Investigative Strategies
By: Bill E. Branscum
Copyrights 2001 & 2002

This section should rightfully be entitled, “The Private Investigator’s Approach to Frauds & Scams,” because much of what I have to say here does not apply to law enforcement. In fact, the first and most important point I want to make is, we aren’t cops anymore. Private Investigators fail to serve their Client’s best interests if they approach their situation from a law enforcement officer’s perspective.

For those of us who matriculated to the private sector following a law enforcement career, it is important (and often difficult) to remember that:

“We are not law enforcement officers, we are not public servants, saving the world and serving society’s best interests are not our responsibility anymore. Our job is to serve the legitimate interests of our Clients.”

The second point I want to make relates to the nature of the con artists you will be dealing with, and the realistic approach to pursuing your Client’s objectives. Swindlers and grifters are opportunistic sociopaths who prey upon the trust and gullibility of others, feeling nobody’s pain in the process. On the other hand, these people live by their wits, and it would be foolish to underestimate them. Morally reprehensible and devoid of compassion as they may be, they tend to be intelligent, practical and devious.

Personally, I believe that is a good thing. I dread and avoid cases involving the weird, twisted, loony-tune characters of the world like the plague. I’ll deal with Organized Crime, corruption, scams, racketeering and murder - just spare me the obsessed stalkers, and similar nutcases, who ought to be wearing tinfoil hats. Those people are not rational, they can be unpredictably dangerous, and it is impossible to anticipate what they will do.

Con artists, on the other hand, do what they do for the money, they are businessmen, and they tend to behave rationally. Some have little formal education, but they are all experts in human behavior who have mastered the art of persuasion. They use words as the instruments of deception, and they recognize pleas and/or threats as the manifestations of desperation. Trying to beg, bluff or intimidate a professional swindler is a complete waste of time and energy.

Con artists invariably have a special, circular file for “Demand Letters,” but they may settle a case if it becomes obvious that settlement is their most painless, and cost effective, option. The more professional, methodical, diligent and relentless you are, the more likely your target will be to pay your Client to make you go away.

The third point I want to make in laying the foundation for the discussions that follow is closely related to the first point, and critical with regard to point two.

As Private Investigators, our investigative efforts may very well culminate in case submissions, Cease and Desist Orders, criminal prosecutions, the “winding up” of the criminal enterprise, criminal convictions, jail time, civil penalties, receiverships, etc., just like they did in the good old days. Unfortunately, if it comes to that in these cases, our Clients usually lose whatever hopes they might otherwise have had to collect.

In most cases, our Client’s best option is to negotiate a settlement, whereby they agree to terminate our investigations, take the money and go. That generally cannot happen unless the target is certain that the Client’s attorney can negotiate in good faith. In the event that a settlement is reached, we absolutely must honor the nondisclosure agreements in good faith.

My fourth point is inextricably intertwined with point three - good faith cuts both ways. In the event that the swindler remains intractable to the very end, you and the Client’s attorney must follow thru and “pull the trigger." It is much easier to persuade the captain to permit your Client to board the ship if he knows for certain that you are going to sink it if he doesn't. Personally, I will not accept a case unless the Client is committed to shut the scams down, wind their operations up, and expose the swindler to the full gamut of regulatory, law enforcement, and IRS scrutiny.

That brings me to point five. In many cases, at the end of the day, your Investigative Report will make or break your Client's ultimate claim to the relief outlined in the Internal Revenue Code, §165(c). In an recently published article on this subject, Bart H. Siegel, a prominent CPA, CFP, CFE . . ., aptly characterized IRC §165 as one of the "best kept IRC secrets."

I will explain this in greater detail in a subsequent section, but for the moment, suffice it to say that IRC §165, as codified in Title 26 USC §165, is a door through which those who have suffered certain uncompensated casualty losses may recover as much as 35% of their losses, and you, as that person's investigator are the key to the door. Even assuming that the Client has a competent attorney and a knowledgeable CPA, they are highly unlikely to get through that door without you.

Finally, I want to address the significance of the “Client’s attorney” to whom I have repeatedly referred. Unless your Client has a sharp and aggressive attorney, your ability to assist them will be limited. This is not the river to ride with the vast majority of attorneys that are out there. I have seen many cases where the attorney meant well, but their efforts ultimately amounted to nothing more than a legitimized “recovery scam.”

Similarly, if your Client suffered a loss that could properly be tax deductible pursuant to the provisions of IRC §165, he is going to need to consult with a competent and aggressive attorney and/or CPA familiar with Title 26 USC §165(c)(2). You simply will not believe the resistance your Client will encounter when dealing with CPA's accustomed to treating investment losses as "Capital Losses" under the provisions of IRC §1211.

If a potential Client does not have, or will not retain, competent counsel, and obtain professional tax assistance from an expert, your involvement in the case may be a miserable exercise in frustration all the way around.

Related Articles: (I will add to this list as time permits)

I welcome your comments, questions and suggestions.

© Copyright 2002 - Bill E. Branscum. All Rights Reserved.