Converting Intelligence into
The intelligence shows where the debtor's accounts are
but what now?
M. Palmer and Richard L.
June 2016 | More Articles
See Part 1 of this article: Asset Investigations: How Intelligence Can Be More Valuable than Evidence
In our first installment of this two-part article, Asset
Investigations: How Intelligence Can Be More Valuable than Evidence, we
stated that The use of intelligence is essential in most asset investigations.
More often than not, however, intelligence is not admissible as evidence in
court. Why? Most human source intelligence is obtained from individuals who will
either not agree to testify or whose information will not survive challenges in
court. However, human source intelligence is often the only practical way to
uncover sophisticated asset concealment schemes and, once converted to evidence,
to efficiently pursue a recovery action in court. (Evidence is generally
defined as proof of fact(s) presented at a judicial hearing such as a trial.)
What then is the value of the intelligence? How can you convert non-admissible
intelligence into court-admissible evidence, now that your investigator has
delivered to you the intelligence about the location of a targets secret bank
accounts in offshore tax havens?
Specialized Legal Expertise is Essential
Untying that Gordian knot will primarily depend upon the skill set of a great
asset recovery lawyer who specializes in asset recovery. He or she should be in
charge of bringing your case. Asset recovery is a highly specialized and complex
field, and it is for this reason that we recommend either choosing an
experienced asset recovery lawyer from the very start or engaging the adjunct
services of such a specialty lawyer.
To be clear, Cachet International and its two principals do NOT provide legal
advice. We are asset investigators and not lawyers. However, below we would like
to share with you some of the methodology that we have seen successfully
employed by asset recovery lawyers.
Why Gather Intelligence,
if It Is Not Court-Admissible?
Traditionally, gathering intelligence from human sources has been best employed
to first provide an assessment of the targets assets to determine whether a
lawyers effort to prepare a contemplated recovery action is justified and
economically viable. This is particularly true if third-party financing for the
recovery effort is being sought. Also, by knowing the location of litigation
targets and their assets, the cost versus expected recovery ratio can be more
accurately estimated. Once this intelligence has been unearthed by the
investigators, the lawyers on behalf of their clients can better determine
whether going after a targets assets is within the clients time and budget
Second, intelligence provides the road map for planning and conducting
investigative actions and legal discovery efforts.
Often, these additional investigative actions will uncover the first actual
court-admissible evidence. For example, if you know that the target has accounts
in a secret offshore jurisdiction such as in the Caribbean or a European tax
haven, then you can begin looking for the targets travels and connections to
these geographic areas. Travel, accommodation and communication records can be
subpoenaed and studied for further leads. Interviewing those who are privy to
the targets travels and connections can supplement and expand on such
information, thus providing leads to different jurisdictions information that
can be vital to establish jurisdiction. It is hard to believe, but many
individuals traveling to exotic islands in order to hide their money and
beneficial ownership in shell companies, forget that their social media postings
and pictures can place them in these locales and even provide dates and a time
line. Needless to say, social media mining is a growth area in asset and
beneficial ownership investigations.
Business and banking records can also be examined in a more focused and precise
manner. If you know what you are looking for in advance, you can better focus
your efforts to finding public records, former employees, counterparties,
litigants and even participants in the concealment of these assets who in turn
can provide court-admissible evidence.
The advantage here is that the legal discovery of documents and depositions can
continue to focus on this information. As seen in our earlier article, once the
target individual (husband) had given depositions, claiming to be bankrupt, the
discovery of his overseas assets placed him in much greater legal jeopardy than
before, increasing the pressure for him to settle.
Confronting the Debtor
with Uncorroborated Intelligence
This is not a good idea, and here is why. Asking the target directly in
depositions about offshore accounts, located by investigators through
intelligence but not yet confirmed with evidence, is a delicate and rather
dangerous tactic that can fatally damage the entire case. After all, now knowing
that his assets are being investigated, the deposed target can then notify his
offshore bank to move and/or close his accounts. If that happens, there are a
multitude of banks which, when subsequently served with seizure orders, will
claim that the accounts had never existed. (If you do not believe that banks
will lie to the courts and regulators, we suggest you do some simple Google
searches of some famous international banks).
In other words, you absolutely need to gather the most powerful possible
evidence in advance of directly approaching the target or the holder of his
assets: the hosting bank.
THE MAGNIFICENT FOUR
(of many other methods)
There are, of course, many methods out there that can be employed for turning
intelligence into evidence, but here are four rather new powerful tools for
generating ironclad court-admissible evidence, and we like to call them the
One method is to convince a local or federal
prosecutor to initiate a criminal case against the target and/or his/her
associates. Reason: The prosecutor has much broader discretion in using his
discovery and his investigative tools, as well as his access to foreign law
enforcement and regulatory authorities. The intelligence that you and your
investigator previously collected on the target may come in very handy and may
be just the information that the prosecutor needs to start a criminal case. Now
that you have convinced the prosecutor to initiate a criminal case against your
target, you can happily slipstream or ride along with the criminal case and
use the evidence that they uncover for introduction into a civil court to
support your very own recovery action.
The second method is a variation on the law enforcement methodology used by
prosecutors to turn or flip a participant in a crime into a witness, thus
securing cooperation from insiders to provide crucial hard evidence. There are
firms that specialize in developing information on persons who were involved
with the target in concealing funds or similar actions that caused client harm.
The goal is to find a reasonable basis for eventually bringing civil suit
against the targets fellow participant unless
he or she agrees to cooperate and be a witness against your target. This
methodology has been employed by asset recovery lawyers with great success and
is extremely effective in court.
The third method is a relatively new concept, available only in the U.S. This
method is known as intermediary bank discovery. This is how it works. All U.S.
dollar denominated wire transfers from anyone to anyone in the world, clear
(are being processed) by intermediary banks located in New York. Intermediary
banks are obligated to, and in fact do, maintain records of all wire transfers
they process. From these bank records, it is possible to recreate the financial
history of any person or company in the world that does business in U.S.
dollars. These records can be obtained by a lawyer using a properly issued U.S.
subpoena, any time a subpoena can be legally issued. Discovery in itself can be
a sufficient reason to proceed with this process, and foreign judgments within
certain circumstances can be recognized in the U.S. As these bank records
include vital information, such as wire transfer information, they also identify
the purpose of the transactions, the sender and recipient of the transaction,
and, of course, the relevant bank account numbers a veritable treasure chest
for the lawyer and his client! In many cases, foreign judgments can also be
pursued in U.S. courts. Perhaps best of all, this method not only circumvents
foreign banking secrecy laws, but the banks customers have NO standing to
object to subpoenas for these financial records. (NOTE: This method is
applicable only to transactions denominated in U.S. dollars.)
The fourth method is the global attachment order, which is New York
States answer to the Mareva injunction, which is not permitted in the
U.S. The use of a global attachment order is exemplified in a February 2016 New
York case, BTG Pactual et al v. SunEdison. In that arbitration
proceeding, claimants successfully obtained a global attachment order and a
temporary restraining order, preventing SunEdison from transferring assets to
avoid collection on any potential award. (At the time we prepared our article,
the claimants had not obtained a judgment on their underlying arbitration claim
but only recently initiated the arbitration process.)
The English common law Mareva ruling is not available in U.S. federal
courts, due to the unique origin of the U.S. federal court system and the limit
on remedies available in federal courts. However, U.S. state courts have the
inherent power to grant remedies in the form of a global attachment order. It
appears that some foreign plaintiffs may qualify to seek redress in New York
courts using a global attachment order.
Note: A Mareva injunction is an English Court order preventing a defendant from
transferring assets until the outcome of the associated law suit is decided.
Named after a 1975 English case, Mareva Compania Naviera S.A. vs. International
Bulk Carriers S.A., it is now called a freezing injunction or freezing
We hope our observations on additional concepts
in pursuing effective asset investigations demonstrate how intelligence can be
used effectively in order to take a case from investigation to the actual asset
recovery. An experienced and highly skilled asset recovery lawyer will be the
best ally in the process.
This short summary should not be considered to be all-inclusive of the methods
available in converting intelligence into court-admissible evidence. We
emphasize that there are many other effective methods available outside the U.S.
To discuss a corporate intelligence or financial
investigation matter, or to learn more about Cachet Internationals
investigative resources in your jurisdiction, contact
Michele Palmer by
email or at
Copyright © 2016 by Cachet International, Inc.
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