Episode 79: Noel Capuano and John "Jack" O'Donnell, Forensic Accounting
In this episode, Noel Capuano, CPA and Principal in the accounting firm of Friedman LLP, and John O’Donnell, Partner in Forensic Litigation Valuation Services at Friedman LLP speak with Karen about forensic accounting as it pertains to divorce. The purpose of this conversation is to be constructive and educational; to help listeners going through a divorce or headed in that direction understand the role that forensic accountants could play in the process.
Noel Capuano, Principal, Friedman LLP
Noel has more than 20 years’ experience in business valuation of closely held companies for purposes of marital dissolution, buy/sell agreements, business disputes, and estate/gift tax planning, as well as due diligence and forensic investigations. She has been qualified as an expert in various courts throughout New Jersey and Pennsylvania and is a frequent lecturer on topics related to business valuation, critique of opposing expert reports, and tax issues specific to divorce.
John O’Donnell, Partner, Forensic Litigation Valuation Services, Friedman LLP
For over 30 years, Jack has provided forensic accounting services and conducted fraud investigations on behalf of business attorneys and litigators, corporations, insurance companies as well as agencies of the U.S. government, state law enforcement and county prosecutors. These engagements have included investigations involving business and contract litigation, lost profits and damage calculations, due diligence services, professional malpractice actions, bankruptcy related services and business valuations. Jack also has extensive experience conducting forensic investigations to uncover white collar crime, fraud and embezzlement schemes, quantify economic damages as the result of theft and assess internal control weaknesses
Intro Voices 00:00
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Karen Ortman 00:31
Hi, everyone, and welcome back to You Matter, a podcast created to teach, inspire and motivate members of the NYU community who have been victimized in some form or fashion and to identify resources both on and off campus that can help. I am your host Karen Ortman, Associate Vice President of Campus Safety Operations at the Department of Campus Safety, and a retired law enforcement professional. Today, I welcome Noel Capuano, CPA and Principal in the accounting firm of Friedman LLP and John O'Donnell, partner in Forensic Litigation Valuation Services at Friedman, LLP. Noel and John, also known as Jack, are here to talk about forensic accounting as it pertains to divorce. The purpose of this conversation is to be constructive, educational and prescriptive; to help listeners going through a divorce or headed in that direction understand the role that forensic accountants could play in the process. Noel and Jack welcome to You Matter.
Noel Capuano 01:37
Thank you. Pleasure to be here.
Jack O'Donnell 01:39
Thank you karen for having us on.
Karen Ortman 01:41
My pleasure. Let's begin by explaining to our listeners what forensic accounting means.
Noel Capuano 01:48
I mean, in its most simplistic terms, it's an investigation into the books and records of a business or a marital partnership. That would include banking records, investment records, general ledgers in the case of a business, and pretty much things like that. So, digging through to kind of get to the underlying nature of the transactions.
Jack O'Donnell 02:20
I think overall, what forensic accounting is, as compared to regular accounting or tax work, we're professionals who utilize our accounting skills and tools in a focused manner; usually in some sort of dispute whether it be a divorce for civil or criminal court matter.
Karen Ortman 02:46
So forensic in this context, does that also mean that you testify as experts in this particular area in court?
Jack O'Donnell 02:56
Noel Capuano 02:57
Karen Ortman 02:58
Okay. And is it also accurate when we're talking about divorce, divorce is between people, two people, but can there also be a divorce from business? Does that also apply?
Noel Capuano 03:16
Yes. So typically when we're talking about a divorce, per se, it's more commonly referred to as a divorce between a married couple, but in the context of a business split up it would be a shareholder dispute, or business split up, both of which are considered to be a divorce.
Karen Ortman 03:40
Jack O'Donnell 03:40
And at times, they do call business shareholder split ups, they call them business divorces.
Karen Ortman 03:46
Okay? Can you explain your backgrounds and how you got into forensic accounting? And Noel we'll start with you.
Noel Capuano 03:53
So, I basically came into the forensics area, I kind of fell into it. I think a lot of people in this in this field, at least in our generation, came to it that way, it's, it's become a lot more popular these days. So, you know, there are definitely colleges now that kind of offer course offerings in that area where they did not back in the day. So I started out, you know, I got my degree in accounting and started out in a traditional accounting firm, offering, you know, audit and tax, I did a little of both. I briefly left public accounting and went into private industry for about five years. And then when I had my two kids, I had the opportunity to go back into public on a part time basis working for a woman who really was kind of at the forefront of the specialization in divorce work, so she had basically partnered up with some attorneys in the area, Divorce Attorneys. And she started offering very specialized services to those attorneys to help her clients settle. Among those services was business valuation, determination of income available for support and assistance with equitable distribution of the of marital assets. So, when I went back to work for her by nature of who I was working for, that's kind of how I fell into this type of work. I just, I absolutely loved it. A few years later, we merged into a larger firm, that's where I met Jack. When we merged into that firm we became the Litigation Group. At that point, and that was about, oh, my goodness, almost 20 years ago. That's when we all of us in that group, at that point, specialized exclusively in litigation support services.
Karen Ortman 06:00
And Jack, how about you?
Jack O'Donnell 06:01
Um, I graduated from college way back, in the, probably the Stone Age. It's been a long, long time. I initially took a position working for the Defense Department doing normal accounting work, auditing contracts, administering appropriations and things for foreign allies. After a few years I left and I took a position with a consulting firm where I got my first taste of forensic work. What that involved was, and why I say it was, I've been doing this for a long time, Iran used to be an ally of the United States prior to the Shah getting overthrown. They used to purchase billions of dollars’ worth of hardware and military services from the United States government. When their regime got overthrown in 1979, United States froze all assets over here. I was hired by an IT consulting firm to help perform forensic accounting work and assist the State Department and an international tribunal. Once that somewhat concluded, a friend of mine was in a small boutique accounting firm in Philadelphia that specialize in forensic accounting. Forensic accounting really has just emerged probably in the last 35 years as a segment of what accountants do. These small specialty firms started to flourish, because the attorney saw a need for services. I took a position with that firm and learn the trade with him. I left somewhere around 2000 and took a position with the firm where I met Noel, and we've been working together ever since in various forms. I've been a forensic accountant providing forensic analysis and Valuation Services for a variety of matters, including, you know, divorces, criminal investigations, business disputes, corporate investigations, things of that nature.
Karen Ortman 08:19
Yeah, forensics seems to have emerged in a lot of disciplines over the course of, you know, the last 30 years. When does a forensic accountant become involved in a divorce proceeding?
Noel Capuano 08:34
So I can speak with regard to personal divorces. As Jack has mentioned, we both kind of do work in both arenas, but my work is a little bit more concentrated in personal divorce. We are typically brought in almost exclusively by the family law attorney. So a couple will decide to get divorced, they both hire attorneys, and then the attorney will say, hey, I think we're gonna have some issues here. Whether it's determination of the lifestyle, determination of income, or if there's a business, if one of the spouses or both spouses own a business, you know, they will they'll bring us in to value it.
Karen Ortman 09:23
What does it mean to value something?
Noel Capuano 09:26
So, when you get divorced or if you have a shareholder dispute in Jack's case, you are basically arguing over the value of an asset. In a personal divorce, most people understand the concept of dividing bank accounts, the marital residence, the cars, all the personal belongings; what they may not understand is that oftentimes one or the other spouse's business is also considered to be a marital asset. Now, there are times where it may not be, but generally speaking, at least a portion of that business is considered a marital asset. So, all we're doing is putting a number on what the business is worth and that goes into basically goes into the pot of assets that then get divided between the two.
Jack O'Donnell 10:26
Let me follow up a little bit on what Noel said, essentially, from a valuation perspective, when we're valuing a business, I don't think many people will truly understand what it involves. And we've all on a personal level, bought and sold houses and you bring in a real estate agent, and they'll give you a value of what they think your house is worth. Normally they look for comps, they look at the neighborhood, they see what other houses have sold for them look like that house or are comparable in size and square footage of the yard and things of that nature. A business valuation is a little bit different. And, it's also similar. We do consult with what other businesses are sold for and what they normally go for in the way of their earnings potential, but we also look at their actual results, what kind of money that's thrown off to its owner, and then we capitalize that, and that becomes the value.
Karen Ortman 11:21
Okay, so do you typically handle the businesses associated with a divorce? And Noel would typically handled the personal financial impacts?
Jack O'Donnell 11:36
I think we both we both do, we both do that. Noel handles a little bit more of the personal aspects of going through to determine what their lifestyle is. We both also value the businesses, we're going to apply all our methodologies to, and they're basically financial models, with the purpose of substituting what an actual transaction would look like if somebody put their business up for sale.
Noel Capuano 12:05
And they're also you know, they're very intertwined. I think that most people may not understand that. I've referenced a couple times what's called a lifestyle analysis. That's basically taking a look at someone's personal finances for the last, you know, three to five years, we'll get all of their bank accounts, all their brokerage accounts, and basically put it into what almost looks like a budget. That becomes a snapshot of their historical spending for the last three to five years. Well, if we see, for example, expenses that might be missing from that lifestyle, so I don't see any automobile payments, I don't see any gas payments, or anything like that, and the one spouse owns a business, well, that's an indication that some of those expenses may be running through the business. So there, they are very intertwined. We have a very cash intensive business, we might recommend, more so than in another instance, that we do a lifestyle so that we can kind of see but you know, that stuff becomes very costly. So, it is kind of a juggling act in terms of trying to figure out what services they need the most, and how we can really kind of focus our efforts so that we can move them towards settlement and get them what they need, without spending fees unnecessarily.
Karen Ortman 13:28
Now, what are the benefits of forensic accounting services in divorce cases?
Jack O'Donnell 13:36
I think a lot of that would be that we're bringing financial expertise to a matter where, in most instances, attorneys are not experts in financial matters. I don't want to use the term accounting, but accounting is kind of our language. We're all looking at, you know, where money comes in and where money went out and what was being spent for it. Our role as forensic accountants is really to uncover what is not known and to follow the extent of that, to follow evidence that there may be some hidden bank accounts, there may be some undisclosed assets, like properties or vehicles, boats, planes, whatever, so that all of the assets now can be considered a part of the estate.
Karen Ortman 14:27
Got it. How does default divorce impact short and long term finances with respect to child support, alimony, investments?
Noel Capuano 14:40
I think it's really more of a kind of a simplistic fashion. So what you know the answer to the previous question that Jack just gave, when we're dealing with a personal divorce. A lot of what we're doing is just as Jack said, you know, we're kind of bringing clarity to a couple's financial situation which, believe it or not, many people kind of go through life with very little insight as to what they're spending, where their money is going, and all that type of thing. Really you're dealing with a situation where you have a couple, they have their marital partnership, and they're maintaining their household and they're raising their children, and now we're trying to separate that into two households, and splitting up all of those expenses for the kids and all that type of thing. Very often, it's very difficult to have two households operate in the same fashion in which the one was, and so you kind of need all of that information with regard to what you've been spending and what you've actually been making. Again, if you have someone that owns a business they're not looking at it in terms of what they're earning personally, they're looking at it in terms of what the business is making. Certainly the spouse that's not working in the business may have no clue what the business owner is making and or doing in the business. It's really just a question of getting all of that information together, and then sort of parsing it out. Also, now, on a forward looking basis, what are things going to cost? We know what the mortgage is for the marital residence, but what are things going to cost now when I have two households to support and now what, you know, what's my medical insurance premium going to be now that I'm not on my spouse's policy and all of that type of thing. So a lot, there's a lot that goes into it. And a lot of that stuff, you know, we don't necessarily get involved in, a lot of that is legwork that they have to do on their own. We do have cases where, you know, parties will come to us and say, hey, can you help us with trying to come up with a budget? And can you help me figure out ways that maybe I can cut down on my budget so that I can live off of this reduced income?
Karen Ortman 17:17
So how about when a divorcing couple’s financial situation is very bleak? How do you determine responsibility for debts, for example, when really, neither one is financially able to settle those debts?
Noel Capuano 17:41
We really don't get involved too much with that. So, in a personal divorce, we more often than not are really concerned more with determining, what is the marital balance sheet, if you will? What are the assets? How much are each of those assets worth? What are the liabilities, you know? And is there any portion of those liabilities that might be related to the business? So it's not personal, it's more business related. And then the parties’ kind of go forward from there, and it becomes more of a negotiation in terms of, can we take a tradeoff, you know, I won't take this asset, if you'll be responsible for getting my name off the debt, that type of thing. So it really kind of becomes more of a negotiation. We're more involved with just quantifying, you know, what there is to negotiate over.
Karen Ortman 18:46
Okay. Both of you have testified many times as an expert in court, can you share with our listeners, maybe an experience that each one of you had, why you were brought in, what sort of purpose you served in providing testimony, and the outcome of that?
Jack O'Donnell 19:10
I can give you both a personal divorce matter as well as a business divorce. I was involved in matter a few years ago where a business owner and his wife after 25 years of marriage broke up. It was a very contentious divorce. The husband moved out and just never moved back. He moved in with a girlfriend, which was not known at the time. And the wife decided to file for divorce but some other actions that I really don't want to get into, caused her to be quite upset. He was a business owner and he owned 40% of a business. It was very lucrative. They had a vacation home and things of that nature. So she, she filed for divorce and she hired a forensic accountant who made requests for just normal financial information that anyone would request. I got a call from the husband's controller of his company, saying that the court is requiring him to provide all this information and he doesn't believe that it's necessary. I spoke with him and went through the list and determined that it was just old normal things like tax returns and things of that nature. I said, you have to give it to them as part of the court. So then I got retained and got brought in. What was initially looking like was, my client was going to end up having to write a big check to his spouse. And, while we were going through all the records, there was a small line in the tax return for a partnership that the wife was involved in, and it had very little monetary activity, but they weren't giving us any information on it, so at one of the hearings I went and testified in court and said, this is important, because it's an asset that we need to know its value. And based upon the tax returns that we were provided, or the information on tax returns, it looked like very minor thing, but it turned out that it was a it was a company that the wife had a 3% interest in, but it was worth $88 million.
Karen Ortman 21:27
Jack O'Donnell 21:28
That swayed the whole calculation of the marital assets to the point where he was getting money as opposed to having to write a seven figure check. So if we weren't retained in that matter, he probably would have ended up having to write a big check. But long term, we found this out and were able to change the outcome.
Karen Ortman 21:50
Sure. A more fair outcome.
Jack O'Donnell 21:53
Karen Ortman 21:56
Noel, how about you?
Noel Capuano 21:57
So, you know, the majority of the cases that I've testified in have been personal divorces. And a lot of times what will happen in those cases is, again, because fees tend to be a little bit more, or the parties tend to be a little bit more sensitive toward the fees. a lot of times in those cases, the the attorneys will try to stipulate to as much as possible outside of the realm of my testimony. And so a lot of times I'm then brought in to testify to a very, very specific issue. For example, I've testified with regard to just specifically whether someone's distributions that they are receiving from their business should be included in their income available for support, or why that person's distributions, historical distributions, should not be considered in their support when the business has clearly demonstrated an inability to sustain those distributions. So like, really, really specific issues. I guess what I'd kind of like to highlight with regard to testimony is that a lot of times, and I think Jack will agree with me, people that are going through a divorce, whether it's a business divorce, or a personal divorce, a lot of people, they want their day in court, they look at it as some sort of vindication in the issue. The problem with that is that once you enter a courtroom, it's just no holds barred. I mean, there is if the judge doesn't understand what it is that you are trying to convey, you're really leaving your situation in his hands, in the judge’s hands. There's really no guarantee that they will be able to really fully understand what it is that we are testifying to. That portion of our job is not only to be able to convey our findings to our clients, but also potentially to a judge.
Karen Ortman 24:15
And a judge, because it judge is the finder of fact in these matters, because it's a civil proceeding.
Noel Capuano 24:21
Karen Ortman 24:22
So, as compared to a criminal matter where you have a judge and a jury and a whole slew of other court personnel, right. Um, so was the goal in divorce situations to settle?
Noel Capuano 24:38
Absolutely. You know, obviously Jack and I, we don't give legal advice, right. But, when you talk about, is it better to settle? That's not even legal advice. I mean, it's...
Karen Ortman 24:54
It's a practical matter.
Noel Capuano 24:55
Rarely is it is it worth it, unless you have and sometimes we do, if you have someone who just refuses to engage in any sort of negotiation, then you really have no choice. But, the cost of taking a case to trial, particularly again, in a personal divorce, that cost very often will exceed any incremental value that they're going to get. So I always encourage my, if possible, sometimes it's easier said than done, to try to put the emotions aside and focus on the facts and circumstances and try to arrive at a settlement.
Karen Ortman 25:40
Okay. So this is a question I actually have. Divorce is obviously a very traumatic event for many people, I'm not going to presume all people, maybe it's not, but for a large majority of people. When or if you recognize that somebody is experiencing the adverse effects of this process, do you ever get involved in providing resources, or like mental health resources to sort of help them cope with this process?
Noel Capuano 26:22
Well, sometimes that's where a case a case may originate, from a therapist. A couple may have gone through marriage counseling, the counseling broke down, they're now with their attorneys, and so they and then may continue to receive counseling throughout the process. I have had cases where, actually, any meeting that I have with this particular client, sometimes they want their therapists there, that has happened. We don't usually make the recommendation to a client, you know, hey, I think you might want to have some support here right. Very often where we are, you know, kind of that pseudo support, at least I try to be; I do try to not only focus on numbers, but on someone. I try to get to really know my clients and understand what their motivations are. I mean, you have to, you can't do this work in a vacuum, you're you are dealing with people, as you said, that are going through a very stressful time, whether it's a shareholder dispute. It could be an estate matter, so we're dealing with, you know, somebody's passing away, or a divorce. If you can't navigate those emotions, which very often will cloud someone's ability to engage in the conversations that you're trying to have, then you're not going to go very far. I have had cases also where an attorney may recommend to a client that they get kind of what's considered to be almost a guardian, so they have their attorney, but then they also have another attorney that's basically just kind of there for support and to almost like a double check for them to make sure that they under really understand the gravity of the decisions that they're entering into. Interesting.
Karen Ortman 28:22
Interesting. What are your positions on prenuptial agreements? Jack, what do you think?
Jack O'Donnell 28:34
I think they're smart. It's, um, I'm sure it's difficult. I don't have one. I've been married a long time. I don't have one. I didn't have anything when I did get married so there was nothing to protect. But, you know, in today's world where there's been so many divorces and remarriages I think it's just a very smart way to set aside the business side of a marriage so that when you're entering into it, there's an understanding and I know at times, very wealthy couples that get divorced, you know, they go back and challenge the prenup. I think it's a good basis to just establish the kind of the ground rules so that it's not a financial transaction when you're getting married, but more of just you're getting married because you want to get married.
Karen Ortman 29:28
You agree Noel?.
Noel Capuano 29:29
Yeah, I do agree. I think I also agree with Jack that, you know, you do see them get challenged very often, so I don't disagree at all that it can be a very useful tool. You just have to make sure that it's drafted properly and that you have, a very detailed and complete list of assets that you want to be excluded. Also that you're not signing it as you're walking down the aisle, because you're just opening yourself up to have it challenged.
Karen Ortman 30:04
What do you mean by that? As long as you're not doing it as you walk down the aisle?
Noel Capuano 30:10
Well, you know, because when you sign something like that so close to the marriage, it's you're just you're opening yourself up, you're giving the spouse who's giving things up the opportunity to say, well, that's...
Karen Ortman 30:25
...why you married him.
Noel Capuano 30:26
You know, I wanted to marry him or her and they were making such an issue of it, I signed it under duress. So, um, you know, these are these are just conversations. I think that, you know, if you're looking to start your life with someone, you need to become comfortable talking about finances.
Karen Ortman 30:48
Yeah. No, I agree.
Jack O'Donnell 30:50
Yeah, and I think that's probably the most difficult conversation is one party wanting a prenup and having to broach the subject to have a discussion without that person? The other person thinking, oh, they're already looking toward divorce and they're not even married yet.
Karen Ortman 31:05
And that's why I think this is an important conversation to have, because it is still one of those stigmatized subjects, finances, people are very uncomfortable talking about finances, even those who are entering into a marriage. Would you say that divorces are more often settled amicably, or less so, in your experience?
Noel Capuano 31:32
Well, depends on what you consider to be amicable. If you mean amicably with regard to not going to court, then I would say, most are. Most cases do not wind up going to trial. But, does that mean they're amicable? No.
Jack O'Donnell 31:48
I think if they're truly amicable, we wouldn't even be involved.
Karen Ortman 31:51
Jack O'Donnell 31:52
The two parties would be able to split up their assets, decide on custody and how they are going to handle their separate lives, but with the tenants of children and things, they can work with that and come to the attorney of the end this area put this into an agreement.
Karen Ortman 32:06
Noel Capuano 32:06
Yeah, I have had cases, honestly, one or two, that were really, truly amicable where I literally, it was very sad for me, like, I would leave my meetings with them and think, I don't understand, I mean, but they just truly had just grown apart and, you know, wanted to move on with their lives. They really had no issues. I've also had cases where that can be a real hindrance to, because they're amicable. On the one hand they're acknowledging that they want to get a divorce, but they're not quite ready to make that final break, so then the case just drags on for years. They find reasons not to, again, they're amicable now, they agree on how to divide things, or whatever and the issues become very, very trivial. It really becomes very clear that they're just not ready to cut the cord yet.
Karen Ortman 33:11
Have you ever had a couple in that position where it's a protracted process and in the end, they remain together?
Noel Capuano 33:22
No, but I have had cases where they've gotten remarried.
Karen Ortman 33:26
Noel Capuano 33:28
Yeah, I have.
Karen Ortman 33:29
Okay. Are there systems in place to constructively address financial protection for couples not yet married, but preparing for marriage, you know, other than the prenuptial that we spoke of?
Noel Capuano 33:45
Well, I would say in business, Jack, I think you'd agree, that would be making sure that you have the proper, you know, operating agreements, shareholder agreements, and all that type of thing. So in a business sense,, protecting against issues in a business divorce, I think there's a lot more preparation and, you know, things that you can do to kind of safeguard against, you know, long protracted issues, with the exception of being perhaps a suppressed shareholder or an oppressed shareholder. In a personal sense, not really. Other than a prenup, I mean, there's really nothing.
Jack O'Donnell 34:38
And just to follow up on what Noel said, more about the business divorces, I would say probably 50% of my practice is dealing with matters where the operating agreements, the initial documents when they were forming their business together, weren't adequately prepared. They went on the internet, and pull some random document that some legal website has. They use that and change some terms to it instead of truly thinking through all of the ugly scenarios that could play out. Usually what happens is they end up splitting up and they want to go their separate ways, and we have to determine how much the business is, but then they're fighting over all these things that weren't addressed. That's where we get a lot of work.
Karen Ortman 35:26
So you recommend avoid those sorts of websites?
Jack O'Donnell 35:31
Yeah. Well, or retain an attorney who's experienced in putting those deals together, not just the general practitioner, and this may be a side light, because they may not consider a lot of things.
Karen Ortman 35:44
Got it. What financial advice would you give a couple considering marriage right now?
Jack O'Donnell 35:54
Karen Ortman 35:58
As and save money?
Jack O'Donnell 36:00
Yes, yes, put a budget together so that some money goes towards savings. I think that the financial pressures of today's world really put a strain on a marriage. And if you can come up with a budget that you can both live with, but at the same time, you're also putting money away for the future? I think it goes a long way in preventing arguments and disagreements and also communication. Yeah, just keep communicating.
Noel Capuano 36:31
I agree with the communication. I think, you know, my advice would be to be a participant, engage in those conversations surrounding a budget. Understand what it is that your potential spouse does, understand their job, understand how they're compensated, you know, do they get stock options, and you know, non cash compensation? What kind of benefits do they get from from their employment? Be an active participant, and likewise, share your information as well. That's your first real opportunity to become partners in this, you know, in this partnership? It is a business venture to some degree., and, the more comfortable you become having those conversations, the less likely it is, you know, down the road when there's kids involved, and there's very little time to talk to each other about anything, let alone finances, the less likelihood that those financial issues become issues that drive you apart.
Karen Ortman 37:45
Now. Are there any financial resources that you're aware of, either one of you, that would be helpful to somebody, to a couple who really is maybe not proficient in handling finances and resources they could learn from? Anything out there.
Jack O'Donnell 38:09
I think there's credit counseling services that could, that's kind of the in their wheelhouse, teach you how to budget your money and not living on credit cards and buying things that you really can't afford and to just to divert a little bit,. A few years ago there was a revision to the bankruptcy law that requires people that are, before they even file for bankruptcy, you have to go to credit counseling.
Karen Ortman 38:38
Jack O'Donnell 38:39
To kind of teach them to avoid going into bankruptcy. That's what happens in those situations, you have someone, a counselor on the phone, they'll get information about your financial situation, and kind of guide you that this is what you need to do.
Noel Capuano 38:54
Yeah. You know, and I guess it is kind of alarming that I feel like the younger generation these days, they're making a lot more money. At the same time, I mean, they really, I mean, I think when we graduated college, and I guess it's, you know, maybe it's relative, but we weren't making that much, we couldn't get into too much trouble with the money that we that we were making. Nowadays, you have very young kids making really, really good money. A lot of them are really, like you said, that they're just kind of floundering out there and really don't have a solid foundation in terms of how to manage money. By the same token, I know that a lot of high schools, for instance, are starting to offer courses in financial literacy. I know that my girls had that in high school. You know, how worthwhile was it? I think it was it was worthwhile just from the standpoint that it gave them just an introduction and a familiarity with how to maintain a checkbook and all those sorts of things that, our kids graduate, and they're just kind of on their own. A lot of us didn't really necessarily have the time or even think of, you know, sitting them down and saying, hey, look, this is this is the way you do this.
Jack O'Donnell 40:14
Also, they need to learn the value of $1. What I mean is, when you put money away how that can grow. Also, when you're borrowing money, especially on a credit card, how much more it takes to pay that off if you pay it off over time. I think people want that instant gratification. They see it, they have a credit card with that available credit, they buy it, and then they're paying the minimum payment, and they get themselves in a jam, because now they probably paid three times what that thing was worth before it's paid off. And sometimes they never get out of that hole. So as Noel said, I don't know if schools are teaching that now, but I would recommend it. To me, I think it's a requirement that everyone should have some sort of personal finance class, to understand how money works, how budgeting works, how to live within your budget, and how you can invest and make more money.
Karen Ortman 41:13
Yeah, agred. If someone is seeking the services of a forensic accountant, must they be referred by an attorney, by a marriage counselor by some professional? Or can they just walk off the street into your offices and say, I need your help?
Jack O'Donnell 41:31
They can do that and they do. I get phone calls from people interested in hiring a forensic accountant. They don't know exactly what we do, but they know, we're here to help them in in a financial dispute. If you wouldn't mind, I'll tell you a story that's actually rather comical. I got contacted by a woman, and a relative of hers was a majority shareholder in the business with her. She thought that relative was stealing money from the business and she wasn't financially astute. She let her mind run wild, and so she said, I was looking for a forensic accountant and I got your name. I said, where did you find it? She said, found it on the internet and I want to retain you. I said, well, have you hired an attorney? She goes, no, not yet. I said, well, here's how we normally work. We, if it's a substantial matter, we like to recommend working through an attorney because most likely, you're going to end up in some sort of official dispute, whether it be arbitration or litigation, things of that nature. So in this matter, I pulled an attorney and recommended him and he got hired along with myself. At the end of the day, after we got the records, it was determined that this other shareholder, who was a relative wasn't stealing from the business, but it looked like it from her cursory review of the accounting records. What that person was doing was using their personal line of credit to keep the business afloat and they were actually owed money. So at the end of the day, we had explained that to her, but in her mind, she had it in her head that this person had stolen upwards of a million dollars, and she couldn't wait to see them, you know, get handcuffs put on, and waltzed away to jail. At the end of the day, we're pointing out that well that the business actually owes that person money.
Karen Ortman 43:27
Like a million dollars?
Jack O'Donnell 43:29
No, but it was about $100,000 at the end.
Karen Ortman 43:31
That's still a lot of money.
Jack O'Donnell 43:32
But it was substantial amount of money that the business owed that person and that person had invested a lot of personal funds to keep the cash flow and the business running.
Karen Ortman 43:42
Well, I thank you both. Is there anything that you would like to add that I have not asked?
Noel Capuano 43:55
I don't think so, I think that ultimately, just to kind of piggyback off what Jack just said, you know, you can certainly hire us individually, but more often than not if you're finding the need to hire a forensic accountant, there is some legal issue. We really are part of a team and I think a lot of times it's better to have an attorney involved. Just because you know, we work together to bring clarity to the issue, and a lot of times and I'm sure jackets this to, a lot of times I will have clients that are asking me questions that are at the end of the day, legal questions that really do need to be addressed by an attorney.
Jack O'Donnell 44:46
I think that the only thing that I would like to add is, especially and it's more in the personal divorce side as opposed to the business side. There's an emotional aspect to this two people's lives are getting completely up ended and the person that's coming to you because they need your advice and your expertise as a financial expert. They're looking for some stability. At the same time, they're bringing what may be an exaggerated understanding of a situation or transactions. As I just pointed out where this one shareholder, and it happens very few times that I've seen in business divorces, because it's all about the money, with personal there's an emotional aspect to it. With that matter there was and I think they tend to exaggerate what they're seeing. I know Noel and I've talked about where we've had clients come in and say, you know, my husband always has $1,000 in his wallet he’s got to be making cash on the side that I don't know. They're creating this ghost that may not have any backing and they'll end up spending a lot of money for us to try to prove that wrong, because our job is really to get to the truth, right. Really, that's our true role. It's not to come in and testify so that my client gets the most money, we have no credibility, then our job is to really get to the truth and tell the truth. Then, we have credibility. Unfortunately, sometimes our client may not want that, but they want to put an X on the other person's head.
Karen Ortman 46:27
Right. So it's really a team effort, and there's a lot of disciplines that really should be involved to figure out where the truth lies, I guess.
Jack O'Donnell 46:40
Karen Ortman 46:41
So I think this, this conversation regarding finances is important and I appreciate the two of you. I know you're very busy. I appreciate you coming and speaking to me on You Matter. So, thank you.
Noel Capuano 46:58
You're very welcome.
Jack O'Donnell 46:59
Thank you for having us.
Karen Ortman 47:00
So thank you to my guests once again, Noel and Jack, and to all of our listeners for joining us for today's episode of You Matter if any information presented was triggering or disturbing, please feel free to contact the Wellness Exchange at 212-443-9999 or NYU's Department of Campus Safety and their Victim Services Unit at 212-998-2222. Please share, like, and subscribe to You Matter on Apple Podcasts, Google Play, Tune in or Spotify.