If someone slips and falls in a business, or if a
car taps their car's rear end, they react like they
just won the lottery. If an armed thug breaks into a
home in the dead of night, slips on a child's marbles,
and breaks a leg, he can sue and likely win.
One idiot strapped a refrigerator on his back and
ran in a race. The strap broke and he hurt his back.
He sued the strap manufacturer and collected $1.3
million.
It is impossible to buy an skateboard anywhere
these days. The manufacturers can't get liability
insurance. (So the kids make more dangerous home built
ones instead.)
Once there is a judgment against somebody, the
court swears them in and takes their testimony "in aid
of collection." They have to tell the court everything
-- no matter how unjust the case is. What properties
they own, what savings accounts, what checking
accounts, and what money market funds, and how much is
in each one. What stocks they own, what bonds they
own, where each and every safe deposit box is and what
precisely they have in each.
If one were a rapist or murderer, they'd have more
rights, such as a right to silence. But as a judgment
debtor a person has no rights, as the winner now owns
everything. And heaven help the defendant if he fudges
on his testimony. If he conceals a safe deposit box,
or that stash of 100 Krugerrands he buried ten years
ago in the garden, he's committing perjury, a felony.
With mandatory sentencing guidelines in effect in most
jurisdictions, he will go to prison for the amount of
time specified in the statute -- the judge no longer
has the discretion to set the sentence but must
sentence in accordance with the guidelines created by
the legislature for that crime. The popular concept
of probation for a first offense is no longer true in
many jurisdictions, including the federal court system.
The perjury defendant may even spend more time in
prison than the thug who broke into his house and
slipped on his child's marbles.
While the defendant's lying about his assets will
always be the felony of perjury, if the thug walked
into the house in daylight through an unlocked door,
his crime is likely to be the misdemeanor of trespass,
with a maximum sentence of six months, versus the
perjury felony with a maximum of from five to twenty
years, depending upon the jurisdiction.
It is all too easy to go around saying it won't
happen, but once it happens, it is too late. If money
is transferred after an incident or accident, that is
concealing assets, which can cause both criminal
charges and civil loss of other assets. The law looks
at it as stealing the property of the person who is
suing, or who may sue. The defendant may think it is
his lifetime savings from hard work, but legally he now
holds it in trust for the person who has a pending
claim. Presumed knowledge of the possibility of a
claim is sufficient to invoke these fraudulent transfer
laws. So if somebody moves their money the morning
after an auto accident, it is likely to come back to
haunt them. The only legally valid protection is to
take careful and legal protective steps before there
is even a potential claim against a person or his
assets.
While these concerns with protecting assets
obviously apply mostly to American readers, non-
American readers need to consider the dangers of
keeping bank accounts or other assets in America while
this craze rages on. It also raises serious concerns
about the viability of investments in American
businesses that might be affected by such judgments.
Inadequate insurance
A doctor works all his life to provide competent
and effective care for his patients. A surgery leaves
a patient crippled. No surgeon is 100% successful, but
the jury in the malpractice suit awards the plaintiff
$15,000,000, an amount greater than the policy limits.
Or worse, the insurance company fails and there is no
protection.
Partnerships
A law firm is having its monthly partners meeting.
They send out for lunch. Most want pizza but one wants
a pastrami sandwich. Their secretary decides to go
pick it up. Unknown to the twelve partners this person
has a horrible driving record. On the way back the
secretary runs into a group of pedestrians. The police
arrive. The secretary eats the pastrami and the
partners are sued. A judge decides that they are
liable as the secretary was performing an act for the
partners in her ordinary course of employment. The
jury, sympathetic to the victims and enraged by the
driving record awards $3,000,000 in damages. As
partners all of the lawyers are jointly and severally
liable. In effect, the jury has awarded the plaintiffs
three condos, two sail boats, three houses, nine cars,
and twelve installment notes.
Directorships
It used to be an honor to be a director of a bank,
savings and loan or prominent business concern. Today
there are over 2,243 directors of banks and savings
institutions being sued. One hospital failed and the
IRS sued its community advisory board for unpaid back
taxes.
Simple Ownership
A land speculator bought a parcel for subdivision,
held it for one week and sold it to a developer.
Later, after houses were built, a homeowner who was an
environmental engineer noticed an old buried drum. It
contained a deadly toxin. The Environmental Protection
Agency held the site to be a "superfund" site. The
largest law firm in the world, Uncle Sam, began an
action against the landowners. The suit brought in the
land speculator. Although the total invested was only
$100,000, the inferred liability exceeded $30,000,000.
Under the law this can never be discharged. The
corporate builder and corporate developer collapsed
leaving the individual land speculator to carry forever
his modern scarlet letter.
Joint Ownership
Mom with the best of intention deeded her house to
joint ownership with her son. She intended to avoid
probate, taxes, etc. Unfortunately, a tax shelter that
he participated in resulted in an unfunded tax
liability of $75,000. The son was a little down on his
luck at the time of the tax levy. IRS can seize and
sell the house according to the United States Supreme
Court.
Inferred Liability
A woman answers a knock at the door and lets the
IRS agent into her house. the IRS agent gives her a
bill for over $100,000 of back taxes, penalties, and
interest with her ex-husband's name. Apparently he was
a little creative with his filings, while she simply
signed their joint return.
Inadequate Corporation
Almost everyone knows that you may use a
corporation to shield liability from its shareholders.
Unfortunately most people fail to follow all the rules
about keeping the corporate papers and procedures up to
standard. A good attorney has an excellent chance of
penetrating the "corporate veil" and going directly to
the officers', directors' and shareholders' pockets.
Charitable Adventures
It is a sad but true statement that the prudent
person today should refrain from serving in any
responsible capacity for a charitable organization. One
of the largest items on the national Boy Scouts' annual
budget is their legal expense. Two scoutmasters take a
number of boys camping. Boys will be boys, and not all
scoutmasters are always perfect. The scoutmaster who
was not at the lake while his partner allowed rough
play to cause a drowning may be held equally liable as
he accepted responsibility for all of the children.
Childhood Dreams
You are so proud of your child. She has
progressed well in school and been responsible in all
her habits. For a seventeen year old, she is
remarkable. She does, however, like rock music. While
returning from the grocery with your salad fixings her
favorite new song is played on the radio. She turns up
the volume on your expensive car stereo. Way up. She
does not hear the siren of the rescue vehicle
overtaking her to pass. The ensuing wreck leaves a
trail of havoc that leads right into court. Your
insurance company settles the first case for policy
limits leaving you high and dry on the other cases.
Being responsible for her until emancipated, you are
left holding the bag for her accident judgments.
How many other examples are required? While the
above may seem exceptional, to the affected they
provided financial ruin. This report gives you the
background needed to begin the process of lawsuit and
asset protection. It is not designed as a tool to
prevent one from paying his normal and ordinary debts.
But the extraordinary and unintended financial
calamities that can occur too easily in our litigious
world can be defended against with these techniques.
