We were recently hired by an attorney to investigate the possibility of a partnership's fraudulent conveyance of money before the partnership terminated in 2008.
Attorney's client has a multi-million dollar judgement against the partnership he once was a member of, the only problem is the company filed bankruptcy, claiming it had no money/assets. Attorney/client thinks there may be a chance that money was illegally distributed to some of the other members before it ceased operations.
This investigation appears to be a herculean task. The partnership ceased operation in 2008. I've requested bank statements, general ledgers, tax returns, canceled checks for years 2004-2008 in an effort to see what a 'normal' year looked like vs. the year the entity folded.
Step #1 (in my mind) would be to do an analytic comparing 2004 to 2005 to 2006 and investigate any large/unusual variances. Then, I'm not too sure. I am wondering if anyone has run across an engagement such as this and could possibly offer some professional guidance.
I would request an interview with the ex-partner claimant. What was the claimant´s involvement in the partnership? What was the detonator for the claim? How does the claimant suspect it occured? When does the claimant suspect it occured? Can the claimant identify any expartnership financial employees who may be willing to supply you with information?
As well the accounting information you intend to request, I would add 2007 and year to closing date 2008 as these are the years removal of money most likely occured. I would focus in on the bank account statements and the corresponding disbursement journal vouchers. I would request trial balances for all the years you mention as well as 2007 and 2008 to identify all partnership bank accounts.
I would also suggest a copy of all partnership agreements relating to the enterprise. Partnership accounting can change with increased capital or distributions, entry and or exit of a partner. Also, the guaranteed payments to a partner or partners can change results.
Also look for any agreements as to how it is taxed. A 1065 tax return is usual.
Include in your search requests for the law firm's attorney/client trust account records. The trust account is an often overlooked source of information. There may be improper deposits or distributions from the trust account, which really should only include client funds, or they might also be running business expenses through that account as well (not a good thing).
When attorneys are doing bad things, it is not uncommon for them to use the trust account. It is "under the radar" money that people rarely think about so it's easy to use it for embezzlement, money laundering, hiding assets or anything else you can (or cannot) think of.
If you don't include it in your analysis, you may only be seeing part of the picture.