Unravelling The Fraudster's Web: Overarching Goals And Objectives

The discovery of major loss through fraud or deceit can come

as a shock. One forensic accountant has said:

"The first issue you may have to contend with is your

reaction. Typical responses include denial and anger. While

understandable, emotions can trigger heat-of-the-moment

decisions that rarely benefit a comprehensive reaction to the

suspected wrongdoing. In fact, they often do the

opposite...

Anger can be equally destructive. Assert your influence to

dissuade management from making premature accusations or

taking rash actions before knowing, or being able to prove,

if a fraud actually happened. Once aware of a potential

fraud, a company should assemble a response team - as

small as possible to ensure

confidentiality."1

Success with concealed asset recovery requires a clear view

of the over-arching goal, a well-organized set of objectives

calculated to reach such goal, and a continual reference to

same. The goal must be worked out in advance, and the means to

achieve it carefully reviewed and explained where necessary.

Victims and creditors will need to understand the implications

of the chosen 'means' and 'objectives' in order

that they may make informed decisions about the risks and

consequences. A detailed retainer letter should be prepared at

the beginning of each assignment, setting-out the principal

facts known about the matter to be pursued, the principal goal

and objectives, the methods to be used in the performance of

the work, a budget, and a description of the rolling phases of

work to be completed.

Victims of fraud do not always choose to take action, having

considered the options. According to a 2001

PricewaterhouseCoopers Fraud Survey, only one in five victims

recovered more than 50% of lost assets. Ernst & Young's

2000 Fraud Survey discovered that victims of a substantial

fraud had recovered only 29% of funds within a

year.2 The prospects of recovery are largely

dependent upon proper planning, prioritisation and

perseverance, the three 'P's. If creditors are aware of

the many investigative options and legal remedies that can

assist them, the potential for recovery can be much higher.

Time and secrecy are critical factors. In almost any

investigation where losses are sustained, quick consideration

should be given to recovery. While the long-term goal will

almost invariably be recovery, interim goals are important.

Speed and surprise are crucial objectives that must be kept in

mind at the planning stages. The element of surprise and prompt

action in asset recovery should not be underestimated. The

plethora of asset protection mechanisms and the ease with which

funds can be moved can confound and add frustration to even the

most diligent recovery effort.

Any investigation should remain confidential as long as

possible. Only those who need to know should be informed.

Select a benign and unrelated pseudonym or code name to

identify the matter discreetly. All team members should be

instructed to use the pseudonym when referencing the name of

the matter to be investigated, in the subject heading to

correspondence and emails. If the target becomes aware an

investigation is being conducted, assets may be moved out of

the jurisdiction to impede the creditor's recovery efforts

for months or years. Thus, your immediate objectives must be to

proceed with speed, silence and by maintaining the element of

surprise, the three 'S's.

Locating Concealed Wealth.

Initially, a key task is to profile the suspected fraudster.

A significant amount of valuable information may be generated

from the investigation of the fraud itself. Among the questions

to consider:

Where does the fraudster reside? Where is he or she

domiciled? Where is he or she now?

If missing, does the fraudster have personal or business

connections in other domestic or foreign locations? Family,

friends and foes (the three 'F's) can be an

invaluable source of information.

How well-known is the fraudster? How clever?

Is there evidence to suggest where the stolen funds might

be?

What are the fraudster's habits?

Are there individuals who know the fraudster who could

provide information on a confidential basis?

If judgment is obtained in one jurisdiction, can it be

enforced readily where the assets are located?

Will a criminal proceeding influence the outcome?

At the same time, the nature of the alleged fraud must be

determined. Legal proceedings to recover assets will require

compelling evidence of the underlying fraud and losses suffered

by the victim. The causes of action that are selected and used

to obtain a judgment can have either an enormous positive, or

seriously limiting, effect on post-judgment enforcement.

Although fraud is more difficult and costly to prove than suing

on a promissory note or personal guarantee, a judgment sounded

in fraud frequently makes the difference between collecting a

judgment or not - as courts are better equipped and more

willing to lift multiple corporate veils and grant a medley of

extraordinary enforcement remedies at equity, for instance, if

a primary fraud has been established.

Locating concealed assets requires knowledge and

understanding of the techniques fraudsters use to conceal. Some

of the more straightforward ones include:

laundering money through local and international

banks;

transfers to corporations, family members or other

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