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Interview: The Role of Investigators in Asset Recovery

Asset recovery hub recently caught up with Peter Pender-Cudlip, Co-Founder of GPW + Co, to see how the role of the investigator has changed in recent times.

Q: How is the role of investigators changing in asset recovery?

Peter Pender-Cudlip: Three trends stick out for me. First, the breadth of asset recovery situations where investigators are retained.  Nowadays we get instructed to provide investigation services across a range of recovery matters including contentious insolvency and trust litigation, investor state disputes, non-performing loans, complex cross- border commercial disputes, state related corruption  as well as the more traditional fraud, breach of contract and matrimonial cases.  Second, similar to the legal community, asset recovery has emerged as a specialist practice area for investigators. The complex and cross border nature of cases makes it difficult to dabble in asset recovery. As a result, there is a relatively small handful of investigators who consistently do this type of work globally and do it well. Third, lawyers and investigators are collaborating much more closely. Often success on asset recovery comes only where legal, investigation and forensic accounting teams work seamlessly together.  For example, investigators identifying assets against which lawyers can obtain a local freezing order; providing evidence to support a United States application for discovery under 28 USC Section 1782., finding a jurisdictional hook to  enable proceedings to be launched in a new, more user friendly jurisdiction or developing evidence to underpin an alter ego argument on SOE asset enforcement.
Q: What is the secret to successful asset recovery?

Peter Pender-Cudlip: I often say investigators get paid to ‘pull a rabbit out of the hat’.  But like any good magic trick a lot of dedication goes in behind the scenes. Large scale asset recoveries require persistence, extensive case experience to know what does and doesn’t work, sound judgement (there are judgement calls to make along every step of the way), emotional intelligence and the ability to think laterally. When it comes to the enforcement phase, the work is very jurisdiction focused so local access and knowledge is critical.
One of the secrets, particularly with recalcitrant respondents becoming more sophisticated in how they proactively hide their assets is to adopt a creative approach to what constitutes assets. As well as looking for the obvious real estate, company shareholdings, cars, planes, artwork etc, widening the scope to claims against third parties such as third party debtors and aiders and abettors, or targeting more esoteric assets ( such as possibly crypto currency in the future) will increase the likelihood of success.

Q: How do you approach an asset recovery case?

Peter Pender-Cudlip: Our approach is to work very much hand-in-glove with the legal team; prioritising those assets and potential fund flows that appear most attractive from a value, enforceability and ‘attention-getting’ perspective. Ultimately, our job is to help the client and lawyers turn a fraud claim, a judgement debt or arbitral award into cash using intelligence and investigations to facilitate payment either through legal process or settlement.

In broad terms there are three main buckets of information in relation to assets. The first bucket, is open-source information relating to the target’s assets and network.  This includes the full range of proprietary and public databases, press, corporate filings, credit reports, land registries, social media as well as obscure hard-copy only archives all of which scoured for leads.   There was a time when UK Companies House officials would scribble numbers associated with a registrant company on the cover sheet of the Form 363 which would turn out to be a bank account number or a telephone number which linked to a previously unknown property address. Also, there is what I call ‘unintentional disclosures’ where a company or individual files information for one purpose eg incorporation, to satisfy regulatory obligations and in the process inadvertently discloses information about its assets which can be exploited. It is therefore important to cast the net wide enough in asset recovery investigations to ensure every snippet of asset information is captured.

The second bucket is human intelligence which is comprised of people who know, have worked with, advised, competed, observed or otherwise transacted with the subject. Often this is a very rich vein of information. As well as drawing on our existing network, we will actively find and cultivate persons who have special knowledge of the events and transactions of interest and are unconstrained to share it with us.  We would usually recommend looking at close business associates and family members. Often fraudsters and others seeking to evade enforcement won’t hold assets in their name but will co-opt family and nominees and use offshore centres and corporate vehicles to obscure beneficial ownership. Probing these links and transactions and building evidence to help lawyers evidence beneficial ownership/pierce the corporate veil is another important role for investigators.

A final bucket that is relevant in some cases is information held by the target company that can be accessed through disclosure orders, insolvency proceedings or other judicial process. Again, this can be a rich vein of information especially when mined and cross-referenced with the other data streams above.

Q. When would you advise an asset investigation be done? Before or after the arbitral award or judgement?

Peter Pender-Cudlip: If possible it is always better to begin an asset investigation before judgment and we are increasingly being instructed at an early stages of the claim whether by a claimant, law firm or litigation funder. Asset due diligence is an important first step in order to assess the feasibility of the claim and therefore save time and money in the event that the assets are either not valuable enough to meet the claim or will cost significantly more time and money to trace and recover than the claim is worth. It can also pay off to take a snapshot of the asset position at the start of proceedings in case at a later point you wish to prove dissipation. Either way, early visibility on assets means you are ready to pounce once the award or judgement is made.  Whether pre-action or at enforcement, the sweet spot is finding assets in a user friendly jurisdiction for legal action. Recently , we developed the GPW Global Asset Tracing & Enforcement (GATE) Map which shows which countries are signatories to the New York Arbitration Convention overlaid with a GPW Country rating on the accessibility of asset information.  This is a handy reference tool when developing your asset recovery strategy.
Peter Pender-Cudlip
GPW

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