How do dishonest debtors hide their assets and income? | In Principle

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How do dishonest debtors hide their assets and income?

Adam Studziński: Previously, you were kind enough to tell us about the role of a private investigator in the struggle with a dishonest debtor. Today, let’s focus on the type of dishonest debtor behaviour which you consider to be the most characteristic of this pathology.

Tomasz Mostowski: For debtors, the most typical is to conceal their current source of income, in particular the form, location and extent of the business they pursue. The practice of companies such as mine providing detective services to aggrieved creditors shows that this is the most common form of activity by debtors seeking to avoid performing their monetary obligations.

What specifically does it entail?

Often debtors simply work “off the books,” but this only applies to people with no business knowledge, without sufficient experience, contacts and business relationships. Naturally, debtors with a lot of experience, knowledge and contacts in a particular field try to exploit this knowhow also in a situation where they cannot continue their activity in the previous form (because everything has already been seized by creditors) or officially they cannot put their name to certain business activities.

Most often, in such a situation, dishonest debtors create new legal entities and use persons close to them to stand in for them in conducting such business ventures. In other words, the debtor suspends or terminates their own business, but only nominally. In reality, they continue to do business, but formally the business is continued by another person. In such a case, the debtor is often employed with little or no pay in a “new” company, which the debtor actually manages and controls like an owner (drawing considerable profit from the business together with their family).

A variation on this method involves concealing the effective beneficial owner of a business in the form of a company. For this purpose, debtors often use companies based in exotic countries (tax havens), where the anonymity of the beneficial owners of these entities is specially protected.

Is there any way to expose such activities?

There are several methods (and within each method, various instruments) for operationally identifying and collecting evidence. With this evidence, it may become sufficiently apparent that the debtor is hiding himself or his assets in another business entity, which the debtor directs “from the back seat.”

To demonstrate this, a detective may use basic working methods, i.e. observation and interviews. Observation can reveal the debtor’s ongoing activity, including business ventures they are pursuing. This way it is possible to identify the group of persons cooperating with the debtor, the places where they operate, the division of roles in the business, the manner of performing such activity, the means used, and the group of clients. Drawing on the knowledge on co-workers, contractors and recipients of goods and services, it is possible to conduct private investigation interviews, targeted conversations with persons from the debtor’s business circle.

Here, for obvious reasons, I cannot describe the details of such specific measures, but I assure you that these are very effective methods, enabling exposure of the dishonest debtor’s actions involving concealment of their activity, assets and income behind a screen of other persons or companies.

And how can this knowledge be used?

Establishing a group of personal sources of information and gathering witness accounts should be sufficient to prove that the debtor is engaged in a particular gainful activity on a much larger scale than the debtor will disclose. It should also be remembered that often, the debtor’s actions meet the statutory definition of the crime of evading satisfaction of creditors’ claims. The private investigation activities may provide information substantiating that a crime has been committed, and may also support the detection and evidentiary process in pending proceedings. On the other hand, in the evidence collected and the findings made, the results of criminal proceedings may be very useful in asserting civil claims.

Thank you for the interview! I look forward to our next conversation.

Interview by Adam Studziński