Conflict of Interest Introduction - When setting up an offshore asset protection structure you should be using an offshore lawyer not a lawyer in your home country (onshore attorney). There are a number of reasons for this but one of the biggest reasons is there is a conflict of interest with an onshore law firm in your own country. If you have financial enemies and they attempt to go after your funds only to find out that you have relocated your assets offshore with the assistance of this lawyer or law firm a number of things could happen to your onshore lawyer that would not be good for that lawyer.
Fraudulent Conveyance – This is a concept that is dealt with far more seriously in some countries than in Panama. A fraudulent conveyance occurs when one intentionally moves assets out of the reach of creditors to delay, hinder or prevent the creditor from recovering these assets from you to satisfy a debt. Generally the debt is a judgment from a valid court of competent jurisdiction and venue. There are all sorts of interpretations to fraudulent conveyance in different jurisdictions and countries. In Panama a fraudulent conveyance is merely a remedy by which a creditor can attempt to recover a debt from assets that have been relocated to Panama. It is not an illegal act prohibited by law. It is not a vehicle to nullify a corporation, trust, foundation or corporation. It is nothing more than a creditor remedy in Panama.
Facilitating a Fraudulent Conveyance – A client goes to an onshore attorney and says I want to get my money out of here into an offshore jurisdiction so I don’t get wiped out by such and such a situation which he describes. What the circumstances are is not all that important here for what we are going to point out. The onshore lawyer, if he helps this client can be sued by the creditors of the client for facilitating a fraudulent conveyance. This means the creditor can attempt to recover the money he would normally have been able to collect from debtor (onshore lawyer client) had the onshore lawyer not assisted the debtor in moving his funds offshore beyond the reach of the creditor. The onshore lawyer would usually have malpractice insurance to cover the losses from such an action so think deep pockets. So your lawyer is a target from your creditor(s) and the lawyer knows this and he can not just operate in terms of what is best for you he has to worry about covering himself from attack as well – conflict of interest is the operative term here. Under Panama law no such action against the Panama lawyer is permissible since a fraudulent conveyance is just a creditor remedy not a violation of law or a civil prohibited action.
What is a fraudulent Conveyance Anyway? – In different countries the laws pertaining to fraudulent conveyances vary. In Panama the burden of proof is on the creditor to show the court that the movement of assets was specifically designed to delay, hinder or prevent the creditor from collecting their debt. The interpretation of the law can be complex. The costs of such litigation can be expensive. The chances of winning in Panama are not great for the creditor. Once the lawsuit starts the person who has their assets in Panama may think it is best to relocate the assets from Panama to another jurisdiction after the creditor spent a lot of money on the lawsuit. Then the creditor has to start over again in another country. There is a three year time limit on the fraudulent conveyance in Panama which means after three years has passed from the time of the conveyance no action can be brought against the conveyance of funds as a fraudulent conveyance. If one brought an action against a conveyance in Panama and the three years time limit ran out before the case was heard it might be considered moot. The key points to a fraudulent conveyance action focus around intent and would be as follows:
* When were the assets moved in relationship to the debt?
* Were there any circumstances that would justify relocating the assets like the person moved, funds were needed for business purposes, medical purposes, a family member was in grave distress financially etc?
* Timing of when the debt was officially recognized which could be a judgment date or something else in relation to when the assets were moved?
* Did the debtor move all of the assets making themselves insolvent or just some of the assets leaving other assets in place?
* Were the assets moved while there was a court case in process?
* How can one assume the debtor knew defeat in the lawsuit was a sure outcome?
* How do you deal with a person who has been in one or more lawsuits at any point in time for a number of years?
* How is the debtor supposed to know the debt is valid before the outcome of the court case?
* Does this mean any shift of their assets is a fraudulent conveyance?
* Did the debtor attempt to conceal the transfer of assets from the creditor specifically or was this part of a privacy asset protection strategy?
* Did the fraudulent conveyance involve transfer of assets such as real estate, boats, cars, etc. at below market prices?
Fraudulent Conveyance Intent - It is clear that more than just timing plays a big part in determining what is the intent and is not intent to conduct a fraudulent conveyance. The problem for the onshore lawyer is that if the creditor just argues he facilitated a fraudulent conveyance he and his insurance company will be in a fight and at the least his rates for insurance will go up or the insurance companies my drop him altogether. The onshore lawyer faces further difficulties along the same lines if your creditors involve government agencies or if there is a court order for child support, alimony or spousal support and it could be alleged that the conveyance was to avoid these payments and the onshore lawyer facilitated this for you by putting you into an offshore asset protection structure.
Onshore Lawyer Asset Protection Tactics – For many of the above mentioned reasons the onshore asset protection lawyer will put a client into an onshore asset protection vehicle. Generally these vehicles are next to worthless because any judge can usually punch right through them at will. The grounds they use are fraudulent conveyance, fraud, sham structure, straw man, or they just flat out avoid grounds and just go after the assets without any explanation. If you were to take a survey in your country as to whether or not the people thought the judges act fairly or not what do you think the outcome would be?
Onshore Lawyer Conflict of Interest - So if the onshore lawyer keeps the clients assets onshore where any judge can attach them he removes himself from the exposure that he would face if he moved the client offshore where the assets were truly out of the reach of the clients financial enemies. If the client loses his money to his financial enemies due to the onshore asset protection structure being faulty then the onshore lawyer says well heck a judge lawfully ordered it, I have no liability. If the client was in an offshore asset protection structure the client would keep his money and the lawyer would get the lawsuit from the creditor(s) for facilitating what they will consider to be a fraudulent conveyance. The fact that the client loses his money in the onshore asset protection structure is a result of the conflict of interest. The onshore lawyer exposes himself by really helping the client get his money offshore where it will be really safe. Another conflict of interest is the fact that if the onshore lawyer puts the client into an onshore asset protection structure and the structure gets attacked by financial enemies the lawyer gets to defend the asset protection structure and this is a good payday for the onshore lawyer. If the lifetime savings of the client comes under attack the client is going to not be that frugal in defending his wealth. If the client had their assets placed offshore there would be no such payday for the onshore lawyer. Remember when the onshore lawyer explains the asset protection structure he proposes he will probably not tell the client how expensive it is going to be to defend the structure, the chances of winning such an attack and what his percentage of wins has been defending his asset protection structures.
Repatriation of Funds – This is a legal concept that occurs in a lot of jurisdictions especially the ones that are privacy invasive. This is where a judge orders a person to bring funds back into their country pending the outcome of a court case so they can be attached by the creditor if he prevails in court. An order like this can also come post judgment. Generally judges grant such orders freely to their own government agencies usually in criminal cases, sometimes a serious civil case like civil fraud. Ok let’s say you retained an onshore lawyer to set up your asset protection structure. If the onshore lawyer put you into an onshore weak asset protection structure the whole issue of repatriation of funds will never come up since the funds are already in the country awaiting an attachment order from a judge anytime he want s to have at your funds. Now let’s see what happens if the onshore lawyer puts you into an offshore structure. Let’s further assume you have decided to go to greener pastures and have moved to the island of green pastures and no taxes. Well the lawyer is still onshore and now your creditors and their lawyers are going to give that lawyer a pounding in court and probably sue him for facilitating your asset protection structure which prevented them from collecting their debt. So they take the onshore lawyer to court, pierce through the attorney client privilege using fraudulent conveyance as grounds to do this. They then get all the records from the onshore lawyer about your offshore structure and this enables the creditors to now try and chase you offshore since they have a roadmap of your asset protection structure. Of course your attorney can be sued by your creditors for conspiracy and facilitating your so called fraudulent conveyance as they will call it. So why would your onshore attorney wish to expose himself to all this just to sell you a good offshore asset protection structure when he can sell you a weak asset protection structure that is onshore and avoid all the legal exposure for himself. A good offshore law firm in Panama has no such legal exposure in that they are under Panama law not the law of another jurisdiction. Assets in Panama are under Panama law not assets of other jurisdictions.
Onshore Lawyers and Offshore Asset Protection Structures – Onshore lawyers tend to not understand offshore asset protection structures. They are unfamiliar with the laws of the jurisdictions and are very uncomfortable in this sort of environment. To be fair this is another big reason why many lawyers prefer to use an onshore asset protection structure. They just do not understand the ins and outs of offshore asset protection structures so they rely on what they understand often not even understanding the extra strength and security the offshore asset protection structure provides for the client. There are possibilities available in good offshore jurisdictions that are unheard of in onshore jurisdictions.
When you want an offshore asset protection structure, go offshore!
http://www.panamalaw.org/offshore_lawyer_versus_onshore_lawyer.html
