[PanamaLegal]

Our law firm gets into this a lot with potential clients. The concept of a fraudulent conveyance is one that extends internationally. It is a term referring to the movement of assets to place the assets out of the reach of a creditor. If one owes another money and they move the funds out of that jurisdiction to make a recovery by the creditor difficult or impossible that is considered a fraudulent conveyance. In most countries it is a civil matter. In some countries it is a criminal issue, you can imagine who these countries are easily, especially one big one. So one moves money out of their country to avoid attachment by a civil judgment creditor and winds up violating a criminal statue and becomes a criminal.

When is a creditor a legal creditor. This is going to vary from country to country. One big country would apply the fraudulent conveyance statue in the absence of a judgment. If one one is in court and it is felt that the party knew they had a high probability of losing they could be held liable for moving money out of the country to avoid attachment. This is ridiculous but possible to be convicted under. Why would anyone be in court wasting money on legal fees if they knew they were going to lose.

Offshore jurisdictions usually have a fraudulent conveyance statue. In Panama a fraudulent conveyance is not a crime or even illegal, it is merely a remedy for a creditor to bring suit in court and try to collect the money owed to them. We have never seen or heard of such an action involving our clients or anyone we know but it is a possibility. The statue allows for a time frame of three years after the money is in Panama. After three years no action can be brought. Such cases are expensive, time consuming and hard to prove unless there is a judgment in place and even then the motivation for the money movement has to be established as a fraudulent conveyance. If the person moved to Panama, made an investment in real estate etc it can be hard again for a creditor to win. They must show the motive was clearly to do a fraudulent conveyance. It gets into how much of their money was moved, how old is the debt, how many debts and lawsuits does the person have, why did the money come to Panama, etc.

Lets say one chases someone to Panama or another jurisdiction. Then they must keep the case private from the person they are going after or they will just remove their money to another country. So they attempt to do an ex parte sequestro or injunctive relief attachment ex parte. They go privately to the judge and post a bond to tie up the money so the person cannot remove the funds. They post a bond of 10%. They convince the judge that they have a case of some sort and if they win the money is attachable. Problems are numerous. Judges are not in the habit of doing this for foreign clients flying in the night before. They would need to show some hard evidence. The judge would be likely to want the other side (defendant) there unless the evidence was strong. The person posting the bond losses it if they lose the case. The defendant can go to court even after the bond is in place and have it removed freeing the money or ask the court to increase the value of the bond due to the damages they are causing being in excess of that amount and showing the likelihood of their prevailing in court. In other words this is going to be expensive, time consuming and most unlikely for the plaintiff to win unless they have a very solid case which is rarely encountered.

Plaintiff problems are they generally see a wire transfer to a Panama corp. from a bank account in the home country since they can easily get into home country bank records. They have no way to establish the ownership of that corporation since owners are not in the public registry. They cannot get into the bank records due to bank secrecy. What do they do? They try to take the deposition of the one who owes them the money. When he sees they are talking about the Panama Corp. Bingo ! He goes home gets online and wires all the money out of the Panama bank account to another country. He can even tell them he owns the company and then goes home and wires out the money. Maybe when the money came into the company account it was transferred inside the bank using the banks online banking system to another account in the same bank. Now they attack a Panama corporation with $1000 in the bank. Strike out. Without a clear path to ownership they cannot even attack the Panama bank account. Even if they got ownership (this is doubtful since the corporation should be owned by a Panama Foundation which no one can own under the law) then they have to prove these funds are not legitimate funds belonging to a corporation. It gets hard for them, sticky, murky and very expensive.

You never know what you are going to get when you trace a trail to an offshore bank account. You might find out the money is gone, the guy transferred ownership of the bearer shares, the company may have had a law suit in the offshore jurisdiction with another anonymous corporation and the plaintiff got a default judgment and cleaned all the money out of the bank account and now what are they going to do unravel a judgment in a foreign court. What if the money has been converted to diamonds and moved cross border few times.

What is the best plan for the plaintiff? To try and get the judge in the home country to order you to repatriate the funds back into the country. If it is a government agency after you this will most likely happen. If it is a divorce and you left the spouse and children broke ready to go on welfare this is probably going to happen. Generally speaking judges hate to be collection agents and will be most reluctant to entertain such measures. It does happen but far less than one might think. If the bloke is no longer in the home county then serving him is just about impossible so that is the end of repatriation. Some people leave the country with their assets and intimidate the other side into a settlement since that is their only option and then they return afterwards. Sometimes a trust agreement can help against repatriation of funds. There is a distress clause which revokes your control over the funds and gives it to the lawyer handling the trust for you. First off the wires should now be going to the law firm not the corporation. The lawyer deposits them in the corporation which the trust agreement deals with. This eliminates the money trail. Going to an offshore jurisdiction and try to get a lawyer to bust open a trust agreement is 500 times harder than getting into bank records which is hard enough. Judges are lawyers, not bankers and are sympathetic to lawyers. The control of the trust will not return to you until the case is settled or dismissed. This provides what is caused plausible deniability but will usually not work against a government agency suing you, with private parties may work, depends on judge and circumstances. If the funds are in real estate then what? If the court says transfer the real estate ok what about the taxes? The court is going to pay them. What if the real estate was finaced and the lender which might be a private party objects to the new owner and forecloses? What if the money was invested in a charter boat out on a six month charter and the title is with the boat for customs inspection at sea somewhere. Hmmm. See how thick it can get.

Rarely does anything like this happen unless the amount is at least $20,000,000 and more likely it will be upwards of $100,000,000. The success rate of the asset protection lawyers is pathetically poor. Millions of dollars are burned up and often there is little or no recovery. Chasing someone offshore for $250,000 is an extremely unlikely event. One needs a case and a alwyer in the home country. Then it is best to have a court order or judgment. Then they have to retain a lawyer in the offshore jurisdiction. This lawyer is not going to work on contingency, he is not stupid. Fees will be like $25,000 to $100,000 to review the case and render an opinion. Add into this the home country lawyer fees to work with the offshore lawyer. Consider his travel to the offshore jurisdiction. Then if the offshore lawyer moves ahead there will be another retainer and so it goes with bills really going into the six digits right away. Big asset recovery cases run up legal bills into the millions.

Bottom line for those wishing to protect their assets is seek good legal counsel. Only an attorney can provide attorney client privilege. You can stop a lot of questions in court or in deposition with attorney client privilege objections. If someone did your structure who is not an attorney and someone subpoenas your records from them they have to hire an attorney to protect you. Will they spend $10,000 to keep you as a client or will they just turn your records over giving your adversary a fast path to establishing ownership of your asset protection structure. Tell your laeyer the truth and the whole truth. You have privileged communications. It is so much easier for them to help you this way. Don't play I hope, I hope. Play plan, plan, plan. Remember if you are really in a bad way there is always negotiating from a position of offshore strength. Good business people never omit settlement as a viable cause of action for problem solving.