Go Back

When everything goes wrong, asset recovery

When everything goes wrong, asset recovery

A bank cannot make 100% of its investment decisions correctly, unless it makes no decision at all. Banks try to make conservative investments, with the term conservative varying from institution to institution, depending on a number of factors not germane to this article. Whatever the decision was, however it was arrived at – eventually a wrong decision will be made and your firm will be out money. What are you going to do about it?

First, find out what was done wrong. Lose the money, but don’t lose the lesson. Is the problem a one of a kind situation or is it more systemic? It is policy, lack of policy, or too much enthusiasm for the wrong type of deal?

As an example of the wrong type of deal, we remember a number of bankers we knew in Arizona going around town telling everyone who would listen – and a few who would not – how they did a deal with the governor. Governor Fife Symington was a land developer and had an active business. Several years later he was bankrupt and under indictment for fraud, a case he lost (but for which he was ultimately pardoned by an outgoing President Clinton).

So they did a deal with the governor of the state. So what? Was it a good deal or a bad deal? We asked many of those bankers this very question. They didn’t answer yes or no they just repeated the mantra “ I did a deal with the governor!” Fiscal Zombies – yikes! Most of these bankers lost their jobs because the deals they did with the governor were very bad deals, and many of the policies the lenders had in place to prevent bad deals were ignored since they were dealing with the governor.

Once you have identified the loss and its cause, does it make sense to mount a recovery effort? By this we mean do you go to the police if the loss of funds involved a crime? Odds are that unless the crime is so blatant and so egregious law enforcement will not be interested. Most law enforcement agencies are not prepared to deal with financial investigations of any sort. This type of crime often does pay.

If is a civil matter, discuss the paths to recovery with an attorney. You will need to litigate and obtain a judgment. What are those costs? You may need professional assistance from independent experts to determine the magnitude of the damage. What are the costs and the time to do this?

Now we are in the realm of business decision. Is better to take the loss, or to pursue a recovery effort? While getting the judgment maybe straightforward, does the subject of your litigation have the wherewithal to pay the judgment? Were third parties involved in the action such that they have become “pregnant” with a portion, or all, of the liability?

This is the point at which LUBRINCO is generally brought in: As financial investigators we can help make an assessment of the assets available and how to identify them before litigation. This is important for two reasons.

• The more information available, the better will be your decision making process. And yes, sometimes a decision is made not to proceed if there are no funds remaining to be recovered.

• When a judgment is obtained you have a baseline of assets, and if any of these assets have been transferred to avoid garnishment a fraudulent conveyance can end up with other parties partially responsible for the debt.

The sad truth is that no matter how careful an institution may be, it will eventually face the likelihood of being victimized. If you exercise appropriate due diligence before the fact, your exposure will of course be greatly lessened.

But if you are victimized, take your time and meet with your professionals to develop the necessary information for your asset recovery requirements.

Back Scroll Up
web
counter