Welcome to the first edition of Follow the Money—my new monthly series on the real world of forensic accounting. After years spent sifting through ledgers, bank statements, and the occasional financial garbage bag disguised as bookkeeping, I’ve come to appreciate just how much finding a single transaction or small series of transactions can change the direction of an investigation. This series is designed to share some of my professional real-life lessons: practical techniques, patterns that repeat across industries, and financial behavior that often says more than a witness.
For this opening article, I want to start with an issue that sits at the core of many disputes: Hidden Transactions. These aren’t simple mistakes or sloppy accounting. I am talking about deliberate, deceptive financial moves designed to hide certain transactions and assets. Finding such evidence can transform a routine disagreement into something far more serious.
When the Transactions Tell a Different Story
Long before any issues surfaced publicly, Crazy Eddie appeared to be a growing and successful retail operation. Stores were expanding, sales were growing, and the company’s financial results seemed to support the growth and strength. What wasn’t visible was that cash was steadily being taken out of the business through sales that were never recorded.
As the company later positioned itself to go public, that earlier activity began to surface in a different form. Money that had previously been pulled out was routed back through foreign accounts and related entities, eventually reentering the company in ways that appeared legitimate on the books.
Viewed in isolation, none of these transactions drew much attention. The issue only became clear once investigators reconstructed the flow of funds and analyzed; where the money originated, how it moved, and why those movements occurred when they did. At that point, the reported financial performance no longer aligned with economic reality. What began as a routine securities review expanded into a far more serious fraud investigation that ultimately brought the entire company down.
That dynamic—where a pattern of seemingly ordinary transactions reshapes the entire understanding of a case—is something I see repeatedly in modern disputes.
What Exactly Are Hidden Transactions?
At its core, hidden transactions are financial activities that are intentionally structured to avoid detection. These might show up as:
- Payments routed through unrelated entities
- Invoices that look legitimate but aren’t tied to any actual service or purchase
- Transfers timed to avoid financial reporting
- Transactions “buried” in unrelated General Ledger accounts
- Funds moved through a chain of entities and transactions, so no single step looks suspicious
One case that illustrates that and sticks with me involved a partnership dispute where everything looked perfectly normal—until we noticed a recurring payment labeled “subscription” to a vendor that, as it turned out, didn’t exist. The “vendor” entity had been formed three months earlier and dissolved quietly after the payments stopped. This forensic finding changed the entire direction of the case.
This scenario also illustrates how hidden transactions surface: often not with a dramatic revelation, but with a minor inconsistency, which, when investigated further, doesn’t line up with the story the numbers are supposed to tell.
Why Hidden Transactions Matter in Litigation
When a hidden transaction comes to light, it rarely stays isolated. Proverbially, if you see one cockroach, there are others! In my experience, these initial discoveries lead to:
- Reinforcement of allegations of fraud and self-dealing
In shareholder disputes or partner conflicts, identifying undisclosed or hidden transfers often establishes breaches of fiduciary duty, embezzlement, and other illicit activities. - Revelations of concealed or dissipated assets
This situation comes up frequently in cases involving marital business interests, dissolving partnerships, or financial distress. Money that “disappears” rarely does so without a trail. As the saying goes…”Follow the money!” - Point to regulatory issues no one initially expected
Payments structured to appear innocuous may actually lead to price fixing, kickbacks, collusion, tax or monetary compliance violations.
Here is an illustration of a hypothetical scenario that mirrors situations I’ve investigated. A manufacturer suspects overbilling by a long-time supplier. The general ledger doesn’t show anything out of the ordinary. But once we trace the payments further, we find a pattern of rebates funneled back to a few executives through related vendors. Suddenly, the case is no longer about billing errors—it’s a deliberate kickback scheme.
How We Trace What’s Meant to Stay Hidden
Forensic accounting isn’t about having one magical tool. It’s about layering multiple approaches and methods until the picture becomes clear and the truth is revealed. Here is a sampling of the techniques we use:
Data Analytics and Pattern Recognition
Large datasets reveal behaviors people don’t expect anyone to notice: repeated transfers just under reporting thresholds, payments clustered around critical events, or unusual vendor activity.
Document Reconstruction
Pulling together shipping documents, invoices, emails, banking information, internal communications, and tracing transactions through the accounting processes often reveals inconsistencies that aren’t obvious in isolation. A two-line email can sometimes reveal what a hundred-page spreadsheet tries to obscure.
Interviews and Legal Tools
Speaking with employees, reviewing internal messages, or using subpoenas to obtain third-party records often provides the missing link between financial reality and illicit intent.
The investigative process requires systematic analysis and patience. Hidden transactions are built on complexity. Our job is to simplify that complexity until the economic reality is revealed.
What Businesses and Litigators Should Keep in Mind
If you’re involved in litigation—or operating a business where money flows through multiple hands—there are a few lessons worth remembering:
- Strong, properly designed internal controls are cheaper than the cost of uncovered fraud.
- Early forensic involvement often prevents wasted time and misdirected discovery.
- Even the most carefully concealed transactions leave some form of footprint.
- The objective isn’t just to find the money; it’s to understand the motivations and intentions behind it.
At the end of the day, tracing hidden transactions is less about fancy spreadsheets and more about clarity of what actually took place. When you uncover what a bad actor tried to hide, the rest of the case often begins to unfold and make sense.
AUTHOR BIO:
Charles “CJ” Pulcine, CPA, CFF is a Manager in Smolin’s Forensic and Valuation Services practice, specializing in forensic accounting, fraud investigations, and litigation support. He is a licensed Certified Public Accountant in New Jersey and holds the Certified in Financial Forensics (CFF) credential.
With more than seven years of experience in forensic accounting, financial audits, and fraud investigation, CJ works with businesses and legal counsel on financial fraud investigations, commercial litigation support, matrimonial litigation, business valuation analyses, and shareholder disputes. His work focuses on uncovering hidden transactions, tracing assets, and analyzing financial misconduct.
As a member of Smolin’s forensic team, CJ supports attorneys throughout the litigation lifecycle, including asset tracing, damages analysis, and preparation of financial evidence for mediation, depositions, and trial. He practices out of Smolin’s Red Bank, New Jersey office.
