Catch me if you can: The art of pursuing fraudulent debtors

Catch me if you can: The art of pursuing fraudulent debtors
For the past 20 years, I have been engaged in a cat-and-mouse game with debtors. Together with our lawyers, I have acted for hundreds of creditors, including individuals, small and large corporations and financial institutions. Our client range is diverse because fraud is a pervasive problem.

So, what is the game? Debtors use fraudulent conveyances, hidden assets, bankruptcy legislation and sometimes downright lies to keep their assets out of the clutches of their current and prospective creditors. To discover what has happened to the debtors’ assets, creditors have to surmount all possible roadblocks. My job description is simple: Navigate the roadblocks, find the assets and then pounce. The means by which I carry out my mandate are far more complicated. Amazingly, just when I think I have seen all the techniques that debtors use to avoid paying their debts, I uncover another scheme.

Who are today’s debtors?
Unlike most debtors of the past, today’s debtors are much more sophisticated. They are often educated and well-versed in the law and our banking system. More importantly, they have unprecedented access to information. A book entitled Hide Your A$$et$ and Disappear is actually selling on Amazon right now.
Debtors come from all walks of life. Some debtors are affluent; some are not. They often believe that, despite being liable to repay their creditor (i.e., owing a debt or a judgment), they were somehow wronged in the transaction and should not have to pay — regardless of whether they have the financial ability to do so. With this perspective, and armed with knowledge, some of them creatively and deviously become fraudsters, improperly sheltering their assets to avoid paying their creditors.

The investigation
Each debtor has a story. My job is to put it together.

Debtors do not realize that their actions and statements leave a trail — physical, electronic or both — but I do. Equipped with my white board, like a crime scene investigator, I review and list the facts from which the debt and, ultimately, the judgment, arose. I list, analyze and file for further reference each tidbit of information, no matter how trivial or insignificant it initially seems to be. In doing so, I learn a lot about the debtors — their financial affairs, employment, line of business and family life. I often learn about their personalities and how they react when cornered.

This information alone, however, does not lead me to the debtor’s assets. I have to interpret the information and create a paper trail of the debtor’s footprints from the past to the present. I assemble the pieces of information like a puzzle. The process is thorough and takes time. Once I complete the puzzle and view the picture in its entirety, I can determine how and why the debtors got into financial trouble and, more importantly, whether they improperly transferred or sheltered their assets.

Legal action
Finding the assets is not enough. They then need to be retrieved, legally speaking.

If a debtor has exigible assets (i.e., assets available for seizure), our team takes the appropriate steps to seize the assets or garnish the money owed to the debtor. If the debtor has fraudulently transferred assets to avoid a creditor, we attack the fraudulent transaction in court. The affidavit materials filed with the court read like a mini-series entitled “In Pursuit of a Fraudster.” The story recounts, among other things, the debtor’s past and present life story, how the debt arose, the players who assisted the debtor and the means by which they carried out their fraudulent scheme.  

Going toe to toe with a fraudulent debtor is not for the faint of heart. Once backed into a corner, fraudulent debtors will try to dissuade or sidetrack you from the game, often lashing out and making it clear that they will not go down without a fight. They can act abrasively, rudely and, sometimes, even threateningly. The team attacking the scheme must let these comments and threats roll off their backs (while taking precautions when necessary). Otherwise, the fight will end before it ever really begins.   

Ultimately, apart from getting paid, the most gratifying comment I can receive from debtors or their counsel is: How did you figure it out? . . . I will never tell.

Tiziana Moretti is the chief law clerk at Speigel Nichols Fox LLP. She was formerly employed for 11 years by a major bank and she ultimately headed the administration of the bank’s secured and unsecured mortgage and loan portfolio for the largest region of the bank. She left her position to join SNF and has managed its collection practice for more than 20 years.

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