A forensic accountant is a useful tool in divorces, especially where there is a closely-held business. Many times, these are family businesses or businesses where the person works individually. Unfortunately, a closely-held business is often a way for a spouse to hide assets. Having a closely-held business can enable a spouse to take additional income by: (1) paying personal debts with business funds, (2) engaging in non-arm’s length transactions, or through expensive “perks” of the job.
Courts support broad investigation into financial matters especially when there is a business asset at stake in a divorce. See Ganin v. Ganin, 114 A.D.2d 883 (2nd Dept. 1985). The “entire financial history of the marriage must be open for inspection” in order for hidden assets to be discovered. Kaye v. Kaye, 102 A.D.2d 682, 686 (2nd Dept. 1984). Furthermore, obstructionist tactics into financial matters can affect equitable distribution in a negative way for the person who created the deception. Baron v. Baron, 71 A.D.3d 807 (2nd Dept. 2010).
Due to the encouragement of financial disclosure, a forensic accountant can do many things, such as:
Review the business’s books and records.
Look into any financial statements given to banks in connection with debt agreements. (This can be useful if the business has filed for bankruptcy as well.)
Discover if there are any other business interests of which the non-asset holding spouse was unaware.
Ascertain whether personal expenses are being paid from the business or if there is deferred compensation due to the business owner-spouse.
Uncover whether the spouse is creating phony debt by scheming with friends or family to establish phony loans or expenses. (He or she can then make payments to them, knowing he will get the money back after the divorce is final. See e.g., Karas-Abraham v. Abraham, 69 A.D.3d 428 (1st 2010)).
Rincker Law, PLLC is equipped to help you through your matrimonial law dispute concerning any closely-held business and help ascertain whether a forensic evaluation will be useful.
"This blog is for informational purposes only and is not intended to create an attorney-client relationship. It is recommended that you speak to an attorney licensed in your jurisdiction before relying on the information in this blog."