Investigators get information in exchange for money, so why in the world would an investigator want to tell people how to get that information for free?

As I wrote last week on our companion blog, The Divorce Asset Hunter in an article called Giving it Away is Great for Business, it’s not a matter of ethics (the usual subject of this blog) but of good business practice.

A speech I gave last month generated tremendous response around the simple topic of five kinds of information you can often get for free and that your hired investigator will get in much the same way.

At The Divorce Asset Hunter, I explained why giving something away is good for business. People buy from people they like and especially in businesses such as ours, people they trust.

Here, I want to go into more detail about what I gave away.

The speech was about asset searches, but the sources we look at in an asset search are sources we use in pretty much any investigation about a person. They are:

Company information, real estate ownership, court records, liens and securities records.

Here (in brief) is what I told the audience:

  1. Company Information. People don’t hide assets just in their own names. They form companies to hold the assets. Even if they are not trying to hide anything, companies limit personal liability and are a standard business device across the western world. I walked them through a couple of Secretary of State websites to show how easy it is to get rudimentary information on private companies. I included the proper caveats, such as the varying amount of information the states offer, the fact that some make you pay a small fee, and some reveal close to no information much of the time (that’s you, Delaware). Still, to get a full picture of someone’s commercial activities, you can’t just look at the companies you know someone runs or works for. They could have a whole second life structured around companies or partnerships that have been secret.

The takeaway was that companies are arranged by state – not by city, county and not nationally as in England or France. A person in Sioux Falls, South Dakota a few miles from the Minnesota line may have companies in either state. Check both.

  1. Real estate ownership. The U.S. has more than 3,000 counties, and real estate ownership is recorded at the county level. The websites differ and some don’t give you much. But others can give you deeds, mortgages and more. Exceptions include a good bit of New England where towns record real estate, and in New York City there is a unified city department.

I told them to search widely, looking for the person as both grantor and grantee and searching for both company and individual names. Sometimes deeds aren’t online but ownership is via the website of the county’s tax assessor.

  1. Court records. Not all records are on line, but many are (especially in Florida). As with real estate these are almost always by county (in New England you may need to check county and town courts). As for federal court records, it’s usually much easier. Anyone can sign up for PACER, the federal court records site. It’s not free but it’s not expensive either. Nearly all federal courts take part in PACER, and while some records are not on line, the majority are (especially in newer cases). All bankruptcies are heard in federal court and are findable here.

The wonderful thing about court records is that they can be gold mine of information. You want to know about Mr. Garcia, and you see he got sued along with some company you never heard of. It turns out that by reading the court papers you find out that this is Mr. Garcia’s company. Now you take that company name search it for real estate (see step 2 above).

  1. Liens. We recently were trying to find out what assets someone had. We found a lien against them that had been satisfied, but the collateral listed included a couple of investment funds they may still have owned. That’s the only place on the public record you would see that kind of information. If they didn’t owe someone money, the ownership would be a matter of private contract only.

Securitized debt (debt that’s backed by a thing) is known as a UCC lien. Usually the state’s Secretary of State keeps track of these as it does of companies. Some states such as Florida and New York have free UCC records, but in Texas they will cost you a whole dollar each. UCC’s are like mortgages on anything that’s not real estate. But like mortgages, the first person to record an interest in something gets first crack at it.

  1. Securities records. If someone is senior enough, a public company will report on how much he gets paid and what stock options he was granted. Even better sometimes is that the company will report that the executive gets paid via a side company. You can then look that company up, see if it owns real estate and has been to court.

U.S. securities records are on a service called EDGAR, maintained by the Securities and Exchange Commission. There’s a free version of EDGAR. Note that this only covers public companies (listed on the stock market).

I like to do the widest possible search on EDGAR because there are a lot of different SEC form numbers. If you restrict your search you could miss something. But if you’re looking at someone with a common name, you may need to pick a form. The one that will reflect compensation in stock is Form 4.

Any investigator you hire should be doing all of the above. They will do a lot of other searches in addition, and also will make use of paid databases you won’t have. No matter.

Say you are doing an asset search on your spouse, prior to a divorce filing. The more research you can do yourself the better. It gives your investigator a basis on which to start and saves you money because investigators should not charge you to retrieve what you already have. Most importantly, it’s an easy way to monitor some of the key indicators that your joint financial affairs may be heading a direction you did not know about.

Wouldn’t it be nice to be able to find out:

  • Whether your spouse has set up a secret company to hold assets?
  • Whether a disgruntled former business partner may have sued your spouse?
  • What kind of money your spouse has borrowed against land or equipment?
  • What initial public offerings your spouse was subscribed to, and what stock awards and options may have been awarded?

In most cases you will still need to hire a professional, but now if a pro tells you that everything he looks for is on line, and you know perfectly well that mortgages in California are not online, you’ll know this is not the investigator for you.

I closed my speech with this: I could give a day-one investigator the password to all of my databases, plus put a huge pile of public record documents in front of them, and they would probably still fail to come up with all that I can. That’s because part of what you pay an investigator for is the ability to keep a number of competing theories in play at any one time, and to generate new inquiries based on what an initial sweep of records turns up.

Not to worry. More knowledge is nearly always preferable to less knowledge – certainly when it comes to finding money, deciding whether to invest or lend, or fighting for your financial life in litigation.