Courts Have Seen (and heard) It All. Be Careful With Those Lies
To some people, divorce is a declaration of war. To that end, any and all tactics are fair game. But a look at divorce rulings across the nation in recent years, from California to Illinois, to Florida, indicates that judges are growing increasingly impatient with spouses who intentionally mislead the court, particularly when it concerns hiding their assets.
Charlotte Huggins, a Certified Family Law Specialist who has handled hundreds of divorce cases over an 18-year career in the San Rafael, Calif., is no stranger to spouses hiding assets. She has seen her share of mischievous spouses over the years, including one who lifted $25,000 in gold bars from the family safe, then insisted that she had no idea that the booty was gone, and went on to blame her spouse for the theft. “She would have gotten away with it,” Huggins said, “but a family member came forward and told the court that the wife was actually the one who had taken the gold.”
In California, as is the case in many other states, the fiduciary responsibility to accurately report your assets is similar to the requirements placed on an officer of a corporation. Unfortunately, as Huggins relates, the wife with the golden touch was fined only $1,000 for her act of perjury. Still, Huggins has noticed that judges seem increasingly impatient with spouses who hide or lie about their holdings.
A California appellate court’s 2007 ruling in the case of Feldman versus Feldman is a perfect example: Aaron Feldman, a multi-millionaire, was appealing as earlier decision by the Superior Court of San Diego County, which had ruled that he had breached his fiduciary duty to disclose financial information to Elena, his wife of 34 years. It then ordered Feldman to pay sanctions in the amount of $250,000 and $140,000 in additional attorney fees. The California appeals court upheld the decision, concurring with the lower court that Mr. Feldman consistently failed to reveal such assets as a $5.8 million residence, which was purchased for him by a holding company created by his principal business.
As Huggins explains, this was a case where one spouse was playing a shell game: moving assets out of one company and into another, with the intent of hiding them from the court and the other spouse.
While penalties appear to be stiffening, Huggins quickly acknowledges that getting at the truth may take some digging and that it’s not unusual for private investigators to be hired in order to ferret it out. Just the knowledge that someone is out there turning over every lead and scrounging for evidence may be the trump card that pressures the other side to realize the jig is up, and level with the opposing side. This might occur during pre-trial depositions, or simply in correspondence between the attorneys representing both spouses.
And then there are the times when family members inadvertently reveal that they’ve visited a vacation timeshare with one spouse, which the other spouse knew nothing about. It might seem somewhat implausible to those without similar experiences, but Huggins has witnessed a variety of deceptions involving such significant assets as vacation homes, condominiums, and automobiles that one owned, and the other knew nothing about.
Often the bitterness of divorce drives people to tell a variety of falsehoods about assets, custody issues and more, explains Margaret Bennett of the Bennett Law Firm in Chicago. “At the start of the process, we sit down with our clients and explain that, while there is an inevitable degree of acrimony involved in most divorce cases, it is in the best interests of both parties to be open and transparent in moving through this process.”
For those who choose to not be open with the court, there are a variety of sanctions the court can, and often does, impose. Says Bennett: “This isn’t rocket science. Most misrepresentations are relatively easy to discover, through a subpoena of various records.”
For Bennett, the bottom line is simple. “If the IRS can’t get to it, then we’re not going to be able to, either. We can’t go after offshore holdings with much luck, but company bonus checks and other such items can be discovered with relative ease.”
As to how clients can help in the treasure hunt, Bennett suggests that they do their homework. The more information you can give your attorney about all financial dealings, from employer bonuses to credit card accounts the more likely you’ll be able to get your fair share of assets.
As for dishonesty related to childcare issues, Bennett believes those are relatively easy to ferret out as well. Again, she insists, “It’s about doing your homework. And being prepared to help your attorney to better represent your issues.”
What if a new revelation comes to light after the settlement has already been made? If that’s the case, in Illinois, for example, you have two years to return to court if, after the divorce settlement, you become aware that a fraud has been committed. In fact, says Bennett, “You have a responsibility to report it to the court, when you have proof that assets were hidden during the proceeding and prior to the settlement.”
And like California, Illinois takes a dim view of perjury in divorce proceedings, awarding sanctions and attorneys fees related to such deceptions.
Michael Naughton, an attorney in Jacksonville, Fla., who has more than 25 years experience in representing husbands and wives in divorce proceedings, says that the most common form of perjury he has seen in recent years is a phenomenon he calls “false light,” when one spouse attempts to undercut the standing of the other before a judge, with exaggerations about the ex’s behavior. Examples of this would be a husband who claims that his wife is a problem drinker, or a wife claiming that her husband is a sexual deviant.
To refute such claims, Naughton has begun calling upon the expert testimony of psychologists. “Alcoholism and other behavioral issues leave a trail of problems. The best way to expose a spouse who is attempting to put the other spouse in a false light is to get an independent professional assessment of the accused spouse’s behavior.”
Additionally, says Naughton, when there is no history of employment problems, DUIs or other such evidence of misdeeds, a complaint like alcohol abuse won’t get very far with the court.
Florida follows the tradition of creating an equitable division of assets, which is not necessarily a 50/50 split. The ability of one spouse to convince the court that the other spouse has a history of financial misconduct can lead to an asset split that favors one spouse over the other. As Naughton points out, making a claim is one thing. Proving it based on past behavior is another.
Physical abuse is another area where spouses will use creative license. Once again, however, with no police reports on file, and no counselors or credible friends or family members to support these claims, they have a good chance of being ignored in the judge’s final decisions.
In one case where Naughton represented a husband whose wife was seeking sole custody of their child, the wife hired a custody coach who then helped her create a false impression of her husband as a father. When the details of this deception were revealed, the wife’s arguments unraveled.
In Naughton’s view, when compared to false light, asset deceptions are relatively easy to uncover. “You can shade the truth in a variety of ways about your spouse’s behavior, but bank statements, pay stubs, and credit cards, are just a series of numbers,” he says. If there has been a fraud committed, Florida gives you one year to go back to court after a settlement has been reached.
As most who have been through the process are aware, the nature of divorce litigation is filled with “he said, she said,” rhetoric. As Margaret Bennett of Chicago says, judges are not going to get too deeply involved in finding out the answer to such questions as: “What happened to my diamond ring?” Or, “How could my favorite golf clubs just disappear?” In the heat of a protracted legal battle, combatants may see such issues as critical, but the court has no real way of knowing what has been taken and hidden away out of spite, and what property might simply be misplaced.
When it comes to hiding assets and playing fast and loose with the truth, be warned that’s a slippery slope that can expose the perpetrator to sanctions, attorneys fees, and possible jail time. If you think you’re on the receiving end of such a deception, play by the rules. Give your attorney all the information that he needs to make sure your former spouse plays by the same rules of open, thorough, and honest disclosure.
