Sunday, January 23, 2011

ALWAYS....Follow the Money!

By now you are probably asking "What's all this hub-bub about a Separate Property Partition?  Why is it such a hot issue in this case?"  Now listen up you men who are always thinking of ways to protect assets and especially listen up you women who may need to understand this someday or add this protection to your own portfolio.

Many of you know about Separate Property coming into a marriage, and how it can be maintained as separate in a community property state as Texas.  This is about creating Separate Property once you are already married.  In the case I am familiar with it is done frequently with real estate developers where the banks and other lenders are requiring personal guarantees during the construction phase.  By doing a Separate Property Partition it allows the guarantor to carve a piece of community property out and split it with their spouse equally thus creating two equal Separate Properties, one for themselves and one for their spouse.  That way if real estate development deals go belly-up and the guarantee is called by the lender(s), they can take the community property and the separate property of the guarantor but the separate property of the guarantor's spouse is still in tact and can be used to support the family.  Pretty good risk management, you say?  Yes, it is.  There was another purpose though, in the instance in which I am familiar.

The above reason for this partition is the one the spouse hears.  The real reason I saw this instigated was once these partners get wealthy, quite often they go looking for the trophy...thus facilitating a divorce.  Guess what divorces do?  Tie up the partnership when the partner is living in a community property state.  A divorce can prevent a real estate deal from being sold, by tieing it up for years, thus keeping all the partners of a deal from realizing millions in profits.  All it takes is one partner going through a nasty divorce (these divorces literally take years)....and where there is a trophy involved I guarantee you there is some nastiness.  So, to prevent this, once there is a property separation, all new real estate development deals are done in the guarantor's separate property.  Over time the old deals are either sold or go back to lender.  As a consequence, it is usually a surprise when the spouse files for a divorce and finds out most the deals have been in the other's separate property and all along they believed the corpus of their community property was growing by millions from the investment profits in these development deals.  The deals were not happening in community property after all so it happens there is really nothing to get other than their own separate property and perhaps the old homestead.  You see, it seems everything comes down to money, right?  If there are no child custody issues, divorce at this level of wealth is just about money.

That's why it surprises me in the statement to the police, it was said that the false accuser was not watching his accounts as he was "distracted by his divorce".  What was his divorce about, where custody was not an issue, if not about money?  Correct, it was entirely about money so if he was distracted with his divorce, wouldn't he be distracted TOWARD his money?  Of course he was, he was already a micro manager of his money, the divorce process only amplified his focus.

What makes this particular situation even more precarious, you ask?  My client's wife called me in January 2003 (see timeline) to tell me she was going to bust his separate property because in the second partition, which she said she never agreed to, he pulled all real estate investments into his separate property, giving them a nominal value and taking his equal share of cash out of the community property, leaving practically nothing in the community property.  Some of these deals went on to see significant profits very soon after (or before) the transfer....if we only knew the actual date of the agreement.  Yet in her testimony at my trial she agrees we had that conversation and she said those things to me but then five minutes later goes on to say she would sign anything to save her marriage.  Hmmm, well, which is it?  She did not agree to it or she did?  She was not questioned further.  The jury was left to wonder what all that was about since no one explained to them the significance of the 2nd Separate Property Partition and how I was placed smack in the middle of it.

As you may recall in the previous timeline blog I talk about how I was questioned on exposure items to client's divorce during a transition meeting on October 15, 2003.  Now that you understand everything about Separate Property Partitions, in particular the intent behind them, I think you'll agree with my stated concern of these three items:
  1. Client's wife had no legal representation in the 2nd property separation and was now questioning all the real estate deals taken out of the community property causing an enormous disparity (years later) in the values of their once equal separate properties.
  2. All the partnership and corporate interests were listed as a nominal value on his transfer of these assets to his separate property when in fact there were on-going sales supporting a much greater value.
  3. My client's unwillingness to provide me with the executed document so I could complete the schedules required by the divorce attorneys - proper allocation of sale proceeds based on effective date was in question.
To further clarify the issues related to this partition, just a couple weeks before the trial (now 2007) I searched for the document as my understanding is it had to be filed with the county and I figured out my trial attorney was doing no investigative work.  Going through the records in downtown Dallas I found both partitions, the first partition filed in the late 80's and the 2nd partition filed in the late 90's.  When comparing the two I found many differences.  The first partition was prepared by an estate/family attorney.  Whereas the second one had been hacked up, I presume by my client, having his secretary cut, paste and type and I came to wonder if it was even a legal document...because it was reciting family law codes which I doubted were even applicable, given the deletions and additions.  It became clear to me why he would never give me the document to support this 2nd partition.  My attorney touched on the authenticity of her signature and the nominal values but the significance of all this was not driven home to the Jury.  Further, when she volunteered she was paid plenty in the divorce, that was not the issue...the issue was the motive of my client when the divorce started and as it became heated up.

All this leads into the significance of the Motion in Limine filed 10 days before my trial and how it is the prosecution was able to keep motive for the false accusations out of my trial.  Following is that Motion:

This document did not come to my attention until about 2 months ago when a friend of my husband's was researching my case.  He also found that all of the testimony from my trial and pre-trial hearings has been taken out of the public records and is being help in the DA's office so he was unable to review that.  My own trial attorney never told me of this Motion.  So, during my testimony I was constantly interrupted by prosecution and not allowed to tell what happened.  It sure did not lend to my credibility in the eyes of the Jury.

At least all of this is coming to light now....for that I am grateful.  What is interesting is that I, the defendant, wanted everything out in the open, nothing to hide and begged for the involvement of the Feds.  Typically it is the defendant who is trying to get Motions in Limine and it is typically the defendant who is fighting like crazy during the pretrial hearings to keep prior actions out of the trial.  In my case it was the false accusers who were spending large sums of money and energy doing that, as if they were the defendants.  I am told my case has been very atypical....I don't know.  What I do know is there were three of us who knew the details of these client, his business partner and me.  And, it took awhile for me to figure it out, I was just trying to correct the allocations, thinking that is what everybody wanted.  Apparently, that is where I made my mistake!

1 comment:

  1. “Slander cannot destroy an honest man - when the flood recedes the rock is there.”
    ~Chinese Proverbs quotes
    "The LORD is my rock, my fortress and my deliverer; my God is my rock, in whom I take refuge. He is my shield and the horn of my salvation, my stronghold." Psalm 18:2