Best practice: Limit investigations to the time period after the “date of first indication”

Hiding assets during a divorce is a type of fraud. Therefore, some of the basic rules that govern fraud investigations generally can be used to discover hidden assets in a divorce proceeding. For example, fraud perpetrated on an employer usually begins small and then escalates. Assume, for example, that an employee discovers a duplicate paycheck she accidentally wrote to herself, and that the duplication is not caught by her employer. That initial, accidental check is the starting point of the fraud, which eventually escalates into the employee duplicating all of her paychecks. There is a high probability that investigative efforts focusing on periods prior to the first paycheck (the time period before the “date of first indication”) are unlikely to yield additional fraudulent activities. For purposes of an investigation into hidden assets in the context of a divorce, the concept of the “date of first indication” proposes that there is a date at which one or both of the parties were likely to have begun hiding assets. Accordingly, investigation efforts after this date are likely to produce worthwhile results, while investigation efforts focusing on time periods before this date are not. The date of first indication in a divorce investigation is usually the point at which one or both of the parties recognize that the marriage is unlikely to continue. The date can be obvious – such as the date an affair is discovered or the date of an argument where physical violence erupted – or it can be more subtle. Moreover, the husband and wife normally do not reach the conclusion that the marriage is over at the same time. However, by looking for changes in behavior on the part of either party, investigators will find clues as to when to begin the search. There are at least two very practical reasons for you, your divorce lawyer and your investigator to limit the investigative time period. First, you are paying for the investigator’s services, and you want results. Second, if the discovery (the legal obligation to divulge information) associated with the investigation becomes onerous for the producing party (your soon-to-be ex-spouse), he or she may protest, with justification, that such discovery is overly burdensome and seek protection from the court. If the court agrees, then your investigator may lose valuable information to the sweeping protection of the court. For example, assume that an investigator asks a husband to produce credit card statements and receipts for the last ten years. The husband protests and the court agrees that the request is excessive, protecting all of the information from production. If, however, the husband’s affair was discovered two years ago, he was likely to have been hiding assets only since the date his marriage was in jeopardy. Had the wife limited her request for detailed documentation to the time period after the date of first indication, this issue may never have ended up before the judge. In addition, if limited discovery requests lead to hidden assets, additional discovery requests for periods prior to the date of first indication are more credible and likely to be allowed. [Note: This discussion relates only to the detailed discovery that is often required in the establishment of income for child support and the search for hidden assets. It does not apply to summary documentation that is required for comparative purposes (e.g., balance sheets). Summary documentation, often consisting of no more than one or two sheets, should be sought for periods before and after the date of first indication.]