Hidden Assets in Divorce & Child Support (Part 5)
Child Support Guidelines are usually to set the child support payments off of one or both parents.
All divorce support is set off of income and assets - alimony, child support, asset splits...
When divorce is in it's most fiery... Dudes (sometimes women, but mainly men)... Get to
Hiding Assets and Income
In our case, our divorce had been finalized years earlier.
However, in the years between our divorce closing and the present day child support modification case, my ex, Mr. Ex, had hidden income in order to keep his child support payments as low as possible.
In our case, Mr. Ex had transferred his business to his girlfriend in order to hide about 60% of his income.
Hello - Hidden income.
Our state's child support guidelines at the time were 20% for one child - so by hiding more than half of his income, Mr. Ex was paying less than half of what he would be required to pay if he showed all his income.
I found his hidden income because of a job he worked (freelance). I call this job...
The Keystone Job
Keystone: /ˈkēˌstōn/ noun - a central stone at the summit of an arch, locking the whole together.
If you're just jumping into my child support modification story, you'll want to either read how I initiated the case in the family courts, or scan to the bottom to see where else you can jump in.
In pursuing child support modification to get my payments raised, I found evidence of Mr. Ex was potentially making double the income that he was showing on his income taxes AND all this, hinged on evidence that Mr. Ex owned ABC Gear (a company held under his girlfriend's name).
The most important evidence, to me, I refer to as the "Keystone Job." It was the job where there was a paper trail of Mr. Ex's money going to G'friend's company, ABC Gear.
This was a film equipment company, Mr. Ex works in film, and so the trail of evidence began with my finding a call sheet with his name in two places.
You might want to read up on the details of how I started my child support modification process AND discovered his hidden assets & income.
The family court process started in Fall of 2013 - and here we were in....
Late February 2014, I received another couple of call sheets which repeated the pattern of the earlier ones: Mr. Ex listed as crew and Mr. Ex (along with his cell phone number and personal email) listed as the vendor contact for ABC Gear.
Paperwork flew back and forth between myself and Mr. Ex via his divorce lawyer, Marty.
Mr. Ex's tax returns finally arrived, along with pay stubs from January and early February clients.
In reviewing his tax returns AND recent pay stubs I found more holes.
Firstly, Mr. Ex didn't have a schedule C* for his DBA (Doing Business As) for ABC Gear.
Schedule C is where you report to the IRS income and losses for a business that your run as a sole proprietor.
During our marriage, Mr. Ex Gear, his rental company, was operated as a DBA and therefore all of its income and losses were reported on a Schedule C of his income tax returns.
Secondly, my friends sent me a call sheet with Mr. Ex listed as having worked a job on February 2.
However, Mr. Ex didn't show a paystub for that job.
Interesting. He worked a job for which he WAS NOT PAID!?!
Mr. Ex would never work without being paid!
I asked my contact, who'd sent me the call sheet about how that job was paid.
She told me the production company didn't use payroll for that job; instead they wrote checks to people at the end of the day and would issued 1099s at the end of the year.
"Ok," I thought.
Mr. Ex was trying to hide about $700-800 from child support.
No surprise there.
But I had to see more information in order to fully understand how it all worked because Mr. Ex was not showing ANY ABC Gear income on his taxes either.
I researched ABC Gear online, looking for a website, social profiles, listings on any film sites... Nothing came up.
I searched state corporate records to make sure it wasn't a C-Corp or S-Corp.
I called the county where Mr. Ex lived to see if ABC Gear was registered (by law it should have been as a DBA).
While ABC Gear was a mirror of his former company, it seemed that I hit a wall.
I called private investigators.
I briefly entertained the idea of hiring one.
I discussed my case and asked what they'd charge and do.
Then I basically did those things myself.
I know that this can get confusing for those who haven't worked in film (I've made several of my non-film friends sit through my ramblings to make sure that my arguments made sense).
The contact person listed for the vendor is the person the producer calls with any questions or concerns about the equipment.
Therefore, if any of the rented equipment malfunctioned, the producer would call Mr. Ex since he was listed as the vendor contact.
So it follows that either it was Mr. Ex's equipment or he worked for the company that owned the equipment.
Either way, it's ADDITIONAL INCOME.
But looking at his tax returns, he didn't have a schedule C, nor did he have a W-2 or 1099 from a vendor named ABC Gear.
Plus, he had a missing pay stub for the February job.
I needed to find out more about ABC Gear.
I called some of the producers (who hire crew) from the call sheets.
Not wanting to disclose my identity, I used a prepaid cell phone and an alias. (When I called as myself, no one wanted to share information.)
Note: I don't advise doing this, but the information I got affirmed that I was onto something.
The conversation would go like this:
"I'm Pauline Gregory, a new producer. I'm doing a job next weekend and looking for a crew person who owns their own _____ gear. Can you recommend someone?
"Sure...sure..," Then they'd rattle off two or three names AND MR EX WAS ALWAYS INCLUDED.
"All these guys own their own equipment, right?" I would ask. "We have a tight budget, and I need someone who can cut me a deal."
"Yes. All these guys," they would reply.
"What about ABC Gear? Someone recommended them to me, but I can't find them online."
"Oh, yeah... that's Mr. Ex's company," they would say.
"And he owns his own gear right?"
Three phone calls all came up with the same info: Mr. Ex's name, Mr. Ex owns his own gear, ABC Gear is Mr. Ex's company.
I felt like I had a good amount of information to follow my hunch and push further.
The question was, what did taking this information further look like? What could I do? How did I make it stand up in court?
In the meantime, Marty calculated the child support amount that Mr. Ex "should pay" based on the income he was showing on his taxes and paystubs.
The number was $764 month.
Where was he HIDING the ABC Gear income?
I decided that my best course of action would be to compel companies that worked with ABC Gear to share their information with me via SUBPOENAS.
Yep, Pro Se subpoenas. (At the time, I was watching "The Good Wife" and thought that endowed me with additional legal knowledge.)
And so, back down to the courthouse I went.
I filled out subpoena forms and sent them off via certified post.
I issued three subpoenas in total requesting all invoices and checks involving both Mr. Ex and ABC Gear: one to the February 2nd company (the job Mr. Ex worked but didn't have a pay stub for) and the other two went to the companies listed on the W-2's Mr. Ex sent me with his tax returns.
Divorce Court Subpoena I Issued
Note: It would have been better if I had gotten the Judge's permission to issue the subpoenas.
Two of the companies were out of state (California and Kansas) and one was in state (in my own city, in fact).
A couple of weeks later, the results of the subpoenas came in from two of the three companies only.
The in-state company was compelled to comply or fight it in court.
They complied; sending me copies of ABC Gear invoices, Mr. Ex's timesheets and cancelled payroll checks.
I had seen Mr. Ex's paychecks already in the documents that he submitted to me.
I hadn't seen ABC Gear invoices yet - this is where the plot thickened.
The ABC Gear invoices were printer/logo'd professional invoices that had ABC Gear's name, a Yahoo email address, Mr. Ex's home address, AND Mr. Ex's cellphone number. That's it!
ABC Gear's business phone number was Mr. Ex's cellphone number.
More Evidence Pointing to Hidden Income in Divorce
The mega company out of California, in no uncertain terms, told me to 'go pound sand.'
They claimed that I had no right to request this information regarding Mr. Ex or ABC Gear.
In fact, I had a conference call with their attorney and they still told me "No."
At this point, Marty and Mr. Ex were blowing up in my ear about the subpoenas because the California company had contacted Mr. Ex about them.
My only course of action would've been to hire an attorney in their county of California to issue a new subpoena and take care of any court time forcing them to comply OR let it go.
I let it go.
The other out of state company, the one for which I had the call sheet that started this whole process and the one with for which Mr. Ex didn't show a pay stub, was a one man shop.
They complied as well.
The guy didn't have to because he was out of state, but he did, which was just dumb luck on my part.
From this point forwards, this job will be known as the Keystone Job.
Why is that?
Because this production company sent me information that became the keystone to my case - it pulled it all together and showed a direct financial link between Mr. Ex and ABC Gear.
The Keystone Job sent me the same ABC Gear-issued invoices (yes with Mr. X's cellphone number printed on them) and a cancelled check as well....
There was only one cancelled check and it was issued to ABC Gear.
Mr. Ex worked this job.
But he didn't get paid... well, he didn't show any paystub from them in the paystubs he sent me....
So, for all practical purposes, he didn't get paid... because...
ABC Gear got paid, not Mr. Ex.
Ahhh, that's where things started to get very interesting.
The cancelled check to ABC Gear had two line items in the memo section listed as "paid."
When I emailed the company producer and asked him what the line items covered, he responded, "The first line item was for EQUIPMENT RENTAL, the second for CREW LABOR."
"Crew labor? You mean Mr. Ex's labor?"
Mr. Ex worked this job and was paid as ABC Gear.
This was the basis that I needed to prove that ABC Gear's income also belonged to Mr. Ex - the paper trail of hidden income!
How I Tripled My Child Support Payments, Including All My Divorce Papers and Court Documents.
How do you keep the evidence for the hidden income alive in your divorce case?
Specifically, how do you gain access via subpoenas and discovery to income and assets that are held in another person's or company's name - and not the name of your ex?
Because remember, just because you've served them a subpoena, doesn't mean they will need to comply - they can claim that they are not a party in the proceedings and therefore them releasing records would be not only unnecessary but an imposition on their rights... or whatever legal blah blah blah covers their butts.
But the new evidence showed that they Mr. Ex and ABC Gear were linked - and I could prove it.
And the law that supported my actions and evidence.
If there is a unity of interest and ownership sufficient to render no financial separation between an obligor and another person or persons or business entity, the court may pierce the ownership veil of the person, persons, or business entity to discover assets of the obligor held in the name of that person, those persons, or that business entity. The following circumstances are sufficient to authorize a court to order discovery of the assets of a person, persons, or business entity and to compel the application of any discovered assets toward payment on the judgement for support:
(1) the obligor and the person, persons, or business entity maintain records together.
(2) the obligor and the person, persons, or business entity fail to maintain an arm's length relationship between themselves with regard to any assets.
(3) the obligor transfers assets to that person, persons, or business entity with the intent to perpetrate a fraud on the obligee.
A little more of an explanation on how film work can go.
When you run payroll through a payroll firm and withhold taxes, you as the company have to pay a fee and and employment taxes.
Sometimes, smaller firms opt not to do that; instead they just write company checks to the crew and issue 1099s.
This out-of-state company did just that.
They wrote checks directly to the crew and vendors at the end of the job.
My friend who worked this job verified this for me.
So, this meant that instead of Mr. Ex getting his check written in his name for his work, he told them to include his pay in the check for ABC Gear.
So in essence, if ABC wasn't his company, he just transferred his wages to them... If wages, aren't an asset, I don't know what is.
This was, in my mind, a clear "unity of interest" enabling us to "pierce the veil" and subpoena ABC Gear records from any and all companies I could.
This was huge. Amazingly huge.
It was proof of Mr. X's financial stake in ABC Gear.
The moment he had a check issued to ABC Gear for his labor, and not to himself, he essentially dissolved any financial separation between himself and that company.
He blew his own cover!
He left a paper trail to his hidden income!
The Keystone Job was EXTREMELY important in my case.
It was a paper trail of all the above things: Mr. Ex and ABC Gear maintaining records together (his cellphone number on company invoices), them failing to maintain an arm's length in regards to assets (the invoices and money), AND Mr. Ex transferring an asset (his pay for that job) to ABC Gear.
Company invoices are considered assets because they represent accounts receivable. Mr. Ex's phone number being the only contact phone number on a company asset meant they were 'maintaining records together'.
Secondly, Mr. Ex worked the Keystone Job.
He was a crew member on it AND he rented gear to this job.
His earned wages were paid to ABC Gear.
Mr. Ex worked the job; ABC Gear got paid.
This was how he was
HIDING INCOME FROM CHILD SUPPORT
I had finally figured it out.
The next step was presenting it to the Judge in a way that made sense.
In my mind, this was justification enough for the court to 'pierce the ownership veil' of ABC Gear and therefore allow me to look at ABC Gear's tax returns since they weren't on a schedule C for Mr. Ex.
But who had reported the income from ABC Gear?
Who was the person fronting ABC Gear for Mr. Ex?
Well as luck would have it, and since I'd been poking at the hornet’s nest with the subpoenas, I got an email from Mr. Ex's girlfriend.
She hadn't been on my radar at all prior to this point.
I mean I knew she existed and I knew who she was (the G'friend), but outside of that, she didn't exist to me.
Oh Gorgeousness, I had the face of the front who was helping Mr. Ex hide income.
This also explained why that income wasn't on his tax returns.
IT WAS ON HERS.
I SO WANTED to send her a big "STICK IT UP YOURS" email that included character assassination and a blunt description of her haggish looks.
But, I refrained.
I'm proud that I did.
Plus, it could have/would have been used against me.
Their strategy during the proceedings became one of distracting from facts by alleging that I was on a personal vendetta of jealousy and anger.
Instead, I relished this breakthrough now that I knew how the whole thing operated.
SHE WAS THE FRONT.
And since ABC Gear (DBA) had the same legal structure as it had when it was Mr. Ex Gear, it meant I had to see HER TAX RETURNS.
At this point I decided that I was going to take this all the way; I stood chance of getting more child support than the $764/month Marty offered.
Back to Divorce Court
The March 19 status date.
I arrived armed with a printout of the law (cited earlier) and copies of the documents received via the subpoenas.
Even though I didn't write my arguments up for the judge (the best option), at least this time I was smart enough to BRING EVERYTHING TO COURT WITH ME.
Instead of focusing on the evidence that I had obtained, Marty blasted about how I initiated the child support modification process via a motion, which is not proper legal process.
And while on that date the Judge reduced the $3202 monthly support to $764, he let the proceedings stay in play by giving me leave to file an amended and proper petition for child support modification.
The Judge could have closed the door on the whole thing with the $764 amount since that's what Mr. Ex's tax returns showed he should pay.
A couple days after this status date, I filed my amended Pro Se Petition for Child Support Modification, based off of a petition I found online.
Not ideal, but it worked.
At this point, I hit a wall. I wasn't quite sure of my next steps.
The obvious choice was to see ABC Gear tax returns, get Mr. Ex & G'friend to admit to their shenanigans, figure out the additional income, get child support factored against it, and move on.
But what were the necessary legal steps?
Mr. Ex, his G'friend, and Marty were extremely hostile, uncooperative, and willing to lie.
The next steps were going to be difficult.
The tough thing with being Pro Se...
without a divorce lawyer...is...
No one gives you legal advice.
The Judge isn't there for that, even if he/she wants to be.
And if things get complicated, you really need a divorce lawyer on your side.
As I unearthed the evidence, I began to get the gnawing sensation that I needed to find
A Good Divorce Lawyer
I sought free legal advice at the public aid office
but was turned down because my income was more than the insanely low level you need to qualify.
I called the child support state disbursement unit.
They had a waiting period and would basically push me through their preformed process starting from the beginning, thereby erasing all the legwork I had done and giving Mr. Ex more time to cover his tracks.
Meeting the usual suspects came next; you know the $300+/hour divorce lawyers who start you off with the $3000-$5000 retainer (of which, I had maybe a fraction).
I called a state-sponsored legal helpline
where volunteer attorneys advise and prepare documents for lower fees.
However, and here was the catch, they couldn't prepare my documents because Mr. Ex had an attorney.
They would only prepare documents if both sides were unrepresented. Of course, they didn't tell me that before they took my $35.
I pleaded with the attorney for something; they took my $35 and were offering me nothing more than "oohs" and "ahs" of shock and dismay.
I didn't need commiseration. I needed legal assistance!
The attorney with whom I spoke said there might be one thing she could do, but no guarantees.
She would "present my case to a board of new lawyers who had agreed to work at reduced rates. "If someone was interested, they would call me; if not, I was on my own."
I hung up and waited.
Three days later, I got a call from an attorney (Karl), who I later found out was pretty much fresh out of law school.
Unbundled Legal Services
He agreed to provide unbundled legal services (work piecemeal without taking on my entire case and charging me a retainer).
Also, he'd give me a flat rate quote ahead of time for things like: preparing a motion, getting my petition up to snuff, appearing in court, meeting with me for a certain amount of time to prepare myself for court, etc.
This was early April, and perfect timing.
A couple weeks after filing my amended petition, Marty shot out a Motion to Strike that very petition AND a Motion to Quash my subpoenas.
Note: It's very important to ask for what you want. I cannot stress that enough. In the final judgment, retroactive child support went back to the date of the document where I asked for a modification of support, October 9, 2013. Had I asked for the modification in my September filing, the retroactive support would have gone back that extra month.
Additionally, I did not ask for contribution to extracurricular activities until June of 2014; therefore, I wasn't able to get any contribution for those prior to that date. The Judge did enable me to get an education contribution back to October of 2013.
That's right, he was trying to kill all the evidence that pointed to hidden income.
Marty knew the subpoena results were a HUGE PROBLEM for Mr. EX.
So now their efforts expanded to include not only shutting down my petition, but also, killing (or as the legal peeps say, quashing) my subpoenas and THE RESULTS.
I was soooo in over my head. What did I do?
Kept plowing, like the Badass Bitch that I am.
To keep my petition and evidence in play, I paid Karl for an hour of coaching.
He walked me through how the hearing for the motion to quash would go and what I needed to do and say.
Reading the motion to quash, you'll see that Marty wanted my subpoenas quashed because I'd failed to pay the $35 witness fee. (Total technicality AND their strategy. Marty's approach was to distract from the facts with technicalities and the image of me as a 'rogue' mom with a personal vendetta.)
Marty also asked the courts, if they didn't quash subpoenas, to bar the information received from being used as evidence.
Reading it again reminds me of the anxiety all these documents induced.
The law is sooooo different than the 'moral compass.'
Anyone with half a sense would recognize that I'd gotten KEYSTONE EVIDENCE pointing to Mr. Ex hiding income and assets behind ABC Gear.
They knew they couldn't get me on anything real or legit, so they hit me on the freakin' technicality that had failed to pay the $35 witness fee.
Back to child support court
On April 8, we went before the Judge to hear the Motion to Strike my second petition AND the Motion to Quash my subpoenas. (From this moment forward, I won't hit on the fact that a written response needs to be filed, and, if possible, sent to the Judge before the date so that she/he can have time to read it over and digest it.)
I showed the Judge the documents that I had gotten from the subpoenas, stressed what they revealed, read the law, and asked the Judge to 'pierce the veil.'
Marty was in glorious bulldog mode.
But still the Judge kept both my petition AND subpoenas alive, denying their motion and allowing me to send out the $35 witness fee after the fact.
At the time, I envisioned the Judge calling in Mr. Ex and his G'friend and telling them to show us everything. But that's not how it worked, of course.
Second effort to kill the subpoenas.
Not a couple days after the first motion to quash was denied, a second motion to quash followed.
It was EXACTLY the same, except this time it included G'friend.
The Motion included a "heartfelt" letter from G'friend "imploring" Marty to help her with "clearing the matter" of my pursuit of child support.
Oh, yeah, help her clear the matter of her being a cheating, lying... I'll refrain from the rest of the words because I am a lady!
But this letter, along with her Employer Identification Number EIN, (which anyone who has ever filed for one knows a monkey with internet can get), upped the ante.
On April 18th, Mr. Ex, G'friend, AND Mr. Ex's parents (yikes hadn't seen them in years) showed up at court.
Oh, group hug everyone! Group hug!
Shaking, I stood before the Judge, solo, while Mr. Ex and the gang had at it.
Marty barked non-stop: "Rachel's on a fishing expedition," and "she doesn't have proof of Mr. Ex's involvement with ABC Gear..."
I reiterated that the subpoena results clearly pointed to Mr. Ex being the man behind ABC Gear.
But with G'friend standing in court claiming that it was her company, it momentarily eroded the Judge's confidence in me.
The Judge turned to me. "Rachel, you've got to give me something."
Then, as instructed by Karl, I requested 28 days to retain counsel....28 days to find...
A Divorce Lawyer
I was given 21 days and the Motion to Quash my subpoenas was set for a hearing.
The Judge again allowed me time for a second amendment to my Petition for Modification.
At this point, I brought on my unbundled services attorney, Karl, for limited scope to defend my subpoenas and bring my petition up to par.
Through it all thus far, I kept the subpoenas in play.
But the second motion to quash seriously threatened the entire thing; without the subpoena results, I had next to NOTHING!
Mr. Ex's name on six call sheets was certainly no smoking gun or preponderance of evidence.
But with the subpoena results, a clearer picture emerged; one in which Mr. Ex, who claimed no connection to ABC Gear, not only had major financial ties, but was the face and EVERYTHING of ABC Gear.
G'friend only appeared as the signature on the EIN. Other than that, she was absent from all documents, contacts, and work associated with her alleged "company."
Calling in the Karl Guns.
Interestingly, the first motion to quash the subpoenas represented Mr. Ex alone.
When the Judge denied that motion, Marty represented Mr. Ex and G'friend together on the second Motion.
Karl later used this to further illustrate the ingrained nature of Mr. Ex, G'friend, and ABC Gear's financial interests.
While G'friend went on to eventually hire her own attorney (Super Bowl Jackie), she may have been better served waiting until she had done that to initiate any quashing proceedings.
Divorce Checklist Lessons:
- 21-28 days to respond. Every motion essentially gets 21-28 days to respond. Even the things that Marty dragged me to court over (Motions to Quash) have a response period. Very little is decided outside of hearings. (At least this was my experience). This is both a good AND a frustrating thing. Every motion becomes another 21-28 days added to the process.
- The 21-day white flag. The courts offer this wonderful gift when you're backed against a wall (at least where our case was heard.) If you're Pro Se and truly need help, you're allowed time to retain counsel. This is outside the standard sort of 21-28 days to respond to the other side's arguments/motions. Of course, if you don't retain counsel, you'd better be prepared to make your case like a pro or risk losing.
- The 'dream team' approach. Think about other professionals you may need on your team and talk to three or four of them. I spoke with private investigators, handwriting experts, and forensic accountants. Each of these people helped forge the terrain of my case. Each of them educated me so that I could better gather evidence for my attorney, wasting less of his time (and my money) on consultation. All of these people spoke to me for free. Thank you, All!
- If you hire an expert, such as those listed above, you'll most likely need an attorney. Most, if not all, of these people want to make sure that there is someone on the team they're joining who knows how to handle expert witnesses on the stand. This, of course, should not dissuade you from calling them and getting advice. While I didn't use any of these people, all the conversations better helped me prepare things for Karl. It helped me direct him towards all the evidence that supported our case. I was not paying him to spend time staring at details.
- You can issue subpoenas as a Pro Se litigant. But when the recipients call with questions, and some of them will, you can't say more than what appears on the subpoena.
- Be very specific and yet broad on the subpoenas. When Karl issued the subpoenas, he got more documents than I got (you will see this happen in June 2014).
My subpoena read:
Copies of all invoices from ABC Gear along with copies of all cancelled checks issued to ABC Gear and/or Mr. X. Copies of all current and previous addresses, contact names, phone numbers, and email addresses associated with ABC Gear. Copies of any and all certificates of liability issued to ABC Gear.
I got all that I asked for. But Karl also got purchase orders, which had Mr. Ex's name all over them.
Karl asked for:
All records relating to contracts, agreements, call sheets and/or other business arrangements with ABC Gear, Mr. X, and Mr. X's girlfriend.
He also asked them to sign an affidavit stating that the records they sent were genuine business records generated by their company.
I didn't ask for that and so, the documents I received on my own were on unstable footing.
All of the Child Support Modification Family Court Documents
My ex (Mr. Ex) had an attorney. His attorney wrote up a motion to strike. It is essentially legal speak for a document moving that the Judge cancel out the Petition for Modification. It tried to attack all the points I made. Again, if you're doing this DIY divorce style, notice how all the arguments are written vs showing up in court and simply presenting arguments verbally.
I issued a handful of subpoenas to deepen the proof of Mr. Ex's hidden income. His attorney then filed a motion to block those subpoenas and the evidence they produced. Running my case DIY divorce style was challenging since I had no knowledge of the divorce and court process. Mr. Ex's attorney used this against me by attacking me on technicalities.
A request for production is a legal request for documents and an integral part of the very important discovery process in divorce. It's used to gather evidence, as well proof of assets and income, of each of the spouses. A good attorney will use a request for production to strategically support their case. In my case, I issued the first round of Request for Production myself, without an attorney.