Asset Searching for Recovery Actions

The Decision Maker's Most Critical Tool - Part 1

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As certified fraud examiners (CFE), we all know the nuts and bolts of our

respective areas of specialty, and hopefully, we are all growing professionally at

an astounding pace. Crime does, unfortunately, pay - just not for the criminal.

After conducting asset research for over 14 years for such demanding institutions

as FDIC, FSLIC, and RTC, as well as major hotels and casinos in the gaming

industry, property management firms, and many of the nation's larger law firms,

one thing that has emerged is a distinct lack of information - not about the type

of items searched, but the depth and quality of other searches.

In cutting to the chase, the following is the result of the compilation of asset

search guidelines, and should serve to assist in setting at least a baseline

standard for developing a viable domestic asset search strategy.

Subject Identification

Prior to beginning the acquisition of information on any subject of an asset

search, the subject should be properly identified.

Studies have shown that as much as 30% of the American population uses

undisclosed aliases and/or "akas" to conduct and transact various levels of

personal and professional business. This statistic does not take into account the

existence of corporate, DBA and/or partnership entity names, which are created

to transact the various forms of business on behalf of the principals of said entity.

To properly identify a non-corporate subject, the following minimum

recommendations are made for non-law enforcement environments:

Obtain credit reports from the three major credit bureaus, per Fair Credit

Reporting Act (FCRA) requirements. However, make sure that obtaining the

reports is in compliance with permissible purposes as defined in Public Law 91-

508, Title VI (FCRA), to avoid tainting your pursuit should the matter ever be

litigated. Remember, in the context of this discussion, we are focused on asset

searches as recovery medium, and the basic assumption is that the asset search

has already been determined to be sanctionable. This could be determined, for

example, by a loan in default, a judgment that has been rendered, or a court

order obtained for the release of the credit information in cases that are not

clearly defined under the FCRA.

Remember this simple guideline: credit reports are legal post-judgment, for

purposes of collection, and/or where consent has been given somewhere in the

stream of the creditor/debtor relationship. In the case of a receivership institution

(i.e., where a director is being scrutinized for alleged conversion of assets),

consent may also have been given for a credit history during pre-employment

evaluation or as a policy-based condition of employment.

This is referred to as "extended consent," and constitutes valid use, especially in

matters where a criminal investigation is under way, and where the conversion of

assets is factually alleged as the result of a forensic audit or proven by

admission. Be careful, though, as "extended consent" from the employment

perspective is still a gray area under the law.

The following two items are available from credit bureaus and their sub-vendors

but have less coverage extended to them under the FCRA, yet the "FCRA

compliance attitude" should be used when accessing them:

? Obtain social security traces from the three major credit bureaus.

? Obtain address update/credit report header information from the three

major credit bureaus.

? Obtain voter registration information for the applicable jurisdiction

germane to the primary, or most recent, residence of the subject. Some

states have compiled voter data through private repositories, which should

be checked for movement.

Match the information obtained through the independent sources to the

information presented by the candidate in the form of the credit application with

the institution, and/or the information developed independently by the institution

in the initial credit qualification process.

Many other methods of identification exist, but the above represents the very

least that should be done.

The reason for obtaining the information from all three bureaus, instead of only

one, is to develop any alias and/or aka data, as well as current addresses (not

specified), and/or any additional addresses that may provide venue data. This

will assist the asset searcher in determining whether to advise the client to

proceed with asset discovery in additional areas unknown to the client at the time

the asset search was requested.

Address verifications are usually difficult without a physical inspection of the

address in question, including a visual identification of the subject entering and/or

leaving the address. Address information that is cross-referenced and verifiable

through the major credit bureau repositories is usually presented in an asset

search, and in most cases is very reliable.

To discover the current telephone number of the subject, methods available to

the fraud examiner include nationwide telephone directories, criss-cross

directories, directory assistance contact, and attempts at contact existing

telephone numbers known by the client. There are other methods of telephone

number development available. However, these methods should not be utilized

by a CFE in order to avoid tainting the legality of the pursuit, in the even that

litigation is ultimate undertaken.

Assets Determination

Assets determination usually constitutes an integration of certain liability data to

offset the assets "worth" in order to arrive at a net equity position. This is

especially true in identifying and analyzing real property assets. There are

multiple forms of asset determination, which are described as follows:

Real Property Ownership: A search should be conducted of the applicable

county jurisdiction. The exception is in California where a statewide assessor's

index is available, usually through the "lien date" of the prior year. This

repository is made available through a private company, and is in no way

sanctioned by any public jurisdiction. For traditional searches throughout the rest

of the U.S., per jurisdiction research is conducted at the assessor's office to

determine if the name exists on the assessor's roll, and/or if the known property

(address) cross-verifies to the suspect owner.

A search of the applicable jurisdiction's Recorder's Grantee/Grantor index (or

general index as it may also be known) is then undertaken to determine if the

property is still vested to the subject, and if any open Deeds of Trust and other

liens exist which identify liabilities against the property. The search in the

recorder's venue should also identify (in jurisdictions where this is possible) the

Documentary Transfer Tax Stamp amount, which should be divided by the

applicable factor. This yields a sales price for the property, which should then be

scrutinized by contacting a local realtor to verify the current market value. This

"thumbnail" market value determination would then be subtracted from the

outstanding Deeds of Trust (encumbrances) for a net equity value of the

property.

Additional research of real property ownership comes in the form of updating the

assessor's rolls through the recorder's offices to determine if the subject's name

has come into title to additional parcels of property, subsequent to the "lien date"

of the assessor's records, which is in many jurisdictions up to sixty to ninety days

old.

The searches in the recorder's offices should also identify recent transfers of

ownership of an individual's real property, wherein the ownership may have been

transferred to a family member, closely held corporation, or other entity. Based

upon the guidelines established by the client, the searches can be permutated to

include additional research on additional names developed during the study,

which the examiner may feel has a direct relationship to the subject of the report.

It is important to note that asset searches are usually requested on specific

names of individuals, and it is an industry standard of practice to conduct the

research on the specific subject name. Competent investigative agencies

contact the client in some way to disclose additional names discovered during

the searches.

Searches should also include information developed on real property assets

jointly held in the name of the husband and wife. This information is usually

indexed by virtue of the husband's name, or the first name that appears on the

conveying deed.

It is important to understand that an asset search does not automatically research

property held in the name of a wife unless the asset search is specifically ordered

on the wife's name. If so, the wife's name would then be included as a primary

search name (parameter), and assets held in the wife's name would then be

covered. Quite simply, an asset search on a husband should usually also reveal

information on spousal assets held jointly, but not necessarily include assets held

by the wife individually or as sole owner, or under different name styles such as

aliases or maiden names.

Vehicle Searches: Searches should be conducted of the applicable states

Department of Motor Vehicles to identify all vehicles owned under the name and

address given to the state repository for search purposes. Several states do not

provide this service, as the tax registration responsibility for vehicular ownership

rests with a county or parish jurisdiction. Where states will not provide this

information, the applicable jurisdiction or jurisdictions should be researched to

determine if vehicles are owned by the name given as primary search parameter.

It is also important to understand that most assets search requests are not only

based upon single name searches, but usually single jurisdiction searches as well.

Some examiners may feel justified in providing additional "over-the-county-line"

information in order to bolster the information developed without an additional

asset search. However, single county or parish jurisdictions should be expected

as an industry standard.

Analyze credit reports to determine if current (outstanding) and/or previous loans

may have existed, linking this type of asset to the subject. Many times vehicular,

vessel, and aircraft assets are not identified through standard search parameters,

but are identified if the subject may have the asset registered in a different

jurisdiction; if the asset may be registered under a different name; or if the subject

may be a guarantor on the loan.

Vessel Ownership: There are three possible forms of accessing vessel ownership

information. The first is on a state-by-state basis at the Departments of Motor

Vehicles. The second is at the county or parish level. The third is a search of the

U.S. Coast Guard's Watercraft Index, a nationwide repository of registered vessels

over a certain length. Depending upon the location of the asset search to be

conducted, one or all of these methods should be utilized.

Aircraft Ownership: Other than by "intelligence" information which may have been

submitted to the institution at the outset of the credit qualification process, the only

method of developing aircraft registration information is to perform an FAA

Airman's Search to determine if an FAA Pilot's license has been issued, and/or if

an individual has an aircraft registered in his or her name within the Federal

Aviation Administration's files. As with the vessel ownership search through the

U.S. Coast Guard Watercraft registration, there is only one national root repository

that makes this service available. The service is resold through other database

repositories, yet it is advised that the "root" repository be utilized in order to

minimize data transfer/loss from vendor to vendor.

Banking Information: Bank account searches may be the world's "second-oldest

profession." There is no specific way to access bank account information, other

than by a multitude of artistic pursuits including the development of information

within a consumer's credit history; director contact with a banking institution; the

use of sources in the U.S. Federal Reserve Clearinghouse System; or by sources

and contacts developed by the fraud examiner with local, state, or national banking

institutions.

This is truly the "art and science' of an asset search, in that the ability to

successfully identify banks rests heavily with the fraud examiner's prowess in this

arena.

The standard guidelines for bank account searches are "exact name basis only"

searches, with less emphasis placed on jurisdictional lines, since most bank

account searches are developed via intelligence leads. In many instances, an

asset search will refer "no record found" to a banking institution under an exact

subject name. The subject's name may appear as a signatory on an alternate

account, possibly under the name of a disclosed or undisclosed entity, or as a

signatory on an account held under the name of another. Bank accounts will not

usually be disclosed in this fashion. Unauthorized information pertaining to a nonsearched

consumer could compromise that person's privacy under federal privacy

laws, the FCRA and the CCPA, as well as many other statutes.

It is safe to say that most agencies are quick to obtain at least some banking

information. This should rest with the successful Write of Execution language,

constructed by counsel as served upon the institution's regional administrative

and/or corporate offices (for examples send a request to

tomlawson@apscreen.com).

In Part 2 of this article, we'll look at other financial and business information that

should be gathered during an asset search, liability-related data which impacts the

subject's net worth as well as other information.

Thomas C. Lawson, CFE, CII is President and Founder of APSCREEN International, the world's

leading full service Consumer Reporting Agency. Lawson is called "one of the real pros" as he

has helped to reshape laws including employment screening permissible credit reporting, asset

discovery and fraud examination. Tom is a Life Member of: ACFE, ASIS, SHRM, PIHRA,

PNRRA, PRRN, CII, WAD, WIN, FCAOC and OCEMA.