What Are The Wealthiest Families Doing About Asset Protection? Part 2

http://www.forbes.com/sites/toddganos/2013/09/08/what-are-the-wealthiest-families-doing-about-asset-protection-part-2/

In Part I of this series of articles on asset protection and risk management, we discussed some of the concepts related to family business entities.  Such business entities might be operating companies or simply entities through which families consolidate management of investments.  And, such business entities might be in the form of a corporation, limited liability company, limited partnership, etc.  We will now touch upon trusts.

There is a common belief that traditional revocable living trusts provide asset protection.  To the extent that a trust is revocable, creditors of the “trustors” – also called “grantors” – whom we will call mom and dad – will be able to reach the trust’s assets.  To the extent that mom and dad’s trust is revocable, mom and dad own the trust’s assets; all the kids and successive generations have is an expectancy . . . which is nothing.  We say “to the extent” because it is often the case that married couples will have joint trusts and, upon the passing of a spouse, that spouse’s portion of the trust becomes irrevocable.  Whether or not the irrevocable portion of a living trust provides asset protection depends on the trust’s specific wording.  If assets ultimately distribute to the next generation upon the passing of mom and dad, then creditors of that next generation will be able to reach mom and dad’s assets in the hands of that next generation.  If the trust states that asset ultimately distribute to the next generation at age X, creditors of that next generation will say, “I can wait.”

A dynasty trust is a type of generation-skipping-transfer trust.  While such a trust has potential tax benefits, it can also provide for the protection of mom and dad’s assets from the creditors of successive generations as they pass from one generation to the next. What kind of protection would such a trust provide?  Typically, the generations below mom and dad would receive discretionary income distributions for life but not principal distributions.  Principal remains in trust. If a beneficiary is subject to a creditor’s claim, the trust will specify that the trustee shall stop payments to the affected beneficiary.  Once the beneficiary is no longer subject to a creditor’s claim, payments to the affected beneficiary would resume.  That being said, the trustee is often given the power to make distributions for education and medical expenses if needed.  Similarly, if a beneficiary has special needs, the trustee is given the power to make distributions.  Such distributions are made to the provider as opposed to the beneficiary. Drafting is the key.

What makes it a “dynasty” trust is if the trust has the ability to exist in perpetuity and, thus, protect the family’s assets and achieve certain tax benefits forever.  How long mom and dad’s assets can stay in trust might be limited by the jurisdiction of the trust.  Under the traditional “Rule Against Perpetuities,” a trust must terminate not later than 21 years after the last living person named in trust (which might be a class of persons) dies.  Some jurisdictions have modified this rule to include “or X years, whichever is longer.”  Still other jurisdictions do not have such a rule.  In such jurisdictions, mom and dad’s trust – if they wanted – could forever provide asset protection of their assets as they pass down through the generations.  Jurisdictions that have eliminated the Rule Against Perpetuities by statute are Alaska, Delaware, Nevada, New Hampshire, and South Dakota.

These states have also adopted asset protection statutes.  These statutes cross a few disciplines of law.  They involve trust law, property law, corporate law, and something called civil procedure.  In essence, these statutes set the rules by which a plaintiff can reach the assets of a defendant . . . or not.

But, what if mom and dad live in another state?  How would the family take advantage of the laws of these other states?  In short, there must be a nexus with the state.  While mom and dad might live in another state, they might have assets – such as real property – in one of these states.  Or, their trustee might be in one of these states.  Mom and dad’s trust should include a provision that gives the trustee (or trust protector) the power to move the situs of their trust to another jurisdiction without court approval.  Moreover, mom and dad’s trust would state that the governing law of the trust is of the jurisdiction in which the trust is being administered.  As such, once mom and dad have passed, the trustee would change the jurisdiction of the trust to one without the Rule Against Perpetuities, and the trust – if appropriately drafted – would become a dynasty trust.  The above mentioned states have made a business decision: we will craft our laws in such a way as to make our states attractive for trust administration and, as family’s move trusts to our states, trustees in our state will need to hire more people to accommodate the extra business.  It’s about greater employment.

This brings up a question: why wouldn’t mom and dad name the beneficiary to be the trustee of her/his respective trust?  There is a multitude of reasons.  Unless the beneficiary is living in one of the jurisdictions that had no Rule Against Perpetuities, the trust must ultimately terminate and the trustee must ultimately distribute assets into the hands of a beneficiary.  The family would ultimately lose the asset protection and potential tax benefits.  Separately, family members often don’t have the time, the desire, or the business/tax acumen to properly administer a trust.  Just consider the tax elections that a trustee might need to make.  Also, if beneficiary is her/his own trustee, a court could compel the individual to make a trust distribution to a creditor irrespective of the trust’s provisions; a court might not be able to require an independent trustee to do so.

Which brings up another reason to have a trustee in one of the above-mentioned states.  Perhaps the better way to phrase it is that the trustee is not in the beneficiary’s state and subject to the courts of the beneficiary’s state.  Within the parlance of civil procedure, the beneficiary’s state would not have in personam jurisdiction over the trustee.

In this installment, we’ve discussed how trusts might provide asset protection for mom and dad’s assets once they’ve passed.  In the next installment, we will discuss how trusts might provide asset protection for mom and dad’s assets while they are still alive.

Asset Protection

While this article is titled the "wealthiest" a lot of the concepts spoken of apply to the everyday person. We help you not only protect your assets but make them very difficult to find should that be necessary. 

http://www.forbes.com/sites/toddganos/2013/09/01/what-are-the-wealthiest-families-doing-about-asset-protection-part-i/

There’s a type of attorney out there that preys on wealthy families.  These attorneys whip up fear about the litigious nature of our society, bleeding heart juries, and slip-and-fall plaintiffs who are out to make a buck.  These particular attorneys typically have a one-size-fits-all solution.  Maybe it is a family limited partnership or an asset protection trust, but the story is much the same.

On the other hand, there are attorneys and accountants and other professionals who are skilled at assisting families protect their assets . . . or assisting families with the broader discipline of risk management.  These professionals take a comprehensive approach and their solutions will be tailored to specific circumstances.  This is the first of a series of articles on the subject of asset protection and risk management.

“Asset protection” has been a catchy term for a number of years.  For some, the term is interchangeable with “risk management.”  Within a family office, the terms are related but are seen as different.  Risk management usually refers to the comprehensive approach to identifying, assessing, and providing for all risks that threaten a family’s wealth.  Asset protection usually refers to the structuring of assets so as to minimize potential losses and is within the broader framework of risk management.

What are the risks that wealthy families face?  While the range of risks present in the world is great, the primary risks that concern wealthy families are typically grouped into business liability, personal liability, risks to assets, and health care risks.  How wealthy families manage their risks is decidedly different from how lower asset families manage their risks.

Fundamentally, there are four things any person or family can do with the risks they face.  One can avoid a given risk.  Whether it is a risk associated with operating a publishing business or driving a car or downhill skiing, one can simply chose to not expose oneself to those risks.  Don’t operate a publishing business.  Don’t drive a car.  Don’t go downhill skiing.  Of course, as a matter of practicality, there are some risks that one can’t avoid.

Family Business Entities

Families with operating businesses are already familiar with some mitigation techniques.  These might include worker safety programs, the adoption of operational best practices, or even being selective regarding customers/suppliers with whom one works.  A more nuanced business risk mitigation strategy might include the drafting of business contracts in a manner that limits the opportunity for litigation and limits damages.  An even more nuanced mitigation strategy in business might include choosing a specific jurisdiction for business organization – say, Delaware.  This would allow the business to choose the governing law of its contracts.  This would also allow the business to contractually identify the venue for litigation or arbitration as opposed to being stuck with the jurisdiction in which the business operates – say, California.  Of course, this can also be a double-edged sword.  While the foregoing focused in on the mitigation of business risks, a family might extend mitigation strategies to each type of risk.

Asset protection, which we loosely defined as the structuring of assets so as to minimize potential losses, is a form of mitigation. Non-operating business entities – that is, those that hold investment assets – are often used to consolidate the management of a family’s assets and for asset protection.  Such a business entity might be a limited liability company, limited partnership, or other structure.  Such a business entity might hold liquid securities, investment real property, etc.  Assuming that one follows all of the legal and financial formalities regarding the organization, liabilities and legal claims that arise within the business entity will be able to look to only the assets of the business entity for satisfaction.  For example, an individual who slips and falls on real property held by a family limited liability company would only be able to assert a claim against the assets of the entity.  Subject to cost, a family would ideally establish a separate business entity for each investment property it owns as well as a separate business entity for securities.

The general discussion that applies to operating business entities also applies to investment business entities.  But, it doesn’t end there.  Let’s say a family member is sued individually and a creditor seeks to obtain title of the family member’s interest in the family business entity via a charging order – whether the business entity is an operating business or for investment.  The governing document of the business entity – operating agreement, partnership agreement, by-laws, etc. – might specify that, in such a forced transfer, the business entity has a first right to purchase the interest from the family member at some low price.  Let’s take it a step further.  Let’s say that the creditor does not obtain title but receives a court order that directs the family member to ask for a distribution from the business entity.  The governing document of the business entity might specify that only a 100 percent vote of interests can force a distribution.  All of this depends on the law of the business entity’s jurisdiction of organization.  Things are complex and nuanced indeed.

Part II will focus on asset protection within trusts.

Asset Investigations Part 3 of 3

In this last installment of asset investigations I'll talk very briefly about businesses and/or LLC's, Inc, PLLC etc.

What we have seen in the past with professional debtors is scores of, for the sake of this blog we will say they are LLC's, and bank accounts associated with those LLC's.

In many instances over the past several years we have seen one individual have multiple LLC's which are all owned by other LLC's making the path back to the one individual very time consuming, difficult and costly to you the client.  This may not seem like a big deal to most of you so let me give you an example below;

XYZ, LLC of Arizona would be owned by John Hopper.
ABC, LLC of Delaware would be owned by XYZ, LLC of Arizona.
ABC, LLC would be owned by CBA, LLC of Nevada and so on and so on.  The end result is they are all owned by John Hopper.

All of these LLC's can have their own banking accounts and not just your average checking and savings.  I'm sure by now you can see where this can become a nightmare to put the pieces together.  If their is a single mistake made by an investigator the chain can be broken potentially costing you the recovery of your judgement.  

Once you have a schematic of your debtors LLC's the real work and strategies come into play.  It is vital that your private investigations firm and your attorney have a comprehensive plan in place prior to executing any recovery efforts in these types of complex recovery cases.  To you that means you don't want your team to prematurely submit garnishment paperwork to one particular state which may require a domesticated judgement (thus notifying your debtor you're about to garnish him/her should it be required) taking sometimes weeks to do when you are at the same-time submitting garnishment in the state your judgment was issued allowing for an immediate garnishment.  What this may do is, again, notify your debtor you are about to take his assets allowing him/her the time to fraudulently transfer funds and possibly having to start the investigation over completely.  The timing is critical.

As I stated in Part 2 of this series I do not want to go into too much detail giving an average debtor the ability to became a professional debtor.

As always should you want more information on this topic or would like me to further explain some of our processes at JB National Investigations please let me know!


John Hopper
Director of Investigative Services
john@jbnational.com
www.jbnationalinvestigations.com

Intellectual Property Crimes

Web address of story.

By Ross Parker

Counterfeiting brings to the public mind a rare fake $20 bill, knockoff handbags (spelled “Gucchi”), 

and a bootleg Tom Cruise DVD. The typical consumer attitude about product counterfeiting ranges 

from tolerance to apathy, nothing threatening or particularly sinister.

But the reality today is more sobering. Not only does counterfeiting and product fraud mean 

global big bucks, but it directly affects all of our everyday lives in areas we do care about—food 

safety, organized crime, pharmaceutical drug fraud, whole industries at risk, and health and safety

 in the Third World.

Dr. Jeremy Wilson, the Director of Anti-Counterfeiting and Product Protection Program 

(hereafter A-CAPPP) at Michigan State University, estimates the annual global trade in counterfeit

 goods to exceed $600 billion, about 5-7% of world trade. The FBI figure is roughly the same. 

Not only does the practice wreak havoc on the economies of industries and governments, it 

threatens the health and safety of individuals worldwide.

Take food, for example. A-CAPPP estimates that inferior products make their way to almost every

 American’s dinner plate. Examples are endless, from watered down milk, vodka laced with 

methanol, diluted olive oil, tomato sauce, candy bars, virtually every kind of food we eat.

Impacts Public Safety

The counterfeit product list goes on to other categories involving public safety. Shoddy auto parts,

 weakened medicine and pharmaceuticals, unsafe propane tanks, even a fake nuclear reactor 

component (in Michigan no less). Over half of the drugs used in Third World countries are 

counterfeit. Dr. Wilson estimates that counterfeit goods are responsible for hundreds of thousands 

of deaths and injuries around the world every year.

I would guess that despite the salutary efforts of several federal law enforcement agencies

 (FBI, FDA, DHS, ICE to name a few), out of the law enforcement dollar less than a penny is spent on counterfeiting and product safety investigations and prosecutions. In a world that wakes up 

each day to a new mass murder or terrorist plot, product safety rarely grabs a headline. And 

stretched-thin federal law enforcement budgets are focused on other crimes which the public 

considers more important.

Counterfeit currency is the exception. Since its inception in 1865, U.S. Secret Service has battled 

counterfeit money pretty effectively. Almost half of the currency in circulation back then in the

 U. S. was bogus. Today, the figure is less than .01%. Still that is over $60 million injected into 

the nation’s money supply. But aggressive law enforcement activity (99% conviction rate) and 

advancements in currency design have minimized the threat from largely dumb and dumber

counterfeiters. In the fields of intellectual and tangible products, however, the current success rate

 is increasingly a serious concern. In these areas it frequently seems that federal law enforcement 

has ceded over the whole subject to the industries whose bottom line is most affected by the particular

 fraud. Many of these corporations have developed excellent security divisions, often manned by

retired federal agents.

The problem is that even the best of these industrial programs is usually focused on a single product 

line and is motivated almost entirely by activity which most affects the profit of the corporation. Nothing

 wrong with that but, even when a program is successful, it is often so sub-specialized that it rarely 

crosses over to other industries or even to other companies in the same field, or to the protection of 

other unrelated products for the public at large.

Lack of Investigative Coordination

The result has been a lack of investigative coordination, preventative expertise, and government

 imprimatur. As well as a dim public awareness of the scope of the problem that law enforcement

 activity can sometimes better influence.

Into this vacuum of both ideas and activity stepped Michigan State University with their creation 

of A-CAPPP in 2009. The multi-faceted program offers an interdisciplinary, evidence-based approach

 to provide research, educational training, and partnership opportunities for corporations, academics, governments, and law enforcement to pool their talents and experience to take on this global threat.

This graduate level program has a busy schedule of research projects, training for businesses and law enforcement, and scholarly publications. It is sponsored by companies like GM and Hewlett-Packard,

 government agencies like DHS, Defense Department and FDA, and other MSU academic 

departments like Criminal Justice, Social Science and the International Business Center. Check 

out their excellent web site at http//www.a-cappp@msu.edu.

Full Disclosure—My family bleeds green and white and I have ten years of cancelled tuition checks 

to prove it.

Finances Vs. Health Needs

The stress between protecting the intellectual and tangible property rights of developed countries 

and the economic, nutritional, and health needs of developing countries has never been higher. 

Incentives for research and development, not to mention return on capital investment, require 

protection. But in Third World countries people are dying because medicine is too expensive and 

unavailable. And they are starving because modern agricultural methods and high-yielding and 

pest-resistant seeds are not available to them from companies whose products are protected by 

patents.

Then, too, the U. S. patent and trademark system is sorely in need of an overhaul. Most economists

 have concluded that in this the most innovative country in the world we have an antiquated patent 

system not geared for the 21st Century. The U. S. Patent and Trademark Office is overwhelmed and underfunded, and a million pending applications lie in wait for examination. Plus the legal framework

 is more suited to an earlier age prior to the technological revolution.

Litigation Comes Into Play

Then there are the patent trollers with the help of my brother and sister attorneys who search for 

and submit ambiguous patents which permit them to file frivolous lawsuits. Litigation which is so 

expensive that righteous defendants unfairly feel forced to settle and pay as a cost of doing business.

The whole trade relations area is immensely complex. Not only is there the developed/developing 

nations divide, but what can and should the U. S. do about China, the capital of counterfeiting?

The Asian Busines Council estimates that as much as 8% of China’s GDP comes from counterfeit 

products. These range widely from pirated business software to fake copies of music and movies. 

Some of these imports are so pervasive that they threaten entire industries in the United States.

But the economic stakes of our relationship with China as a trading partner (not to mention as a 

creditor) complicate how tough our legal and diplomatic stance should be.

Yikes! These are some complicated and convoluted issues that demand innovative ideas and 

effective activity. I, for one, am glad that some policy wonks like those MSU professors are on the 

case. Hats off to this Spartan initiative.

But it is clear that an expanded and better funded federal law enforcement role is also essential to 

navigate this morass of issues and conflicts. Collaboration between academics, business, 

government, and law enforcement is essential to survive these complex and threatening forces.

Counterfeiting isn’t just about knockoff Gucci bags. It involves public safety and welfare all over 

the globe.

Asset Investigations Part 2 of 3

In this part two I want to talk a little about physical assets.  This is usually the easiest part of any asset investigation in Arizona.

All private investigators should have access to a database that allows them to perform generic searches for physical assets like property which, I will talk about first.  In some cases a database search is all you need.  If your subject/debtor is a professional and/or has been "hiding" these assets may be harder to find.

Worst case scenario is you have a judgment against a professional debtor.  Chances are they have been in the game for a long time and know all the tricks of the trade.  Without disclosing more than necessary to avoid helping these types hide even further, tracking property can be pretty simple.  As discussed in a previous blog its all about finding patterns.

Once a property or home is acquired that record never goes away.  It becomes very easy to start from the beginning of that assets life and move forward with owners of record.  What some of these professional debtors like to do is transfer a property to a LLC, Inc or the like.  Once the paperwork is approved and completed they will then fraudulently change the name on the LLC paperwork to a
completely fictitious name for owner/manager making it almost impossible for the average private investigator to track.  As mentioned before, some private investigators are lazy and some are just bad investigators.  In the end its really simple, you follow the money and you start from the beginning of that assets life.

Hopefully if you read Part 1 you are asking how this ties into the awful report I received from another firm.  The original report contained only one property.  My initial investigation had revealed that this particular subject had at one time owned 11 different homes and properties throughout Arizona and Nevada.  What had happened was our debtor knew a lawsuit was in the works and did exactly as I mentioned above.  When the investigation was complete I essentially was able to show that this debtor had fraudulently transferred 9 of the 11 assets to LLC's with managers that really didn't exist.  I was further able to show the paperwork taking his name off the LLC's with his signature and adding a total of 10 ghost managers.  It did cost the client a large amount of money in attorney's to fight this in court but in the end the judge couldn't deny the facts that we had provided.

On a side note, some really brazen and educated debtors manipulate bank accounts this way as well.  I will talk about that in another blog.


The last thing I want to touch on is vehicles.  A lot of investigators over look this for some reason.  Its really simple for private investigators to get this information from the Department of Motor Vehicles.  Its relatively cheap and quick.

For whatever reason a lot of folks with money like their cars and a lot of the time classic cars.  99% of the time these assets are paid off making them gold mines for seizures to pay your judgment or debt off.




I know this particular section wasn't informative as the others but again I didn't want to disclose to much and educate the debtors who are on the edge of becoming professionals.


As always if you have any questions feel free to contact me anytime.



John Hopper
Director of Investigative Services
JB National Investigations, LLC
john@jbnational.com
www.jbnational.com 

Asset Searches. What Does That Really Mean? Part 1 of 3

www.jbnational.com

All of you have heard the term "asset search" before.  Like our blog on backgrounds, asset searches are at times cookie cutter and just flat horrible.  Now that you have paid, sometimes thousands of dollars, for your search you receive a report, at times lengthy, and probably full of "fluff".

I will give you one example of a report I personally received from another firm that "specialized" in collections and asset location looking for my help to further their investigation.  As you read I will explain what they did and what JB National Investigations did so that you can come to your own conclusions about whats professional and through and whats not.

I received a legal folder with 28 pages which at first glance appeared to be full of pertinent information.  I was a little intimidated by the amount of information I was receiving wondering what else I could possibly uncover that they hadn't.  That intimidation quickly subsided once I was back at my desk and began to parse through the provided information.

What I had found, much like "basic" backgrounds, was that the information provided was simply a credit report, some old bank statements as well as information that was obviously taken from a simple database search.

If I were to take all of the FACTS that were listed in their report it may have taken 2.5 pages total.  What was in the other 25.5 pages?  Cut and paste pictures of current and past properties, cut and paste maps, the last 3 owners of a certain property (this could be useful but not in this particular case), pictures of the interior of homes that were completely outdated, paragraph upon paragraph of speculation, several pages of what used to be owned by the subject years prior to any involvement in legal action.....I could go on but it would be pointless, it was a report full of nothing basically trying to justify to their client their fee.

Let me now tell you what you need to know, what should be included in any written report and whats relevant when it comes to asset searches.

The most important piece of any asset location or search, especially for recovery, is getting a realtime "snapshot" of their assets prior to any action, legal or otherwise.  This is paramount in cases of professional debtors, people committing fraud, and/or people who owe significant amounts of money.  This "snapshot" will allow you to present this information to a judge and/or your attorney and prove

where the assets were prior to any action taking place.  This becomes important should your "bad guy" decide to start moving assets.  In almost all states its a crime to "fraudulently transfer" any asset with the intent to "hide" and/or circumvent legal action of any kind.  Arizona for instance takes fraudulent transfer very seriously.

Your state laws may dictate how to move forward but in Arizona the order in which information is relevant definitely starts with liquid assets (cash/bank accounts) which can be seized immediately (with judgement of course).  A professional private investigative firm, like JB National Investigations,  should be able to provide you with your subjects banking institution(s).  If the private investigator you have hired can't offer banking information, chances are they are not a truly professional asset location specialist.

Bank accounts as well as any another cash type account should give you a good idea about how the rest of your investigation will go.    For instance if you were to garnish four accounts and they only contained a total of $1000 when you are looking for millions either your debtor/subject is very good or there just aren't enough liquid assets to continue to "throw good money at bad money".

The search for accounts should not be limited to "standard" financial institutions.  They should include all retirement accounts, 401k's, IRA's etc.

In some cases an account garnishment may be all you need to accomplish your investigative goals.

Now that you know what your private investigator should be doing let me tell you what JB National Investigations did for the client we talked about at the beginning of this blog.

JB National Investigations followed the above mentioned standard to the letter when continuing the investigation for our now client.  What we found as far as liquid assets were concerned was significant.

The subject of this particular investigation had scores of bank accounts in multiple LLC's, personally, the spouses name as well as shell companies of the mentioned LLC's.  We spent weeks putting together a chain of custody for ownership for bank accounts.  None of this information was even mentioned in the supplied report.  Of course as with any criminal who commits fraud or professional debtor they show a pattern if you are able to gather enough intelligence on them.  Of course our debtors pattern emerged which made our search for physical assets much easier.



I will talk about physical assets in Part 2.


If you have questions or would like to know more about asset investigations please contact me anytime.


John Hopper
Director of Investigative Services
JB National Investigations, LLC
john@jbnational.com


For further reading on offshore assets searches I found another blog that may interest you.

A Phoenix Arizona Base Private Investigations Firm

Its not just someone else's problem.....

http://www.theguardian.com/law/2013/sep/02/tougher-laws-stop-companies-benefiting-from-fraud

• Simon Bowers
• The Guardian, Monday 2 September 2013 16.10 EDT

Plans to reform the test for criminal prosecutions could boost the forepower of the Serious Fraud Office to initiate prosecutions.

Banks and other businesses benefiting from fraudulent behaviour will be more likely to join their employees in the dock under proposals being considered by ministers, borrowing from a tough US approach to corporate offending.

Plans to reform the test for criminal prosecutions could trigger a new wave of fines and criminal convictions for businesses and transform the armoury of the Serious Fraud Office, marrying up with new SFO powers to reach financial settlements with companies, known as deferred prosecution agreements(DPAs).

It would also go some way to meeting the Conservative party's pre-election pledge to "strengthen corporate criminal law to ensure companies can be held liable for their actions". That 2010 promise was made in the face of widespread public frustration at the failure of criminal and regulatory authorities to bring companies and individuals to book after the 2008 banking crash.

The latest proposals are yet to win unanimous support in Westminster, with some officials — particularly within the department for business, innovation and skills — understood to be weary of any legislative moves that could be perceived as hostile by the business lobby. In the wake of the Libor-fixing scandal, however, others in government are adamant that the credibility of the authorities policing the markets is vital to safeguarding the integrity of London as an international financial centre.

The SFO is still pursuing its investigation into Libor fixing, having secured additional funding for its inquiries from the Treasury. It has so far charged one bank trader and two money-brokers, and has yet to decide whether to bring charges against banks or other companies.

Prosecutors rarely pursue charges against companies in large fraud cases because the existing law requires that they prove a "directing mind and will" of a company was complicit in the offence. In practice, this typically means they must present evidence that board-level executives were at the centre of a fraud.

SFO director David Green, a strong supporter of reform, said: "The way companies work today, the email chain tends to get rather sparse among very senior managers … But if a [company] has gained from dishonesty, why should it be able to chuck a few mid-ranking people overboard and sail onwards?"

New proposals borrow a criminal liability test which already exists in cases of bribery, under which companies can be prosecuted for "failing to prevent" corrupt payments even if top executives had no immediate involvement in the dishonesty.

But as well as creating this offence, the 2010 Bribery Act also offers businesses the opportunity to defend themselves by demonstrating they had in place "adequate procedures" to prevent corruption.

This test is similar to the powers available to US prosecutors, who assume vicarious corporate liability for fraudulent behaviour on the part of employees. This has armed the Department of Justice with formidable powers to take on some of the largest corporations in the world, often winning financial settlements that allow the company to accept responsibility, pay a fine and then quickly draw a line under the affair.

While proposals under consideration in the UK fall short of the aggressive US approach, critics claim such reform would criminalise what amounts to negligence — a mater not involving dishonesty and ordinarily confined to the civil courts. Green counters: "If that is so, it [corporate criminal liability for fraud] would only be for a very high degree of negligence".

He added: "[Reform] would help promote a better corporate culture in Britain. Poor corporate culture was a contributory factor in the crash."

Jonathan Fisher QC, a barrister specialising in financial crime, has been a long-standing proponent of reform, insisting that DPAs are unlikely to prove an effective tool without a credible threat of corporate prosecution. "If you put yourselves in the shoes of a company, the first thing you are going to ask yourselves in cases like these is: 'What are the chances of conviction'? If it is low, there is little point in engaging in discussions about a settlement."

A spokesman for the Attorney General's office said: "The Government has a range of policies in place in relation to fraud, and all legislation is kept under review." The proposed reform is already supported by shadow attorney general Emily Thornberry.

But the prospect of increased powers to prosecute companies, even where there is no evidence that top executives are involved in dishonesty, is likely to meet with sharp opposition from business lobby groups. They are already unhappy with the 2010 bribery laws and have pressed ministers to review them, the requirement to show businesses have in place "adequate procedures" to prevent corruption amounts to an onerous red tape burden. The are expected to lobby hard against a similar test for corporate fraud.

Comprehensive Background Investigations

As promised we want to continue the conversation from our Background Checks, The Good, The Bad and The Ugly.

JB National Investigations' Tier 1 Background Investigations are at a minimum at least as rigorous and many times, more comprehensive than a police cadet "new-hire" screening.  There is no doubt some of you have no idea what this process is so let me explain.  I must warn you, this is pretty dry content, for that I do apologize, but I wanted to express how detailed our Tier 1 Backgrounds can be.

The entire process starts with a background packet that the candidate must complete in its entirety.  This packet should list their history from a minimum 18 years old to current.  This packet asks questions about education, any police contact, all drug use, financial history including credit report, minimum 8 references, alcohol consumption, "undetected" crimes, orders of protection, employment history with references, DMV records for a minimum 3 years preferably 5, gambling questioner, military records, discharge type, marital status, registered sex offender status, and family history.

As stated the above asks very specific questions in each individual section.  These questions become very important later.

After we have received the completed packet, the information provided is verified as much as is able to be.  The information that can not be verified through a third party source prior to interviews should be addressed during subsequent interviews.

Once the candidate is deemed hirable (or whatever the case may be), by you the client, we strongly recommend drug screening.

Once we have gathered and documented all pertinent information the candidate will be called in for an initial interview.  During this interview the entire background packet should be addressed section by section.  Any inconsistencies should be addressed and questioned during this initial interview.  This initial interview could take from 1-5 hours (in rare cases longer) depending on the particular individuals history.

Depending on what the subject and/or candidate is being engaged to do, the above may have provided enough information to make a decision.  As stated in the previous blog you really have to weigh the risk to your business or assets as to whether or not to further
invest.  Really knowing who your new-hire, business partner or whatever the case may be is vital.

Should this individual have substantial responsibilities to either you, your business or the public we highly recommend a complete Tier 1 investigation.

The next step in our process would be reference interviews.  We at JB National Investigations really like to do these in person if possible.  An investigator with any real experience will tell you that  interviews and/or email exchanges never truly get the whole story.  Investigators don't get a "feeling" if reference is really telling the truth or covering for their "buddy" if not done in person.  A simple line of questioning is conducted with most if not all of the references the subject has supplied.  This "simple" line of questioning always leads to other follow up questions and most importantly other friends, colleagues or acquaintances that the investigator can interview.  These are the most important interviews that can be done.  Good investigators never count on interviews that their subject wants you to interview for obvious reasons.

Again once this process is complete a through review of the case file should be completed and an update given to you the client to decide whether or not to continue with the hiring process or further engagement of the subject.  Interviews often provide enough information to decide to disengage and move on to another candidate.

The second to last step of this process is a voice stress analysis and/or a polygraph.  We prefer voice stress.  Voice stress in our opinion tends to be more accurate.  The background questioner and interview comes in to play once again.  The subject is essentially asked the same question line again only this time technology helps to determine whether or not he or she is being deceitful.  Once this step is complete our job is almost done.

At this point you would be receiving a complete written report on your candidate.  This report should be easy to understand, fact based and have your candidates life from A-Z documented.  All issues, if any, will be clearly spelled out, the results of the voice stress analysis will be documented and any recommendations from JB National Investigations would be included.  One of the recommendations may be a psychological test and/or interview.  Again this would depend on what the candidate would be responsible for.

This type of background investigation is not for everyone or every business.  You should consult with your attorney about liabilities of the candidates responsibilities, risk to you and whether or not this type of background would help mitigate future risks.  This type of work can be expensive, but if you are risking millions you should know who you are handing the keys to your kingdom to!

Feel free to email any questions you may have or visit our website at www.jbnational.com



Thank you for reading!  I truly hope it was informative.


John Hopper
Director of Investigative Services
JB National Investigations, LLC
john@jbnational.com

Background Checks; The Good, The Bad and The Ugly.

Background checks are something that we at JB National Investigations take very seriously.  There are probably thousands of companies who claim they can complete this vital task for you but, what we have found is a lot of these companies are simply not performing as they should.

I'm sure if you are reading this you have seen searches like Intelius, beenverified.com and the like.  Can you have a "background" completed for $4.95?   Absolutely.  Is this a background check that you want to risk your business or assets to?  NO!

What those types of searches are is name matching and/or other identifier matching search.  It will run your subject through a database but will only return what is publicly available.  What this means to you is their system or database has collected information from all of the known public sources into one place.  These types of reports are mass produced (usually by computer program with no human input) and totally unverified. This sounds like its really all you need right?  Not exactly, let me further explain.

Almost all private investigators in Arizona, and in the country for that matter, use one of two database providers.  So essentially they all have access to the same information when it comes to background checks.  What sets good firms from bad firms is what they do with that information.  If a firm is telling you they can turn around a background that same-day, or possibly next day, you are probably not getting a thorough background check.  What they are doing is simply taking the information you have supplied them and running your individual through a database.  Usually they won't even attempt to verify any information that the report contained or worst case will not understand how to properly read the criminal report provided.  As horrible as these types of backgrounds are they do have a place.  They do serve the purpose of identification, previous addresses, whether or not they have liens or judgments and give an investigator a good starting point for a proper background investigation.

Now that I've told you what a bad background check is let me explain what JB National Investigations can offer as well as any other firm that takes background investigations seriously.

As stated above all background investigations start with known facts, i.e. the initial database report.  Anything additional that you the client can provide will only enhance the investigation.  The first step in any background investigation is verifying what you already know or have in front of you.  For example if the initial report shows a criminal violation steps should be taken, by the firm you have chosen, to verify the crime including date of offense and disposition of that offense if any.  Are they on parole/probation, have they paid their fines, upcoming court dates if any etc.  Best case scenario is obviously is no criminal record.  One caveat to the above is there are times that city courts do not share their information to database services.  It may be necessary for your investigator to physically walk into the municipal court to ensure there aren't any past or current criminal charges.


Depending on your business or personal needs the above steps may be enough for you to make your decision.  However if you are risking any meaningful sum of money, assets or business ventures we highly recommend completing a comprehensive investigation.

I will talk about JB National Investigations Tier 1 Backgrounds and other steps that should be taken if the risk dictates the time and effort in another blog soon.


As always if you have any questions feel free to contact me anytime.


John Hopper
Director of Investigative Services
JB National Investigations
www.jbnationalinvestigations.com 
john@jbnational.com

What To Ask When Hiring a Private Investigator

Hiring a private investigator is not something most people will ever have to do.  So you may have no idea how to start, or even what questions to ask.  This blog is designed to help you identify what factors to consider when you decide you need to hire a private investigator.

In Arizona the vast majority of private investigators work for attorneys.  Each attorney has their own method of hiring and usually work based off of referrals from other attorneys.  So one place to start is to call an attorney you know and ask for a recommendation.  We hope that if you ever need a private investigator the information below will help you make a well informed decision.

 

If you have come to the point to where you are considering hiring a P.I. something has gone really wrong or the police just won't or can't help you.

One of the most important questions to ask your potential P.I  is are you licensed in Arizona to do the work?  This is one of the simplest things you as a client can do.  You can simply go to http://webapps.azdps.gov/public_inq/sgrd/ShowLicenseStatus.action or Google search Arizona Department of Public Safety Private Investigator.  We would also suggest calling the licensing unit to ask if there has been any complaints submitted, if they have ever been sanctioned or suspended and what the outcome if any of the complaint.  Once this step is complete you can be confidant that the person you are about to contact is licensed and has an active insurance bond.

Obviously your first contact with any private investigator will be you explaining your specific situation to the proper person.  What I mean by proper person is an actual investigator not just someone who answers the phone.  You as a client do have a responsibility at this point to disclose the whole story not just what you think the private investigator needs to know.  This is a vital step, in order for the company to properly estimate time and resources they will have to allocate to you they truly need to know everything regarding your specific case. Things you leave out now, because they are embarrassing or you don’t want to mention them, can end up costing you more in the long run.  Leaving out a crucial detail can even destroy your investigation before it begins.

You need to know who you are going to be dealing with at the company you choose to hire.  For instance at JB National Investigations you will never have to speak with someone who is not intimately familiar with your case.  It is possible you could have 1-5 investigators assigned to your case depending on the complexity.  It is important to you as the client not to waste your time speaking to other employees or investigators who know nothing of your case.  There should be one main point of contact for you to discuss your case issues.  If the firm cannot promise this to you either verbally or in writing we suggest you move on to someone who can.

 

Depending on what type of case you are referring to an investigations firm you should ask for work samples (written reports), investigators resumes who will be working your case and the firms professional references.  Again if a firm is unwilling to give any of this to you move on to another private investigations firm who will.  At JB National Investigations we are happy to provide you with resumes of the investigators who will be working your case, professional references as well as at least one previous written report as it relates to your case.

Once you have reviewed the documents the firm has given you there are several things you need to be looking at.  The most important being the layout and content of the supplied reports and resumes.  Did the report only contain facts or did it include speculation with no evidence to back up that speculation?  Was it easy to understand and read?  Did it look professional?  Were there any obvious grammatical errors?  Do they have the experience to complete your case professionally? You will immediately know whether or not you are engaging experienced professionals by reviewing these documents.

Once you are comfortable with your investigator you should request a contract.  Most private investigation firms in Arizona do require a retainer to engage their services.  Before you sign this contract you should at a minimum have received a written proposal documenting

what the firm has committed to providing you, their hourly cost, an estimate of time needed to complete your case, and a date as to when your case should be completed.  If the firm does not supply this to you ask them for it.  As stated previously if they refuse to provide you with the information you have requested move on to another private investigator who will.  There are cases that have been too complex to give an exact date for completion.  You should however receive an estimate.

Now that you have given your hard earned retainer to an investigative firm you should expect from them exactly what they have promised.  If they are not holding up to their end of the contract, first attempt to resolve the issue with the owner or manager of the firm.  There is likely a good reason for their issue, if there is it should be communicated to you long before it becomes a problem.  Should you still not be satisfied we would recommend filing a complaint with the Arizona Department of Public Safety Licensing Unit.  They should be more than happy to help you resolve your dispute.

We truly hope this helps you make an educated choice when hiring a private investigator in Arizona or any other state where one may be required.

If you have any questions or would like to know more about JB National Investigations in Phoenix Arizona please email me personally or visit our site at www.jbnationalinvestigations.com 

John Hopper

Director of Investigative Services

JB National Investigations, LLC

john@jbnational.com

480-217-0320