1. Bankruptcy, Divorce and Tax Fraud

2.  Understand how perpetrators fraudulently conceal
and transfer assets and income in bankruptcies and
divorces.
 Define tax fraud and be familiar with common tax
fraud schemes.
 Identify consequences of tax fraud
 Understand the nature and consequences of divorce
fraud

3.  Bankruptcy is the legal process allowing a debtor to
work out an orderly plan to settle debts, liquidate
assets, and distribute them to creditors
 Fraud is common in the cases of bankruptcy, divorce
and tax because assets are taken away from the
individual and given to someone else
 Divorce and bankruptcy fraud can be both criminal
and civil matters
 Tax fraud is a criminal matter

4.  Investigating and testifying
 Serve as an examiner in bankruptcy cases
 Investigate debtors’ financial affairs and prepare
investigation reports
 Recover assets for divorce and bankruptcy cases
 Be a private investigator and find hidden assets

5.  Bankruptcy or divorce resulting from fraud
 Bankruptcy or divorce used to perpetrate fraud
 Bankruptcy or divorce used to conceal fraud

6.  Committed against the government or tax collecting
organisation
 IRD estimates $82.6m income tax shortfall based on
undeclared income in 2012
 177 tip offs a week about concealed earnings
 513 cases investigated
 414 cases with discrepancies
 44 prosecutions

8.  New Zealand works under a voluntary compliance
system

9.  https://www.youtube.com/watch?v=5ItLq9wJlwU

10.  A number of tax positions can result in shortfall
penalties
 Not taking reasonable care
 Gross carelessness
 Unacceptable tax position
 Abusive tax position
 Promoter penalty
 Evasion
 Voluntary disclosure can help to reduce penalties

11.  Income shifting or sheltering
 Income deferral
 Accelerating the use of losses or credits
 Creating or inflating expenses
 Changing the character of receipts or outlays

12.  Scott Anderson and Paul William O’Connor
 Allowed fictitious expenses to be created and offset
against income
 14 charges of tax evasion
 Both sentenced to three and a half years jail
 Brent Gilchrist
 Sentenced to 10 months home detention in July
 Now providing tax advice again

13.  One party may feel cheated by the proceedings
 Hire an investigator to locate the assets
 Steps to prove fraud:
1. False representation made by the other party
2. Defendant had knowledge or belief that the
representation was false, or made the representation
with reckless indifference to the truth
3. Defendant had the intent to induce plaintiff to
act/refrain from acting in a particular way

14.  Wife won $1.3m in the California state lottery on Dec 28,
1996
 Files for divorce 11 days later
 Husband was declared bankrupt in 1998 after his business
folded
 Misdirected mail meant for his now-ex-wife
 Got a court injunction
 Judge awarded all winnings to the husband

15.  The defendant hid assets so that they didn’t have to be
shared or taken away
 The values assigned to assets were unrealistically low
 Both allegations result in an unfair divorce settlement

16.  Fraud is common in the cases of bankruptcy, divorce
and tax because assets are taken away from the
individual and given to someone else
 Issues such as tax morality, and where the line is
between tax evasion and tax strategy are becoming
more important
 Divorce fraud often occurs when one party hides assets
or assigns low values to distort the settlement value

17. Thank you