Latest / Wisdom For What's Next / Uncovering Hidden Money in Divorce with Krista Shelton, CFE
Transcript
- Megan Jewett: Hi, welcome back. I'm Megan Jewitt, co-founder and wealth advisor at Craft Sage Wealth. And today, on our episode of Wisdom for What's Next, we have a very special guest, Krista Shelton. She is the president and examiner with Focused Forensic Solutions. Welcome, Krista. Thanks. Thank you for having me. Yeah, absolutely. So today we've got a lot of interesting topics to cover, so I want to give her plenty of time to do that. But before we do, give us a little bit of background about you. Sure, well so after college I s immediately started working for the Internal Revenue Service. I spent about three and a half years as a revenue agent where I was actually auditing small business tax returns and then switched over to the criminal side and spent 10 years as a special agent. And once I left the federal government, that's when I started and founded Focus Forensic Solutions so that we could use our experience to help people who are going through financial problems. Awesome. And so just real quick, define IRS special agent, right? Because to me that sounds like something I might see on TV, but maybe not something you think of when you are thinking about the IRS. Well, and it's funny because you see all the the special agent shows. Yes. There aren't any on the IRS. And it's probably because it's all tax returns and bake statements. Yes. but as a special agent, you my My job was to investigate potential criminal violations of the Internal Revenue Code. So we're talking tax evasion, money laundering. Gotcha. And so what made you make that shift from working for the IRS to creating this company? So I always had kind of an entrepreneurial spirit. I to be honest, I thought I would work for the IRS, get my CPA license, and then start a CPA firm. when I ended up going on the criminal side, that's when it became much more interesting. and so that's at that point I just decided to to go ahead and start the forensic accounting firm as instead of a CPA firm. And so Tell us a little bit about the makeup of the company. Do you have people that work with you? Yes. and that's probably one of the things I'm the most proud of is at Focus Forensic Solutions, all of our team members are all coming from federal experience. So we have team members from the FBI as well as the IRS. And I think right now we have almost 300 years of experience on the team. That's fantastic. Yeah, and so we I mean we use that federal experience. I mean we we've been working financial investigations for the federal government, and now we we're able to use that experience to be able to help people who who need it. Yeah absolutely. So I just I want to jump right in and get right down to the the main points of our discussion today. So just talk to us about you know red flags that you see and unusual things and what that looks like for you and how you help people in those situations. Sure. the types of cases that we do we handle anything from embezzlement to trusted estate litigation but one of the primary areas that we're involved in is in divorce. And family law cases. And it's something that, as I as I started to get into these cases after leaving the government, it's an area that has a lot of issues. Right. and and number one, probably there are no consequences. So if somebody hides money, if somebody lies and cheats on their income, then then there isn't a lot of room for number one to get caught, and then if they do get caught, what the consequences are. And so that's really where I've focused in the last few years is really again, working in those divorce cases. And so through that, we have developed a list of five red flags that we see quite often. And so we'll we'll go through this a little bit as we talk today, but the number one that we see is that there's a small business involved. If if your spouse owns a small business, they have so much room to manipulate the income and manipulate the figures and we'll see everything from unreported income. We'll see them decrease their their compensation for purposes of child support. Okay. We see lots of personal expenses that are paid through the business, which equals income purposes of child support. And so, I mean, if I showed you the adjustments that we make in some of these cases, it would shock you. And these are things that are happening every single day. And I believe that. as many of our listeners already know, because we've done a few segments on this already, but most of my clients and people that I help are people going through those transitions, right? So divorce is a very large transition that you have to navigate in your life. And so where I've worked with Krista in the past is, there will be situations where we're looking at assets or, balance sheets, income, trying to help the attorney figure out, Best case scenario for an amicable split, especially financially. And we partner with you or the attorney partners with you as well because there's something that just feels off in this. And so it might not be something that I can pinpoint or the attorney pinpoints, but that's where you and your crew can come in and and really help unravel and and unturn, you know, a lot of different stones. So when working together with you on things, this is where her firm helps and then my job and my role in this along with Crafted Sage Wealth is to help protect what was found, what was earned and how to make that work for this person in their new chapter. Yes. And and C D FAs or s or wealth advisors in general are some of the f my favorite people to work with because you guys have Your goal is to help this individual. And that is the that is the entire purpose of what you guys are doing. And and I've seen them so many cases where, one spouse doesn't have any financial control throughout their life. And so they're they're put into this position where all of a sudden now they have to be responsible for that going forward. And so you guys do provide just such a an important service for them. Yeah, absolutely. And and we talked through that on, a previous episode of this and it's something that I feel very strongly about, right? To be able to advocate for yourself, even if you've never made those decisions throughout the time that you were with that person, you're getting ready to. And so making sure you understand not only what was there, but what's going to be there going forward and how that's supposed to work for you is incredibly important. But then also when you I I can't emphasize enough trust in your gut. Right? That that is probably I I think it's the last red flag I have on here. Which we can go talk about Yeah, absolutely. Please do. 1000%. And it's your gut, it's your attorney's gut. If if your gut is telling you something's not quite right, you have to listen to it. if if something doesn't feel right when you're Looking at the finances, especially if you're going through the divorce, but maybe you're not sure where to look, that's where we come in. Because we take all those discovery documents, we take all that financial information, and then we analyze it using our forensic accounting minds, and we're able to find those suspicious activity, where s you know, point to the red flags and then help develop a plan that that your attorney can use to tackle the issue. Absolutely. So let's go ahead and just jump right in. What are the red flags? So the the small businesses, the number One of the other big red flags is missing documents. And what I mean by that is if, in Discovery, normally you're exchanging a couple of years of bank statements. Mm-hmm. If there are one or two months in a two year span that somebody's not providing, there's probably a reason for it. Something is on that those bank statements that they don't want you to see. Uh-huh. And in today's digital age, tell me you can't go right now to your online banking and print off two years of bank statements. So it's just very easy, as we all know. It's not an excuse. So missing accounts, missing missing months those are huge red flags for us. Yeah, what are some other things that you look for or that somebody that's listening should be looking for if they have that that gut feeling or have found a few things they notice are maybe not on the up and up or have further questions on what are some other things that they need to be paying attention to? another one that I hear quite often from clients is when income is controlled by a related party. And so this one can come up in several different areas. Number one would be If somebody's working for their parents' company. And so what we'll often see is the income generally goes up year after year, but then all of a sudden they're going through a divorce and the income starts declining. That would be a red flag. And it's a scenario where you have somebody else controlling that income, then they can make those decisions and they try to do that again for purposes of child support, which is based generally on somebody's income. I've also seen this with nomination. Of businesses. And what I mean by that is when on paper it looks like a parent owns the company, but in reality, all of the day-to-day operations, the entire company is being controlled by the individual. That can be a red flag. And that's one that we you know I've testified in court on as far as that goes. So another thing to keep an eye out. one other one that I just have to mention is lifestyle that does not match your income. And I'm sure you see this kind of in your Yes, and maybe not even in divorce. There are some things that I'm like, we're not making very good financial decisions, but great lifestyle, right? You're not gonna be very happy with yourself in the future. But well and the you know, going back to my IRS days, I can't tell you how many times I would look at a tax return. Somebody's claiming they make like thirty thousand dollars in income, but they're living in a million dollars. Yeah, absolutely. Yes. So an again another thing that to just to keep an eye on and and you know, there's usually financial records. I our job has never been easier than it is today because everything is a financial transaction. Right. It's all recorded, it's all traceable. So it's just a matter of getting our hands on the right records. Absolutely. So speaking of records, what are as a forensic accountant, what are the most important documents for you? the two documents if if I have nothing else to choose from would be tax returns and bank statements. Okay. So in our analysis, we always start with the tax returns because they tell us what we should see in the bank statements. And the bank statements, they're so important because they are third-party records and they can't lie. Because at the end of the day, somebody can put anything they want on the tax return. Right. Anything they want. They can make up every single number that's on there, especially if you're a small business owner. But the bank statements show what actually happened. And so we do a lot of comparisons between the tax, you know, tax records and the bank statements. And when those things don't match, that's when we know we've got a problem. And I think, you know, the work that you do is so incredibly valuable, but it's becoming even more and more prevalent. In something that is a need, and how would you say Focus Forensic Solutions is doing things different? How are you guys shaking up that forensic accounting world? Forensic accounting is expensive and it's untoachable. And so that's really kind of our goal. Forensic is to change that. number one, we use our experience. We're we're a team of former FBI, former IRS. That makes a huge difference. That gives us some leverage when we go into these discussions. But the thing that I'm probably the most proud of that we're doing is flat rate fees. Yes. So you don't you don't sign an engagement with us and then have no control over the hours that are spent on this case. What we do is you you give us the record you want us to analyze, and we're gonna tell you exactly how much it's gonna cost us to analyze those records. Mm-hmm. And the main thing that we do when we get involved in these especially divorced cases is, we analyze the tax returns, we analyze the bank statements, we analyze every record that you provide to And then we put our findings in a PowerPoint to you and your attorney. We're gonna show you here's what we looked at, here's the red flags, and then here's a plan, here's what you're missing, here's here's the depositions that we need to help you, you know, craft and and get some answers on. And then ultimately we show up at court if we need to testify. That's what I was gonna say. You can testify on their behalf as well. And if their attorney feels like, Hey, you know, we need to bring you in, that is an available resource, which I think is incredibly powerful to have a specialist in that space that gets it that can go, on your behalf. Right. That's fantastic. And you know, we're we're looking at numbers. Numbers don't lie. Right. So the goal is never to create the most income. The the goal is to get to the accurate amount and and to make it fair. Yeah, absolutely. so tell me a little bit about I I know because I follow you. what are some new things you have coming? I'm very excited about these. I'm not gonna spoil them. I'm gonna let her tell you. But tell us a little bit about what you're working on. So I've got a couple things. So we'll well really let me back up for a bit. Focus forensic is a forensic accounting company. We are there to to do the forensic accounting, to show up for you, to work the case. What I have realized over the last several years is that people don't even know where to start and so what I've started is I've started my my own Substack. It's okay Follow the Money. And for those who aren't familiar with that, Substack is an online publication. It's it's kind of a mix between a blog and a newsletter. but I Sometimes I'm sharing stories from my law enforcement days. I provide real case studies to show individuals like what we're actually seeing on a daily basis in these divorce cases as well as embezzlement cases. But more than anything, I'm just I'm trying to teach every individual how to start, how to find the questions, how to identify what records can answer those questions, and ultimately how to follow the money. Right, because that can be the the most overwhelming and daunting part of this entire process is like, well, I don't know where to start, I don't know who to call, I'm doing this by myself. sometimes it can be very paralyzing when you're in that situation. Cause not only are you navigating transition and trying to figure out all of these things, but you don't know who to call, you don't know where to go, you don't know what to use as a resource, you're scared of the fee. Right. all of those things. So I think that's that's fantastic and a great value added. resource to those that really need your assistance. And and the goal with it is for people to come with questions. Right. Let tell tell me what you want me to teach you and I and I'm happy to do that. And I hope to eventually do some webinars and and again just to be a resource, to have a place where somebody can go and ask a question and and get it from an investigator's mind. Mm-hmm. How would we tackle it? Absolutely. What else you got going on? Well, I can't say the show yet, but I was called in to be the forensic accounting expert on a documentary series on fraud. Okay. So I flew out to Tampa back in June and I'll be on series two of the show, which I can't talk about yet, but but that will be coming out hopefully soon. Okay. And then I'm finishing touches on a my first book. And the book is is going to be it's a book about the investigation of Kermit Washington, which was one of my career cases at the IRS. Mr. Washington was a former NBA player, who He's infamous for The Punch, where he actually punched a player on court in 1977 and almost killed him. And fast forward 40 years, I worked the case with Homeland Security, and we investigated four different fraud schemes that he was committing through a charitable organization and then ultimately embezzling the funds. And so that it's just an exciting case. There's lots of twists and turns and examples of greed. And so I'm gonna get that published and tell the story. What's the ETA on that? Because I gotta add it to my mustard. Read list. Yes. hopefully early January because then it'll be published. Fantastic. What a way to start your 2027. Yeah. Read her book. Perfect. Totally. Jessica Chastain. Yes. We'll get her to play me on the Shout out to that going. Yes. So tell everyone that's listening how do they find you? How do they follow you? If they need to reach out to you or if they know somebody that could benefit from the value you so Focus Forensic is at focusforensic.com. Okay. I have a personal website called Krista SheltonCFE.com. Okay. and that has a link to my Substack. but you can also find me on Krista Shelton CFE.substack.com. Perfect. And you know, before we kind of wrap things up here, give us if you could give anybody one tip. that they can take away from today's podcast, whether they're experiencing something like this now, they have a hunch, like I said earlier, they know somebody that might be going through this and would benefit from, your services and and what you're looking for and the value your team provides. What's the one tip you could give somebody? Bank statements. I mean ultimately bank statements are the most important document that we can get our hands on. They're third-party records, they don't lie. So if if you're in a pre-despair, pre-divorce, start gathering those records now. And we've talked about this. So if anybody's listened to my past ones, not that you have to, but if they have, they're going to know very quickly. We've talked about if you are in a situation where you do not have access to these, get access to them. If you are in a situation where you haven't looked at these in a really long time, be looking at them. You need to be understanding the cash flow that you have now. Not only now, but also what this is gonna look like in the future. So it's you know it's imperative that you stay involved in these things, even if you've never done it before. Now's the time. Make sure you have access to those. Absolutely. Well, awesome. thank you so much for coming on the show today. Thanks for having me. as always, please make sure you you know follow. She gave the list of resources there on how to contact her. you also can reach out to me if that's something that you're interested in, make sure you are following us, Craft and Sage Wealth. if you have a subject you want me to speak about or a guest that you think would be interesting and beneficial for those that listen, make sure you reach out to us at craftandsage.com. and just thank you for being here. Thanks for listening in and thank you, Krista. Thank you.