Unfortunately, an ugly truth of divorce is that the actions of a dishonest spouse can make the impending end of a marriage even more stressful than it already is. The California Code of Civil Procedure is very clear that married persons have a fiduciary duty to one another and that both divorcing parties, with very few exceptions, are required to participate in full and transparent financial disclosure as a matter of legal procedure before the Court will even think to enter a Judgment of Dissolution. The California courts have created a disclosure process which, when used honestly and diligently by the divorcees, is very effective in moving a case toward fair and informed property division via a series of completed forms and document attachments.
Many can attest, however, that not every party will engage in the disclosure process in good faith.
As family law attorneys, complaints and concerns we frequently hear from our clients include:
- I think my spouse is hiding money;
- My spouse controlled or excluded me from the finances, and I do not have access to our accounts or I have been removed from our accounts;
- My spouse is underreporting or misrepresenting income to get out of support obligations;
- My spouse has assets in foreign countries. How do we get information about those?
As with everything in divorce, there is no fast and easy answer, or an answer suitable for all cases, but the Code provides a party and their attorney tools and avenues by which they can try to uncover this information when the opposing party is not meeting their obligation to provide it. Among these tools are:
- The aforementioned disclosure process and supplementary disclosure process;
- Subpoenas;
- An “informal” discovery process;
- The “formal” discovery process;
- Forensic accounting;
SUBPOENAS
Most of us are probably familiar with the term “subpoena”, but don’t know what it is exactly beyond something that sounds legally significant and stressful. A subpoena is a formal written order requiring a person or business to appear before a court, to testify, or to produce documentation by a specific date. In family law, subpoenas are frequently prepared by a party’s attorney and served on various persons or entities seeking employment or financial documentation related to their spouse. For example, if it is suspected that a party may be hiding income or employee benefits, then a subpoena may be served on the employer directly, demanding this information from their Custodian of Records. Other frequently subpoenaed entities include banks, credit unions, and certified public accountants.
While subpoenas can be an incredibly useful tool, it should be noted that they have limitations. They are, for example, beholden to a strict set of complex service rules and timelines. Additionally, subpoenas issued within the State of California can only be served within the State of California, as a matter of jurisdiction. If the entity is outside of California, you will need to speak to your attorney about taking additional steps in pursuit of subpoenaed information. Unfortunately, persons and businesses outside of the United States cannot be subpoenaed by the Superior Court of California.
DISCOVERY
Discovery may be a better option for some, especially where jurisdictional issues interfere with subpoenas. But what is “discovery”? In short, “discovery” refers to the process by which one party requests documents and information from the other party, and other party “produces” them. In family law cases, this information almost always pertains to finances, assets, and debts, but can also pertain to any number of at-issue topics, such as disagreement over date of separation, incidents of domestic violence, or child custody matters. This process follows a strict timeline, with deadlines applying to both sides that can only be modified by agreement between the parties and their counsels or by court order. The courts recognize that the production required by the discovery process is time-consuming and arduous, which is why the law gives a responding party a minimum of thirty (30) days to comply upon receipt of a discovery demand.
While discovery, unlike subpoenas, require a certain level of individual cooperation, parties should be aware that there are strict penalties for those who do not comply adequately with discovery and who necessitate the bringing of a motion to court. These penalties can include sanctions, often to the tune of thousands of dollars. If you are the party with an uncooperative spouse, ask your attorney what your options for enforcement are. If you are the party who is responding to discovery, you should be asking your attorney about your possible objections and protections.
FORENSIC ACCOUNTING
Ok, so as far as you know you have the information and the documents, but they make no sense to you. What do these documents mean for your case? Family law attorneys, while informed, are not accountants. For cases where the finances are particularly voluminous and complex, forensic accounting may be appropriate. Forensic accountants, independently retained by the interested party but often in communication with the attorney(s), have the ability to take overwhelming documentation and tell their clients what the documents show and what the numbers mean. Forensic accountants frequently perform “tracings”, going back through years of financial statements in an effort to locate property, and assist in characterizing property, based on dates of acquisition, monetary contributions of each spouse, and other factors. The family law attorney then takes this information and utilizes it in settlement discussion or in the family courts.
Ultimately, when persons decide not to cooperate fully with financial disclosure, the case can take on the feel of a long and expensive investigation. Parties can worry that their assets and debts may be divided unfairly or their interests will not be served during the settlement or litigation process, leaving them without rightful support or making them pay more support than they should have to by law. It is the attorney’s job to make sure their clients understand what their options are under these circumstances, and the pros and cons of each.
At The Zhou Law Group, we encourage our clients to ask which investigative resource may be right for their case, given their unique circumstances and the limitations of their personal timeline and budget.
