Using Venmo as a Vehicle for Hidden Assets and Fraud in Divorce

Millennials have grown up, and while they were busy revolutionizing the technology sector with smartphone applications like Venmo, the law has not adapted to the changing realities of how people interact. Venmo is a smartphone app, but it can be used as a tool by devious parties to the detriment of spouses and children.  It uses a person’s Facebook account to verify their identity, and to produce a list of people with whom that person can send and receive money. After populating this list, and verifying identities through Facebook, Venmo syncs up with a person’s bank account, where it can deposit and withdraw funds with ease.  Once set up, a party is not limited to exchanging funds to only their Facebook friends, but can receive funds from anyone, including employers and buyers of goods. If this transfer was instantaneous, there wouldn’t be a problem, Venmo would simply serve as a bridge, linking two bank accounts, similar to a direct deposit.

However, Venmo is not a bridge, it is a bridge with a parking lot in the middle of it.  Money is sent from the transmitting bank account, received and held by Venmo, and then only upon instruction from the receiving party are funds transferred from Venmo into the receiving bank account.  This payment “trigger” is the issue.

In the world of family law, Venmo is a problem that has not been fully realized yet.  More employers are paying their employees through Venmo, particularly in the wedding industry (planners, DJ’s, florists, bakers, professional photographers, etc.).  If that employee never instructs Venmo to deposit the funds received as wages into the receiving bank account, a problem arises.  The party’s bank account would show a zero balance, when in reality, Venmo could be holding thousands of dollars on the employee’s behalf.  In the case of a wedding photographer, a single day’s shoot could easily yield $3,000.  If that photographer worked every weekend in a month, there could be $12,000.00 held in Venmo that is not accounted for. That party can essentially park assets in Venmo, wait for their court date or a final order to be signed, and transfer funds upon the entry of the order (or thirty days later if they are smart).

Venmo evades traditional discovery. Through the tactics above, it can be used to hide community assets in a divorce, or to minimize income in child support amounts in suits affecting the parent-child relationship.  The only possibility of finding funds held by Venmo, is to conduct exhaustive discovery, which is expensive, easily costing a client at least $5,000 to request, respond to, and evaluate.  Most attorneys of clients seeking more economical representation use discovery as a tool of last resort, and rely solely on Rule 11 agreements, verified inventories and appraisements, pay stubs, and bank account statements.

Why does Venmo matter in a discovery context? The Office of the Attorney General does not ask for Venmo records in their discovery requests in child support cases.  Older attorneys do not know Venmo exists, and those who are aware of its existence rarely send requests for production of Venmo records in discovery.  A party can say they receive little to no wages, produce bank accounts and inventories showing very low balances, and be ordered to pay minimum wage guideline child support, when in reality they earn many times minimum wage.  In the divorce context, a party can hide large sums of cash from their spouse in Venmo, distorting property divisions.  They can sell certain assets or goods, require payment through Venmo, then claim they gave it away as a gift or don’t know what happened to the asset, without having to ever disclose the actual value received for the goods.

Venmo is neither a bank account, nor is it a social media account, but lies somewhere in between, as a smartphone app that vaguely resembles an escrow account or clearing house.  Unless attorneys are proactive in regards to new technological developments like Venmo, including requesting screenshots of a party’s Venmo “feed,” “transfers,” and “activity,” the problem will remain.

Day of Civility – What’s it all about?


Today is the Day of Civility in Texas.

What does that mean exactly? Well, once a year, the legal community in Texas takes an entire day to focus on and improve the conduct of lawyers and to celebrate the importance of civility in our legal system.  This day—known as the Day of Civility—was created to encourage legal professionals to aspire to the highest levels of courteous and professional interaction with judges, peers, adversaries, and workplace colleagues.  This spirit of professionalism inspired the promulgation of the Texas Lawyer’s Creed in 1989, which serves as every lawyer’s “how-to” guide on civility. Its preamble states that, “[t]he conduct of a lawyer should be characterized at all times by honesty, candor, and fairness.”

The State Bar of Texas urges all local bar associations to participate in a Day of Civility—both to educate and to celebrate all members of the bar.  The Dallas Bar Association will host its Day of Civility today at the historic Belo Mansion in downtown Dallas. The event features speakers and dignitaries from around the state, including Justice Eva Guzman of the Supreme Court of Texas, Tom Vick, President of the State Bar of Texas, the Honorable Carolyn Wright, Justice of the Fifth District Court of Appeals, and Royal Ferguson, Dean of UNT Dallas College of Law.

So why is civility so important? Why do we need a Day of Civility?

Justice Anthony Kennedy succinctly summarized the importance of civility in his 1997 speech at the American Bar Association’s Annual Meeting, stating: “[Civility] … is not some bumper-sticker slogan, ‘Have you hugged your adversary today?’ Civility is the mark of an accomplished and superb professional.”

P.T. Barnum, whose life is the subject of the recent hit movie The Greatest Showman, also praised civility, stating that “politeness and civility are the best capital ever invested in business.”

Civility–encompassing respect, professionalism, candor, honesty, and fairness–is espoused by OWL Attorneys and staff alike.

Here are “The 25 Rules of Considerate Conduct” for you to follow to ensure perfectly civil conduct:

  1. Pay attention
  2. Acknowledge others
  3. Think the best
  4. Listen
  5. Be inclusive
  6. Speak kindly
  7. Don’t speak ill
  8. Accept and give praise
  9. Respect even a subtle “no”
  10. Respect others’ opinions
  11. Mind your body
  12. Be agreeable
  13. Keep it down (and rediscover silence)
  14. Respect other people’s time
  15. Respect other people’s space
  16. Apologize earnestly and thoughtfully
  17. Assert yourself
  18. Avoid personal questions
  19. Care for your guests
  20. Be a considerate guest
  21. Think twice before asking for favors
  22. Refrain from idle complaints
  23. Give constructive criticism
  24. Respect the environment and be gentle to animals
  25. Don’t shift responsibility and blame.

From Choosing Civility. Copyright © 2002 P. M. Forni. (St. Martin’s Press, 2002)

Happy Day of Civility from O’Neil Wysocki!

Does civility mean hugging your opposing lawyer? (Part 4 of 4)

The big topic among Texas lawyers this week is the Texas Day of Civility in Law, fashioned by joint proclamation by the Texas Supreme Court and Court of Criminal Appeals, the two highest courts in our state. Civility is supposed to be at the core of our profession. But, what does it mean?

First, let’s examine what civility does not mean. Civility is not the absence of disagreement. In fact, the very notion of civility assumes that there will be disagreement and discussion. Our legal system roots in disagreement while providing a method for resolution.

Likewise, civility is not the absence of criticism. The process requires pointing out errors or shortcomings of the other person, such as errors in another’s brief or shortcomings of a legal argument.

Civility does not require that you like a person. Civility requires respect, but not fondness.

Civility is not equivalent to good manners alone. Good manners alone is not sufficient. For example, politely refusing to hire a female lawyer because the firm has a policy against hiring women lawyers is not civil behavior.

Civility comes from French and Latin etymologies, suggesting that one should exhibit good behavior for the good of a community. The principles of civility in law permeate the entire legal system, defining at the core what it means to be a lawyer. Such principles speak to the lawyer’s dual duty as an officer of legal system and the advocate of the client. Even in advocating for a client, a lawyer must show respect for the legal system. Zealous advocacy does not extend to offensive tactics, discourtesy, or disrespect.

A 2007 survey conducted by the Illinois Supreme Court Commission on Professionalism revealed that 71% of the lawyers surveyed reported experience uncivil behavior, characterized as follows:

  • Rudeness – described at sarcasm, condescending comments, swearing, or inappropriate interruption.
  • Strategic incivility – strategically employing uncivil behavior in an attempt to gain the upper hand such as deliberate misrepresentation of the facts, not agreeing to reasonable requests for accommodation, indiscriminate or frivolous use of pleadings, and inflammatory writing in briefs or motions.

Civility in our profession provides positive outcomes for the legal system and the lawyers involved. Civil lawyers are more effective and achieve better outcomes. Civil lawyers build better reputations. Civility breeds job satisfaction among lawyers in a profession that tends the opposite.

Hat tip to Jayne R. Reardon Civility as the Core of Professionalism

The Texas Lawyer’s Creed — voluntary standards for attorney professionalism and civility (Part 3 of 4)

Texas Lawyer’s Creed

The Texas Lawyer’s Creed was adopted by the Supreme Court of Texas and the Court of Criminal Appeals of Texas in 1989, then reaffirmed in 2013. Amendments were passed in 2016 to update the creed. Civility is at the heart of the creed – suggesting that the conduct of a lawyer should “be characterized at all time by honesty, candor, and fairness.” It reminds lawyers that we owe, not only a duty to our clients, but also to the legal system as a whole. Designed by Justice Eugene Cook, with the assistance of James “Blackie” Holmes III and Fred Hagans, the Texas Lawyers Creed came about due to an increase in “Rambo” obstructionist tactics, numerous motions for sanctions, and generally petty behavior that concerned high level members of the Texas Bar.

In 2015, Governor Greg Abbott signed into law a civility oath to be added to the oath that every lawyer takes when being admitted to the Texas bar. The oath adds that the individual will conduct oneself with integrity and civility in dealing with the court and all parties.

Justice Anthony Kennedy described civility as, “not some bumper-sticker slogan… but the mark of an accomplished and superb professional… with deep roots in respect for the individual.” (Kennedy, Anthony, 1997 Speech, ABA Annual Meeting.)

The Creed contains four focuses of civility:

  • Our legal system – A lawyer owes to the administration of justice personal dignity, integrity, and independence.
  • Lawyer to client – A lawyer owes to a client allegiance, learning, skill, and industry.
  • Lawyer to lawyer – A lawyer owes to opposing counsel courtesy, candor, cooperation, and scrupulous observance of all agreements and mutual understandings.
  • Lawyer to judge – Lawyers and judges owe each other respect, diligence, candor, punctuality, and protection against unjust and improper criticism and attack.

The Creed is completely voluntary, with no means of enforcement. Involuntary enforcement operates contrary to the purpose of the creed. We as lawyers should desire to achieve the goals of the creed, without such actions being a requirement.

To read the entire Texas Lawyer’s Creed, click here.

Civility and Family law — are the two concepts compatible? (Part 2 of 4)

Family law, like no other practice area of law, is fraught with emotion, tension, and discourse. After all, if the parties could get along and reach civil resolution, they would probably not need family law attorneys, right? But does the parties’ incivility have to pass along to the lawyer’s behavior toward one another?  In fact, family law attorneys must work harder than lawyers in other practice areas to remain civil to each other because our duty as lawyers is to be a neutral voice of reason that sees beyond and above the emotion of the case.

Here are 10 suggestions a family law attorney can use to help the client remain civil in an emotional situation:

  • Set reasonable expectations for the client – give clients an accurate assessment of the worst possible outcome and the best possible outcome for all of the issues in the case and help them to understand where their expectations may lie outside of those ranges.
  • Explain the alternative to litigation – discuss with clients up front the downside to litigation, including the unretractable consequences of a contested trial, and suggest ways to resolve the case without going to those extremes. Discuss settlement possibilities, mediation, and other methods of resolution.
  • Do not involve family members. Often ancillary parties can stir emotions and tension in a case without fully understanding all of the issues at play. Keeping third parties out of the discussion as much as possible encourages the people who are directly involved in the problem to deal with each other.
  • Discourage revenge tactics – this is where the lawyer has to be the voice of reason. Often emotions give a desire for revenge. But revenge tactics will not be effective in the long run of the case and may increase the tension and certainly the cost.
  • Take the high road – Maintain perspective on the ultimate goal of resolution of the case and don’t engage in tactics that do not further the goal of resolution.
  • Do not engage in name-calling or making extreme statements – remember that these people have to interact and deal with each other long after the case is over so engaging in extreme behavior is seldom warranted or conducive to the goal of resolution.
  • Avoid burdensome discovery requests – By utilizing unnecessary discovery requests, an attorney raises the cost of litigation and looses focus on resolution of the case.
  • Do not take the client’s case personally – I frequently tell younger lawyers to remember the euphemism “not my case, not my monkeys”. We didn’t marry the opposing party or have babies with him/her. The lawyer goes home at night to his/her own family and problems. Don’t take the clients with you.

Hat tip to Lisa DuFour and Carol Bailey and their article Civility and Family Law – Not an Oxymoron in the August 2017 edition of Family Lawyer Magazine.

Part 2 of 4 in the series Civility in Law.

Is civility on the decline? (Part 1 of 4)

This week marks the declared Texas Day of Civility in the Law, according to a joint proclamation by the Texas Supreme Court and Texas Court of Criminal Appeals, the two highest courts in Texas. This begs the question, do we need a day of civility? As if we’ve checked that one off for one day, the rest of the year is for incivility.  A recent study by the University of Chicago found that 74% of Americans believe that manners and behavior have deteriorated in the U.S. over the past several decades. Many believe that politicians should be held to a higher standard of civility than the general public.

The study finds that people generally agree as to what is unacceptable:

  • Use of cell phones in restaurants;
  • Swearing in public or online;
  • Remarks or jokes based on race, gender, or sexuality.

Some differences emerged in the study based on age. With technology, half of younger people believe it is acceptable and not rude to use a cell phone in a restaurant, while only 22% of older Americans agree. This same division is seen with issues of profanity or discussing sex in public.

Most Americans believe political campaigns are more rude than the average American. However, of the people surveyed, they reported that Republicans are more rude that Democrats.

So, we basically agree that there has been a decline in civility in our society and among our politicians. But, where does that come from? My take… the decline in civility in society reflects what we seen on television. (Or, some would say, television reflects society. Chicken? Egg?)

With the modern 24/7 news cycle and reporters on the constant watch for anything unusual to make a story out of, examples of incivility are often highlighted and maybe overstated. Let someone have a cross word in Washington and it becomes a major event, replayed on-the-hour, with pundits weighing in on all sides of the political/racial/gender spectrum to opine about who was right and who was wrong.

Also, reality television shows have heightened our focus on incivility. Think back to the first example that I can remember of incivility on television – The Jerry Springer Show. For the first time on modern, daytime tv, a show gained ratings because people acted badly. Fast forward that to today, with reality tv, a show has to have drama – incivility – to get ratings and attention. Then, when the dust settles they have a reunion show to replay all of the drama and incivility and rehash it all over again. Bloggers blog about the drama and entertainment shows gossip about it. Modern culture feeds off of incivility.

I mean, face it, civility is boring. Or, at least, it’s boring where tv ratings are concerned.

So, as society, if we all agree that we have become increasingly uncivil, and we none prefer for us to act that way, then what do we, as a society, do about it? What are your ideas – tell us in the comments.

 

Part 1 of 4 Civility in Law series.

A place to look for hidden money

I read an article in the Fall 2017 Family Lawyer Magazine (yes, I’m behind on my reading pile) that talks about away to hide income – at the IRS. Husband owed wife spousal support, which was calculated on his actual net income. After receiving a raise, Husband increased his federal withholding taxes above the amount that should have been withheld. This had the effect of reducing his new pay to his pre-raise level and hiding his annual pay increase. He used this decreased net income evidence to influence the court to order less in spousal support.

This same Husband also sent a lump-sum estimated tax payment to the IRS while the divorce was pending, which resulted in an over-payment. Husband elected in his tax return to use the refund to carryforward to next year’s taxes. Combined with the over-withholding from his income and the secreting lump-sums at the IRS over the course of a couple of years, a pretty sizeable asset accumulated.

There are two reasons why this type of scheme would be difficult in Texas. First, all support payments in Texas are based off of gross income. While child support percentages apply against net income, there is a mandatory calculation for taxes to be considered based on a single person claiming one exemption so no “funny business” can be done to manipulate the taxes withheld.

Second, in a divorce, previous years’ tax returns are discoverable, and most lawyers are astute enough to look at any tax carryforwards.

Even so, somone who wants to try this type of scheme should also be warned that the IRS would deem such a scheme to be a frivolous filing and could asses a penalty. (See IRC 6702(a)(22). The penalty for filing a frivolous tax return si $5,000.

If you or your lawyer aren’t familiar with how to read tax returns and find these types of schemes, consult with a forensic accountant for help.

 

Hat tip to Harriet Fox, CPA and her article Hiding Income and Assets at the IRS.

Agreement to an order — when does it matter for appeal?

Almost every day in my practice area, lawyers are faced with the dilemmas:

  • When should you agree to an order, especially after a contested hearing?
  • What is the difference between “agreed as to form” versus “agreed as to form and substance”?
  • Is there ever a time to not sign off on an order even as to form?
  • Is there ever a time that a lawyer should agree to the substance of an order instead of the client?

I recently read an interesting blog post by the TexAppBlog.com guys on this topic Agreed as to Form and Substance: An Appellate Kiss of Death?

Consider that you have a contested hearing over an issue. You disagree with the judge’s ruling. You may even think this issue could be something appealable. The judge requests that the attorneys agree on the order. Opposing counsel presents an order that has the language “agreed as to form and substance” at the end by your signature blank. What do you do?

There is a split in the courts of appeals as to the effect of the language “agreed as to form and substance”. One view, according to Dallas, Texarkana, El Paso, and San Antonio, is that signing off on such language equates to a consent judgment that cannot be appealed. These courts distinguish between the phrases “agreed as to form” versus “agreed as to form and substance”. Claxton v. (Upper) Lake Fork Water Control and Imp. Dist. No. 1, 220 S.W.3d 537, 544 (Tex. App.—Texarkana 2006, pet. denied); Office of Attorney General of Texas v. Wilson, 24 S.W.3d 902, 906 (Tex. App.—Dallas 2000, no pet.); Cisneros v. Cisneros, 787 S.W.2d 550, 552 (Tex. App.—El Paso 1990, no writ); Bexar County Criminal Dist. Attorney’s Office v. Mayo, 773 S.W.2d 642, 644 (Tex. App.—San Antonio 1989, no writ).

On the other hand the two Houston courts, Corpus Christi, Austin and Fort Worth find that the language “agreed as to form and substance” is not enough to rise to a consent judgment. Standing alone, without other indications, the language is not enough to suggest that the matter was settled by agreement. Andrew Shebay & Co., PLLC v. Bishop, 429 S.W.3d 644, 646–47 (Tex. App.—Houston [1st Dist.] 2012, pet. denied); Chang v. Nguyen, 81 S.W.3d 314, 316, 319 n.1 (Tex. App.—Houston [14th Dist.] 2001, no pet.); Bonner v. Texas Children’s Hosp., No. 13-03-228-CV, 2006 WL 349510, at *2 & n.5 (Tex. App.—Corpus Christi Feb. 16, 2006, no pet.); Cash v. Cash, No. 03-04-00563-CV, 2005 WL 1787552, at *3 & n.7 (Tex. App.—Austin July 27, 2005, no pet.); Leeper v. Woodrick, No. 2-04-371-CV, 2005 WL 1475614, at *2 (Tex. App.—Fort Worth June 23, 2005, no pet.).

Seems to me that there is an important distinction between the langauge “agreed as to form” versus “agreed as to form and substance”. The word form denotes the form of the order — does it meet the requirements of formatting, language, and content per the Judge’s ruling? The word substance indicates that the heart of the matter, the substance, what the hearing was about, is agreed. Using Jimmy Buffett as an example… If he were the judge, he would rule that a cheeseburger should come with lettuce, tomato, Heinz 57, french fried potatoes, kosher pickle and a beer. I disagree and prefer my cheeseburger with mayo, lettuce,

The best practice is to never agree to “form and substance” unless you actually agree to the content and subject matter underlying the order. At most, only agree to form. However, many times when the order results from a contested hearing, the result of which I disagree, I will not even agree to form to avoid any ambiguity in my position. As to substance, it is the client’s agreement to substance that matters, so many times even if agreeing to the matters underlying the order — the substance — the client should be the one signing off on that, not the lawyer.

 

Five Divorce Truths — featured on DMagazine

Shareholder Michelle O’Neil was featured on DMagazine with her article Five Divorce Truths. Check it out!

Here’s a synopsis of her five points:

  1. The divorce will take twice as long as you think it will.
  2. It is going to cost twice as much as you think it will.
  3. There will be bad feelings between you and your ex.
  4. The ex’s family will probably hate you too.
  5. You will feel awful during your divorce.

What do you think? What are the things you wish you  knew during your divorce? Comments welcome!

International Women’s Day: Right to Divorce

Happy International Women’s Day!

Of the many big and small inequalities, we cannot overlook the right of a woman to end a difficult marriage. While divorce may be common place and social acceptable for women today, it has not been that way in history.

Throughout modern time, divorce could only be granted if one spouse proved “fault” – usually either adultery or cruel treatment – in a court of law. Some states in the US went further and required that a divorce be approved by the state legislature!In order to have such a contested type of suit, in a male-dominated arena with male lawyers and male judges, a woman would first have to have the guts to tell her business in public, then she would have to find the financial mean to hire a (male) lawyer to handle her case. In the good-old-boy system that existed back then, she couldn’t be sure that the male lawyer she hired wasn’t one of her husband’s social buddies. In short, only women who had wealth could effectively get divorced. A woman who was from a lower socio-economic situation would be stuck in a bad marriage with a violent man without much recourse.

In the 1970’s, with the advancement of women’s equality, along came no-fault divorce. This means that a woman could just say she wanted a divorce, without having to “prove” anyone did something wrong, to get released from a bad marriage. She wouldn’t have to “air her laundry” in public. She wouldn’t have to prove that her husband had sex with the secretary. She wouldn’t have to document her bruises from the last beating he gave her.

California – and future President Ronald Regan – passed the first no-fault divorce statute in the United States in 1970. Most other states, including Texas followed suit shortly thereafter.  New York became the last state to pass no-fault divorce in 2010! (See Wikipedia on no-fault divorce.)

President Regan later regretted his favor for no-fault divorce because he felt that it weakened the institution of marriage, making it too easy to divorce. Statistics support his regreat:

  • From 1960 to 1980, the divorce rate more than doubled — from 9.2 divorces per 1,000 married women to 22.6 divorces per 1,000 married women.
  • While less than 20% of couples who married in 1950 ended up divorced, about 50% of couples who married in 1970 did.
  • And approximately half of the children born to married parents in the 1970s saw their parents part, compared to only about 11% of those born in the 1950s.

(See W. Bradford Wilcox The Evolution of Divorce, Fall 2009, National Affairs.)

Many women who are now able to get out of bad marriages that they couldn’t have before would disagree with his regrets!

Betsey Stevenson, an economist at the University of Pennsylvania who has studied divorce extensively, believes that the introduction of no-fault divorce benefits women. “It leads to a 30 percent decrease in domestic violence. Not only is it easier for the abused to escape their marriages, but potential abusers are also less likely to act because they’re aware that their spouses can leave them. No-fault divorce also makes women less likely to commit suicide.” (See Jamie Kapalko, No-fault divorce: Good for women?)

So, in honor of International Women’s Day, be grateful that you live in a country where you have the RIGHT divorce your husband for a good reason or no reason at all – just because you want to. Like many things… it is OUR choice for what’s best for us, not the government or a man or the church or whoever else wants to meddle. You get to decide whether to stay in your marriage or leave it.

 

See History of Divorce Law in the USA, History Cooperative.

 

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