Utility Bills Can Unlock Secrets
Posted on Thursday, October 19, 2017 Share
During legal proceedings, such as a divorce or bankruptcy, it's often necessary to uncover money by conducting a financial investigation to expose fraud, embezzlement or hidden assets.
How The Analysis Works
Assume that utility expenses for the year under examination are $7,000, in absolute dollars, or 10 percent of total expenses. During the financial probe, a horizontal approach compares a given expense for a particular time period (before the alleged wrongful activity) to the period of alleged wrongdoing.
This lets investigators determine a pattern of variations that may pinpoint when the wrongdoing occurred. (In many instances, a statistical analysis is also used to predict what the suspicious payments look like.)
However, the paper trail of hidden assets isn't always clear and it takes a specialist to track it down. For example, a typical ploy is to pay personal bills using funds that don't belong to the perpetrator -- money from a company or an employer.
An initial approach to finding the trail is to use a technique called horizontal analysis. This approach can be done on an absolute dollar basis or a common size basis, where the dollar payments are converted to a percentage of some larger amount -- say total expenses.
Utility costs are a particularly fertile ground for uncovering hidden assets for two reasons:
1. Consistency. Utility expenses are relatively constant. Variations in a business occur for predictable reasons, such as the enlargement of a plant, the addition of energy-consuming machinery, or a change in unit costs and weather patterns from one period to another. For example, a local energy provider might note that a particular month was the coldest on record and that consumption jumped 17 percent from the previous year.
2. Unusual consumption. Given the general stability of energy costs, it's easy to spot any surplus spending. This evidence leads the investigator to identify where the energy was consumed. If it's just at the perpetrator's residence, nothing particularly exciting has been uncovered. However, tracing excess payments can lead to a bigger and more exciting discovery: the existence of unknown real estate assets.
Taking this discovery a step further, these real estate assets may be held in a fictitious or corporate name that wasn't readily associated with the individual and could point to even larger sums that have been misappropriated or hidden.
When your case involves fraud, defalcation, embezzlement, or hidden assets in a divorce, bankruptcy or other incident of financial wrongdoing, be sure to turn to skilled and experienced financial investigators. They know how to find the assets and show you the money.
Posted in Fraud & Forensics Group
Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.