LIABILITIES

Litigation

A search should be conducted of the applicable jurisdiction to determine the extent of possible litigation involving the subject from both current and prior perspectives. A standard expectation for the research should be primarily an index review of the cases, which are outstanding, and if required, an analysis to determine the extent of pending lawsuits, which, as of the date of the report, remain unresolved. The search should be conducted on a ten-year basis, with the pending actions focused within a five-year window.

Federal, State, and Local Tax Liens

A search of the applicable jurisdictions should be made in the Recorders Office to determine the extent of federal, state and/or local tax liens that might impact the net equity position of the subject.

The existence of, for example, a $150,000 federal tax lien could wipe out all equity positions enjoyed by the assets discovered throughout the course of the research. Thus, the discovery of this liability is critically important in the assessment of the subjects net worth and ability to pay.

Bankruptcies

A search should be conducted through applicable jurisdictions germane to the residences and/or activities of the subject of the U.S. District Bankruptcy Court records for a ten-year period.

The purpose of this research is to determine if the subject has established a pattern of filing bankruptcy, and/or possibly (in the event a bankruptcy is discovered) to scrutinize the assets and/or creditors list to determine if there was fraudulent misrepresentation of assets and/or liabilities at the outset of the credit relationship with the institution.

Judgments

Searches for Abstracts of Judgments, or Judgments, are usually conducted in the applicable jurisdictions Recorders Grantee/Grantor Indices. The searches should reflect primary judgments that were filed in the applicable jurisdiction by the court, and can be included in the research for pending and/or previous lawsuits at the court jurisdiction level.

The Abstract of Judgment concept is that a particular judgment is extracted from the court records, and abstracted to the county jurisdiction, in order to encumber items of personal and/or real property which are identified, and are targeted for attachment and liquidation to pay off the claim. Plaintiff actions can be considered potential assets, and should not be overlooked.

Miscellaneous Liabilities

Additional searches should be conducted on a wide-area basis, both at the state level (Secretary of State) and the county or parish jurisdictional level, to determine if additional liabilities exist from the standpoint of judgments, tax liens, or county-based UCC Financing Statements.

These identify specific types of assets such as crops, timber, and inventory. They are not usually found at the state level UCC search, and most agencies do not provide them unless requested to do so. This search is more specifically covered in the following Intelligence section.

Intelligence

In any good asset search, the fraud examiner should develop intelligence throughout the course of the research that would refer to information as specified above concerning additional names on real estate ownership, transferee names, and so forth.

Additional modules of research that should be conducted include criminal histories on the individuals targeted within the asset search, as well as a search for evidence of known connections with other business enterprises and/or individuals with whom regular associations are engaged.

There are multiple methods of access to this type of information, not the least of which would constitute a surveillance (highly unusual in an asset search) which would identify the comings and goings of the subjects at hand, and would assist in the identification of the intelligence type of data.

Additional information is developed with respect to the assets, in order to assist in the determination of the market value so that a net equity figure can be derived for one asset, or a group of assets, from all levels.

To delve into the methods of this type of discovery would be to get into the mind of the fraud examiner working the case, and shall not be addressed in this article, but should be included in an overview process in the Intelligence Section of any asset search report.

Some other instances where information would be helpful include areas where other tangible net worth is discovered, such as intelligence provided by developed sources close to the subject regarding stamp collections, gold coin collections, cash under a mattress, and so forth.

This information is highly inconsistent within the context of a normal asset search, and, while hoped for, should not be expected as a matter of doing business with a particular fraud examiner.

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Thomas C. Lawson, CFE, CII is President and Founder of APSCREEN International, the worlds leading full service Consumer Reporting Agency since 1980. Lawson is called one of the real pros as he has helped to reshape laws including those for employment screening, permissible credit reporting, asset discovery and fraud examination. Tom is a Life Member of: ACFE, ASIS, SHRM, PIHRA, PNRRA, PRRN, CII, WAD, WIN, FCAOC and OCEMA.