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Getting Out Of Dodge

By Rob Lambert - Email Editor

Date : Nov 30, 2006

Dear Subscriber:

I hope you had a great Thanksgiving.

Before we get to the grist of this newsletter, I want to outline my two key rules of Asset Protection:

Rule One: What you don't own can't be taken from you.

Rule Two: No country in the world automatically enforces U.S. judgments.

These two simple rules form the foundation of most solid Asset Protection structures.

Rule One is normally satisfied when an asset is put into a properly designed Kinetic Asset Protection Trust. I have talked about this a lot in the past and will not revisit this issue again here. It is sufficient to simply realize that most solid Asset Protection Trusts are structured so that the assets in the trust are not included on your balance sheet applying generally accepted accounting principles. Thus, assets in a trust are off your balance sheet and logically “not yours” to take. As long as the transfer to the trust was not fraudulent, the trust should hold up, and creditors should be unable to get to the protected “stuff” in the trust. Unfortunately, it is never this simple. If it were, domestic Asset Protection Trusts would be in favor because they would work. The reality is any judge, rogue or not, can get to any domestically protected assets because he can undo even the best domestic Asset Protection structures (including trusts) with the stroke of a pen.

This propensity of judges to redistribute wealth and ignore the law when it suits their purposes is what makes my second rule of Asset Protection important. Sometimes it is important to get out of Dodge by removing assets from the reach of any and all U.S. judges. Of course, this makes them mad (sometimes) but it is mighty effective.

Getting out of Dodge does a lot more than removing any power U.S. judges have over the assets. There are many other implications. Most of these implications come from a longstanding rule of international law that courts in one country do not recognize judgments from another country. The most important statement of this doctrine (which you should skip unless you enjoy legal jargon) comes from the U.S. Supreme Court in 1895 in the famous case of Hilton v. Guyot. The Court stated:

“[N]o law has any effect, of its own force, beyond the limits of the sovereignty from which its authority is derived. ... Further, the decision of this court have clearly recognized that judgments of a foreign state are prima facie evidence only, and that, but for these constitutional and legislative provisions, judgments of a State of the Union, when sued upon in another State, would have no greater effect. Lastly, in holding such a judgment, for want of reciprocity, not be conclusive evidence of the merits of the claim, we do not proceed upon any theory of retaliation upon one person by reason of injustice done to another; but upon the broad ground that international law is founded upon mutuality and reciprocity, and that by the principles of international law recognized in most civilized nations, and by the comity of our own country, which it is our judicial duty to know and to declare the judgment is not entitled to be considered conclusive."

The implications of this second rule of Asset Protection are profound. The bottom line is that the U.S. judgment creditor is forced to re-litigate his case abroad, often in a hostile environment. At the very least, the creditor will have to locate, retain AND PAY COLD HARD CASH to foreign counsel to have even a chance to get the judgment enforced in a foreign country. Of course, as my regular readers know, by the time the judgment creditor gets around to this, any reachable wealth will have left the jurisdiction. It is a matter of pure economics. Any solid Plan makes a creditor spend dollars to collect pennies.

Since most litigation is brought to make money and not on principle, the frustrated creditor will normally settle for pennies on the dollar.

I hope this tidbit was helpful.

I wish you a healthy and protected week.

Rob Lambert

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