Due Diligence

A client of ours, agreed I could discuss and summarize her case.  She wanted others to know the importance of a proper objective due diligence investigation and in her case one coupled with a divorce proceeding.  She and her, now ex husband, owned a large corporation together.  Their accountant agreed to do the forensic accounting and their attorney agreed to handle the divorce as well as the division of the corporation. 

Two huge problems with this, the accountant and attorney were college friends of the husband.  A family friend had discussed with the wife that an independent attorney, forensic accountant and corporate private investigator should be assigned to handle this extensive case.  The wife was referred to us, but did not contact us.  What could go wrong? The attorney and accountant children went to school with my client's children.  They spent holidays together. 

The forensic accountant provided documentation that the company was only worth six-million dollars.  The wife signed off on this as well as the divorce paper work.  She received half of the company; however, only an initial 1.5 million cash with a $100,000 payment each year thereafter.  Exactly one year later, the husband sold the company for 15 million dollars cash.  We were able to confirm that the husband had been orchestrating the sale of the corporation before he told the wife he was banging the nanny. 

We confirmed the accountant and the attorney had been in on the deal.  Clearly this would never have happened if the wife would have hired us, even independently just to review the process as far as asset assessment and management aspect.  We brought our case investigation packet to a law firm we work with along with the client.  Our forensic accountant reviewed the original materials prepared by the forensic accountant.  There was no legal action she could take and to make matters worse, the husband had been mailing the client 1099 forms each year; however, had not actually paid her any money.  She was paying taxes on income she never received. 

This entire scenario would never had played out this way if the wife had contacted us and we certainly would have able to identify the husband was cheating on the wife long before he admitted to his love for the nanny.  She could have had the upper hand. 

The negative financial results of this are obvious, what is not is the physical and mental damage caused by all of this.  This incident played out over a two year period and impacting the client terribly.        

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