting, you know, information So I think it's a fine balance and you know, knowing, do you ask the cpa, Hey, can I get a copy of my tax returns if that CPA has been talking with Eric Wolf, you know, all along, you know, the CPAs probably gonna give Eric a heads up, Hey, Melanie's never really asked for tax returns and that, you know, that could cause a domino effect.

Ryan Kalamaya (22m 42s):
But you know, if Melanie does it, you know, smart in with some guidance on what to look for, that can be very, very helpful. On the other end, I do think it also is worth mentioning that having a special master, an arbitrator or private judge, that is something that, you know, we would certainly want to talk about depending on the finances because you know, and, and you have to have an appointment or an agreement. But you know, if a special master that has some experience and has seen, you know, people hide money and the same thing with an arbitrator and a private judge. Anyone that's been doing Family Law for, you know, a long time, they have seen examples of, you know, Amy where you mentioned, you know, the $700,000 if you get a brand new judge, I've definitely had it where they're somewhat naive.

Ryan Kalamaya (23m 33s):
They don't think people in Family, Law and divorces are gonna try to hide, you know, money if they have been previously some sort of civil litigator there. There's just no way that they could conceptualize the extent to what people, the lengths that people are willing to go through And I. Think having a special master in arbitrator or private judge is certainly, you know, something that I'm gonna talk with in Eric and Melanie's situation if I have concerns about the disclosure. Well, until next time, thank you for joining us on Divorce at Altitude. Take care. Hey. Everyone, this is Ryan again. Thank you for joining us on Divorce at Altitude.

Ryan Kalamaya (24m 15s):
If you found our tips, insight, or discussion helpful, please tell a friend about this podcast. For show notes, additional resources or links mentioned on today's episode, visit Divorce at Altitude dot com. Follow us on Apple Podcasts, Spotify, or wherever you listen in. Many of our episodes are also posted on YouTube. You can also find Amy and me at Kalamaya.law or 970-315-2365. That's K A L A M A Y A.