By: Mike Gora
Q: For two decades, my husband and I ran a restaurant. We don’t take credit cards. We also do not pay much in income taxes, as our cash registers always run out of tape when we are busy. Instead of having a 401k we have (had) trunks full of the green stuff, and I do not mean spinach, all over the house.
Two weeks ago, I took my sister to New York for 10 days. I was going to write off the trip as a business expense. When I got back, I found that my husband had moved out of the house and into the apartment of our 25-year-old waitress, who he could not have known for more than a month.
He was generous; did not touch the $3,000 in our bank account, but did empty all the cash out of the house. Bales of money. I am a little anal. I kept records. We were saving a couple of hundred thousand a year. He took over $3 million in cash.
I am going to divorce the turkey, but I don’t know what I can tell the divorce lawyer. Will the lawyer have to turn me in to the IRS? How can I get my half of the cash back? How can I prove what the value was of our restaurant? How can I prove how much we made, for alimony and child support? (We have one girl, a freshman in high school.) The only asset we have other than the restaurant and the cash is a mortgage free house which used to be worth about two million.
Mike Gora
A: Your lawyer has no obligation to turn you and your husband in to the IRS for any of your past conduct, which you disclose during your confidential relationship. On the other hand, telling the attorney of plans to continue defrauding the government technically requires reporting you to authorities. Your attorney should not allow you to knowingly file a false financial affidavit or assist you in preparing such an affidavit.
Any judge who receives information of past criminal conduct will probably report you immediately. If you use the circumstances to threaten your husband into a settlement agreement, the agreement would probably not be upheld in court if attacked based on coercion and duress.
Even mediation becomes a problem for you. Rules concerning mediation provide that the issues discussed are confidential. However, information concerning the commission of a future crime is an exception, which, in theory, the mediator has to report.
Your underground income makes the normal divorce process very difficult to use successfully. Your husband is in a better position, having possession of the cash. The first thing your lawyer has to do is convince the other side that your husband is in a potential trouble as you are.
Suggest to your attorney that both you and your husband should prepare, but not sign or file, financial affidavits, which you each believe are reasonably accurate. Next, a four-way meeting, with no mediator, might be appropriate, with a written confidentiality agreement to be signed by all.
Bring your records of savings and, perhaps, of the history of your spending to help prove assets and income. Take the position that you both need to settle without court interference for you both and your daughter to go forward with no criminal problems. His lawyer will point out that you both signed tax returns.
There might be some value in the restaurant business, but with no accurate books and records, you might not be able to get much for it if it was for sale, unless an experienced operator of similar restaurants can be convinced of its true value.
Negotiate for all of the assets other than the restaurant, not in cash such as your mortgage-free house. However, the house could be lost as the result of a future criminal prosecution. You have the kind of case that must be settled, as there is no good alternative that will not be more trouble than it is worth.
Michael H. Gora, has been certified by the Board of Specialization and Education of The Florida Bar as a specialist in matrimonial law and is a partner in Shapiro Blasi Wasserman & Gora P.A. in Boca Raton, Florida. He may be contacted at mhgora@sbwlawfirm.com and (561) 477-7800.