Gusty A.E. Sunseri & Associates, P.C. Attorneys at Law

Innocent ex allowed to keep fraudulently earned funds from divorce

For many couples in Pittsburgh, property division can be one of the most challenging parts of the divorce process. Couples work hard to build their estate and assets during marriage, and it's tough to watch everything get cut in half by a divorce judge.

However, in some situations, spouses may be better off after the property division is complete.

One ex-wife was allowed to keep the considerable sum of money that was awarded to her during the property settlement, even after it was discovered that her husband earned the money fraudulently.

About two years ago, the woman's ex-husband was arrested on charges of defrauding investors of more than $550 million during a 13-year Ponzi scheme. Although the couple was divorced and the ex-wife did not participate in or know about the fraudulent activities, federal authorities still went after her money.

The Securities and Exchange Commission and the Commodity Futures Trading Commission both made attempts to seize the woman's assets, and a federal judge froze most of her assets, including $7.6 million in cash.

The woman's lawyer argued that because she and her ex-husband had "divided their marital property and signed a divorce settlement agreement, the government could not force her to disgorge what were her rightful proceeds."

The court was forced to weigh the two options: returning the stolen cash to its rightful owners or allowing the innocent ex-spouse of a fraudulent man to move on with her life.

Ultimately, the court sided with the ex-wife, saying their priorities were rooted in a "concern for finality in business transactions." The courts went on to emphasize that if ex-spouses knew about fraudulent schemes when they received their money, that they could be expected to return the sum. If not, the money is rightfully theirs.

Source: New York Times, "Court Says Ex-Wife May Retain Money From Ponzi Scheme," Peter Lattman, 23 June 2011

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