Question

1. Given the following scenario and facts, compute the subject’s funds from unknown sources using the net worth method of proof.

Scenario Richard Ross operates a flower shop downtown. It is alleged that this business is a front for his bookmaking and loan sharking activities.

Facts:

a. You find a financial statement signed by Ross and dated December 31, 1998. The statement indicates that Ross had $1,000 cash on hand.

b. Ross has a checking account that he opened on June 1, 1998. His balance as of December 31, 1998, was $4,000. During 1999, Ross made total cash deposits of $30,000 and withdrawals of $25,000. His balance as of December 31, 1999 was $9,000. During 2000, Ross made total cash deposits of $25,000 and withdrawals of $32,000. His balance as December 31, 2000 was $2,000.

c. A search of your county real estate records shows that Ross purchased his present home in 1998 for $130,000 and that he obtained a $100,000 mortgage. Real estate taxes on the property amounted to $1,500 for each of the years 1999 and 2000. Contact with the lending institution shows that Ross made monthly payments of $1,000 to the lending institution during the subject years. The mortgage balances are as follows: 12/31/98 $98,000 12/31/99 $96,500 12/31/00 $94,500 Interest payments are as follows: 1999 $10,500 2000 $10,000

d. Ross bought a new car in April 1998. He paid $25,000 cash.

e. City records indicate that Ross applied for a building permit in 1999 for the construction of a swimming pool in his backyard. Contact with the pool construction company reveals that Ross paid $20,000 for the pool. He made a $10,000 cash downpayment and received an interest-free loan from the pool company for the remaining $10,000. The pool was completed in June 1999. Ross made monthly payments of $500 to the pool company. The loan balance on December 31, 1999 was $7,000 and December 31, 2000 the loan balance was $1,000.

f. An informant stated that since 1998, Ross had maintained a $1,500 a month apartment for his girlfriend, Mary Perry. The informant’s information was verified as being accurate.

g. During your investigation, you find that on February 28, 1999 Ross purchased a Rolex watch for $25,100 cash and on December 23, 2000 he paid $15,000 cash for a ring.

h. During an interview with Ms. Perry, she told you that in addition to the apartment, Ross provided her with a new car that he leased on January 1, 1999. Contact with the auto leading company revealed that Ross made lease payments of $300 per month during 1999 and 2000.

i. Information obtained from a local boat company shows that Ross purchased a boat on June 4, 2000 for $24,000.

j. The county judgment index shows that Ross borrowed $5,000 from a local finance company in 1997. He has never made any repayments.

k. Records of the local travel agency disclosed that Ross took Mary Perry on a vacation to the Orient in 2000. It cost $12,000.

l. You interviewed Ross and he showed you the books and records for his flower shop that indicated that he had a net profit of $40,000 in 1999 and $45,000 in 2000.During the interview Ross stated cash on hand in 1999 and 2000 was zero.

2. Given the scenario and facts listed in problem 1, compute the subject’s funds from unknown sources using the expenditures method.

3. Given the scenario and facts listed in problem 1, compute the subject’s funds from unknown sources using the bank deposit method.

Answer 1