The Akiona Law Podcast: Featuring Mark Martinez

In this episode of the Akiona Law podcast, Ululani "Lani" Akiona speaks with Mark Martinez, a Marine Corps veteran and founder of Red-3 CPA and Forensic Accounting. Mark uses his sharp eye for financial discrepancies to help individuals and legal teams find "the truth behind the numbers." Tune in as we break down exactly what a forensic accountant does, how they uncover assets people are trying to hide, and what you should do if you suspect financial dishonesty in your own case.

Transcript

Speaker 0:11

Hello, and welcome to another episode of the Akiona law podcast, where in we talk about anything and everything that intersects in the world of family law and divorce. And today I have with me I'm thrilled to welcome Mark Martinez. Mark is a Marine Corps veteran and the founder of Red 3's DPA and forensic accounting. Mark is armed with a sharp eye for financial discrepancies and he has a background in finances, economics, and accounting. Mark specializes in giving businesses, individuals, and legal professionals the tools they need to prepare for the future. Mark is a certified public accountant in Washington. He's a certified forensic accountant, and he's a registered forensic investigator with the American Board of Forensic Accounting. Welcome to the Aki on a law podcast, Mark.

Speaker 1 1:09

Thank you. I'm glad to be here. I appreciate the invite and the opportunity to have this good conversation.

Speaker 1:15

Yeah, and I'm excited to have Mark here because I was at a continuing legal education lunch thing where Mark gave a presentation and it was about forensic accounting. And it's something that comes up a lot. So and that's why I'm excited to have you on here, Mark, because what it is is that people always have this concern with, I think my spouse is hiding money. What do I do? So let's just get into it. Mark, what is a forensic accountant?

Speaker 1 1:44

Yeah, so forensic is just kind of a fancy word for suitable in court, right? So um I, as a CPA and a forensic accountant, uh dig into the financials, specifically the financials, right? Um, and see where the money went, where if if it's being hidden somewhere, um, if there's if there's unreported revenue in a company, that sort of thing. So I dig in and find the details that essentially people are trying to hide, and then uh would repair prepare a report that would be suitable for court. And um I'm able to testify. I'm an expert witness, um, and uh really kind of just supporting what the client is is uh the client side. But specifically, like I'm finding what the truth is, right? Finding the truth behind the numbers is is really what what I try and do.

Speaker 2:39

Finding the truth behind the numbers. I love that.

Speaker 1 2:42

Yeah, you know, you let the numbers tell tell the stories as a as a good line, uh standard line in accounting, right? Because you have you have hopes and dreams and plans and all those things that you want to do either with your business or with your savings. Um, you know, you're trying to plan for your kids uh uh college fund. But when it comes down to it, it's it's it's like your actions speak louder than your words. The the financials and the numbers speak louder than your words as well, sometimes.

Speaker 3:12

You know, Mark, you have a you have a really interesting background because you you're you're a Marine Corps veteran. So how did you get into the world of forensic accounting?

Speaker 1 3:22

Uh good good question. So um, yeah, I know I spent I had two combat deployments in Iraq. I was a M1A1 tanker, but right there. There's my tank. Um, and uh I oftentimes had my guys who we were we're at in 29 Palms in the middle of the desert. There's not a whole lot to do. So after a year, I had two guys who had $10,000 in a checking account. I'm like, guys, you you gotta do something with that, right? Put it in a 401k, open up a Roth, put it in a money market, a high yield money market account. And they're like, I don't even know what that is. I'm like, okay. So try and work with the guys to show them, you know, what a Vanguard account is and that sort of thing. Um, all the time, like I was learning myself because at the time I I was enlisted, I didn't have a degree in accounting. Um, and then when I got out of the Marines, I looked around and uh people I knew, people in my family um who otherwise did well for themselves. Um, and I had an uncle who was the treasurer for mobile oil overseas. Wow. He did pretty well for himself. And I just thought I'll just go do what that is, what he does. And he did finance, right? So his degree was in finance. So um I started uh at uh Bellevue College, it was Bellevue Community College back then, and then uh transferred to uh Seattle U to got my degree in accounting, worked for a big four, KPMG. Um I did some small public uh some small uh private companies, um, small small CPAs, one two member CPAs. And I'll be honest with you, I learned a lot doing small business finances. Um it was, you know, it's you know, it's it's it's Mike's Mike's tools and trucks, right? And the difference of $500 means that he's not getting a paycheck that week, right? Because it's his business. Yeah. And it's these people, it's like these people's baby, and you know, they really close to it. And so, you know, you learn a lot of good uh bedside manner. Um, and you go to go to a couple of times I had to tell a client, okay, you've got $10,000 worth of checks to write, and you've got $8,000 in the bank, so mail these ones now, and then when you make some deposits, mail these ones. Um, they're they're due in 15 days, so you have time. And just helping people manage their business like that to the point where, okay, I've had I had three businesses that grew to the point where they instead of hiring me as a consultant, they hired a full-time bookkeeper, right? So helping people grow their business like that. And that was honestly, that was that was pretty amazing.

Speaker 6:15

Yeah, that's exciting.

Speaker 1 6:17

Yeah, and then uh, and then most recently I was a corporate controller for you know hundred million dollar companies, um, and uh had a lawyer friend who said, Hey, I need uh CPA work. There's not enough CPAs who are supporting family law and law in general. And uh, if you want some work, it's you know, I can I have work for you. So um, you know, renovated this room, painted the walls, and got some decorations and and uh got a couple of additional certifications. I've been a CPA for um so got some additional certifications and now, yeah. So it's uh it's been a good journey to from the beginning to where I am now. Being a Marine, telling people having money in a checking account is not you're not letting your money work for you to now trying to find all the money in all the checking accounts.

Speaker 7:13

That's neat. And uh, I must say that I love the paint color that you picked. It looks like a gray blue.

Speaker 1 7:18

Yeah, it's uh right. I wanted to make it lively and everything. So I don't want to, but not like not like uh a plain white you know office. So yeah.

Speaker 7:29

But you did a good job.

Speaker 1 7:30

Thank you, thank you, appreciate it.

Speaker 7:32

Uh so when so we we're talking about now, now you're looking at people's checking accounts to see, you know, where's the money going? So that brings me to my next question, my next question. When should someone hire a forensic accountant?

Speaker 1 7:48

Yeah, so um really the question comes down to, you know, you're you're you're separating or you think that uh sibling A, who is mom's trustee, is mess spending mom's money inappropriately. Um you're a business owner and you your your senior person or the uh your other partner uh is is uh not tell you think they're not telling the truth. Well, that's where someone like me comes in place, right? So I I review financial statements, I review bank statements, and it's really to come down to like really, like I said, you let the numbers tell the story, right? Where did the money go? If you're getting a divorce, you have to worry about you have to do things, um uh your financial declaration, and how do you split money and how much income are you really making? That sort of thing. And so it comes down to you and your ex-spouse, soon-to-be ex-spouse, how much are you really making? So it comes down to finding what the truth that can be presented in court really is.

Speaker 8:59

Yeah, because I like what you you said in a way, because the numbers don't lie, right?

Speaker 1 9:03

Yeah, if if you if someone is claiming that they only make sixty thousand dollars, but they you know drive a Mercedes and live in Bellevue, uh I mean that could happen, but probably not, right? So you do a lifestyle analysis and say, well, where is all their money coming from? And how are they supporting this really nice neighborhood with you know high tax rates and a super nice car and that sort of thing? So you you do the analysis and say, well, they said this, but the evidence shows this other thing.

Speaker 9:38

Well, Mark, that's what what's a lifestyle analysis?

Speaker 1 9:41

Yeah, so a lifestyle analysis is you go, uh you go in and start with the spending, right? Well, what are the outputs? Right? You the income is separate. Okay, so you have a mortgage, you're sending your your kid to a private school, um, you have a really nice car, and you go on, you know, $20,000 vacations. So those are uses of funds that you need to support. And if the uses of funds are higher than what's being reported as income, you have a disparage, that disparity there. And so if someone's saying, like I said, you only make $60,000, but you've got $100,000 worth of expenses a year, including savings and all of these other things, you've got to go and find where the other part of the money is coming from. So a good example would be you're a business owner and uh, like I said, you're going on $20,000 trips, but you you represent that as a business expense. So the business is technically paying for it, but it is money available for the household that would otherwise be household income. And uh a lot of people try and push their you know trips to Vegas, two-week trip to Vegas or to Hawaii or whatever, and they they spend one day in a seminar and it's trying to expense the whole thing. IRS doesn't allow you to allow you to do that. If you're gonna go for two weeks and uh go through one seminar, you only get to claim one day, right? So the twenty thousand dollars a thousand really quickly, and that that difference that is what would be attributable to household income um for for both parties, right?

Speaker 3 11:28

So okay.

Speaker 1 11:39

Okay, is only limited by the imagination. Ah, I see, right? So you really have to go and look and see what the details are, you know.

Speaker 11:50

So just in terms of so that that lifestyle analysis then helps is part of the part and parcel of the forensic accounting to determine what the income is available and where is it going.

Speaker 1 12:03

Right. If you have two people, um, you know, again, uh my wife has been a stay-at-home mom ever since we got married, right? And say that's the the situation of a couple, another situation of a couple getting divorced. And they are going to Hawaii, you know, two times a year, and they both drive really nice cars, and then all of a sudden things don't work out and they gotta split up, and one person, the husband is saying, uh, hey, I only make, you know, I only make a hundred grand a year, but they had two hundred thousand dollars worth of expenses, right? So it's it's and and that goes to the fact like how much child support is there gonna be and how much uh spousal support, if any, there's gonna be um based off of the facts and circumstances for that case. So you'd you'd certainly the difference between $100,000 and $200,000 is significant when you start talking about things like child support and and uh and spousal support.

Speaker 13:03

Yeah, I had a case where the uh the my client was a business owner. Uh the wife was a stay-at-home mom, you know, she maybe worked part-time jobs here and there. And so the her attorney was like, your client makes a lot of money, he's making a lot of money, he can pay this much. But when it came to because you know, they're they do this and they do this, but when it came down to it, what happened was my client was not paying his business taxes.

Speaker 2 13:31

Yeah.

Speaker 13:32

Yeah.

unknown 13:33

Yeah.

Speaker 13:33

So there's a huge tax debt. And it's like, no, he doesn't have instead of paying his business taxes, he was diverting the monies to the family so they could go on these vacations.

Speaker 1 13:45

Right. Well, so then that that is a separate issue when somebody isn't paying their taxes and it's a business, specifically if it's a family business, they're the IRS kind of doesn't really care. They just want their their money, right? So uh that is when those sort of things, excuse me, can be how should I say this right nicely, um, tactics in your case? Because if it turns out that the person isn't paying taxes, um do you like I have had that and I have counsel Clyde, hey, I know what you want. This is what the situation is. If you bring these things forward, you, my client, will be liable for these taxes. Yeah, so how do you want to handle that? Do you want to say, hey, we have found this is the situation, and there is, I'll make up a number, $60,000 in back taxes over the next three years. Do you want to bring that into evidence and part of the mediation and potentially into court, where now it is, you know, you're testifying under oath that you know that you did this, or do you want to settle outside? And as the CPA, I gotta tell you, you need to pay your taxes appropriately, right? But and I don't have client, that's a good point, uh specific point. I don't have uh client privileges. Um, I'm not a lawyer, CPAs don't have um don't have privilege like that. So that's why typically I'm always engaged uh to work directly for the lawyer, and so my work becomes lawyer work product, which is privilege. So um, so yeah, that's kind of the uh an aside. Well, actually an important aside, but um the issue is if if there's issues like that, they come to light very, very quickly. I mean, the details in a tax return. I I'm actually surprised. It was funny. I'm I'm in a tax group where we meet once a month. I'm surprised how many bookkeepers just let you let the client do whatever and don't ask questions. And just like of course, all of these Venmo payments are business expenses when it turns out they're all child care or food and stuff like that, which is generally not a business expense.

Speaker 16:13

So that is true, you cannot run child care expenses through the business. I've seen it happen before.

Speaker 1 16:22

Yeah, yeah. I had I had a client um whose uh spouse was um working less. That she was, I don't know why she was working less, but she was working less and she wanted to adjust, and the ex-husband was working more and she wanted to adjust uh uh child care payments. I I see your tax return, and there's child care in in her business that's decreasing her business income. And she even threw she sold her car and claimed a business loss on this car that was gifted to her. I'm like, these like those are not business expenses, and so I I um for someone like me who really wants to like like be in integrity, like I be integrity, right? So it's right because it's right and it's not right because it's not right. And to see all of these people in my profession that like okay, I'm a CPA, not a bookkeeper. Okay, it's a distinction, but to see the bookkeepers like let run stuff through like that and uh let and and then it ends up on a tax return, it's just a little frustrating for me.

Speaker 17:33

Okay, got it.

Speaker 1 17:35

Yeah, just a personal, just a personal thing because you really you know, when you're gonna testify in court to this issue, right? Like your word and your reputation is on on the line. Um of the reasons I'm no longer uh uh uh a corporate controller is I had a I told my boss, I'm like, hey, if we do, if we run the the website like this, we're gonna run into these three issues and we're gonna potentially have to file income tax in every state that we sell to. And he was like, Mark, who's gonna know? I'm like, that is the wrong answer. You you have to do things the right way. So that's that brings me full circle because when you're your your soon-to-be ex-spouse or your you know your mom's trustee is using money for their own benefit, that is not their money, or they're hiding money in a in a divorce, that's where guys like me come in, people like me come in to find those issues. I'm like, yeah, you you renovated your house and you put all of the $150,000 as a business expense, and that's why you're showing $60,000 worth of income because you had $150,000 expenses that were personal expenses to renovate your house through through your business.

Speaker 19:03

So you ran it through the business, yeah.

Speaker 1 19:06

Yeah, it's uh yeah, it's it's it's amazing. The uh the it's only limited by somebody's imagination.

Speaker 19:14

Yeah, the creativity. Well, and that you know, and so that's why you need to have integrity because that leads me to my next question. And you mentioned it, like you're you're gonna have to testify in court. So what makes a good expert witness?

Speaker 1 19:27

Yeah, so really from the accounting side, uh there okay, funny, funny little anecdote. Um there's this t-shirt that I got when I was a brand new CPA at at the at the um public firm. And it's it was it's silly. Honestly, it's silly. It said accounting, a person who fixes a problem you didn't know you had in a way you don't understand, right? So accounting is complicated, and unless you kind of understand the the the very basics, it's super easy to get lost. So a good expert witness is is kind of an educator and can turn something complex like double entry bookkeeping into which which sounds weird. Why would you enter something twice? Yeah. Why? Um, well, because okay, here's a good here's a very, very easy example. You start a business, right? You put fifty thousand dollars in cash into your business. Okay, so now you have a bank account with fifty thousand dollars, but you're the owner and you own a fifty thousand dollar business. So there's double entry right there. You have you have cash and and you have equity, right? Your equity is fifty thousand dollars in the business, but you have cash. Now you're gonna go and you're gonna buy a truck, you're gonna spend ten thousand dollars and buy uh uh a used truck for uh say your landscaping, I don't know, say whatever your business, you're gonna buy a truck. So now you have forty thousand dollars and a ten thousand dollar ten thousand dollar truck, okay? Four thousand dollars and ten thousand dollar truck, you still have fifty thousand dollars in equity, yeah, right? So the further on down the trail you go from that, it it it gets unless you know unless you know that how that works, it gets really messy. And you know, uh especially when you're talking about, you know, mom mom gave me the fifty thousand dollars and brother saying, you know, you you're just wasting all of mom's money. It's like, no, well, I have this truck and now I have some cash. I'm gonna go buy some inventory and go buy twenty thousand dollars of inventory, and you know, now you you have a ten thousand dollar truck, twenty thousand dollars of inventory, and and twenty thousand dollars in cash, and like you're just wasting all mom's money. Well, they you sell that right and it's it gets complicated very quickly and so being able to make that understandable in court um to generally the lay person right right um it is is a big part of being a good expert witness okay is that does that help is that right does that sound good that no that that does sound good it's just kind of uh be because what it is I mean you you want to be able to have your expert witness explain things so the judge understands right yeah the judge um I that's a good point I haven't had too many cases that have gone to a jury um I don't think too many divorce cases do but yeah that and you know um it I it's like you know it's it's like uh people specialize right yeah you're a you're a family attorney versus a tax attorney versus a criminal defense attorney versus a prosecutor well I I I am not gonna presume that I know the law as much as an attorney does and accounting is very similar to the law right you have tax accountants you have bookkeepers you have auditors you have internal audit you have financial accounting um and then forensics uh so you you really need to be able to explain what how things work in accounting um as as an expert witness so being a good uh kind of a having a teacher mindset is super important yeah um and the other big one is being being a puzzle solver right so again like I said it's it's the other person's um the other person's uh uh um imagination is what you're up against and if you you have a inclining inkling that something is going wrong you gotta go in and dig and find where it's going um I've had a situation so I have a software that can take your bank statement and just turn it into Excel file right it's pretty cool okay um and so I can see I can see that you've made transfers to this file these three bank bank accounts yeah right so one is your personal savings one is your personal checking and one is some other bank account that I don't have access to oh so if that's the one that you know this big that relatively you know relatively small dollar amounts of money are going into say like twelve hundred dollars a month but over five years wow then now you're now that's you somebody could be potentially hiding money right so uh uh so my software can help me find those things and it's now it's the point where okay I need to pull on this string here and pull a little bit more and well it turns out it's a you know I don't know a retirement account. Okay that's probably fine. Okay. But from the retirement account they're they're taking draws on it and you know have they have some side hustle going on that spouse doesn't know about. Right? So now we have hidden money and hitting at hidden assets. And so it's just again pulling on the string to try and find find the puzzle. You know you have you know you have uh we'll just say $100,000 coming in to the household because W2 income says $100,000. Yeah and you only have you only have $80,000 going out and you're accounting for all the things you're accounting for their their savings for mortgage and all these things where's the other 20 grand going well that's where I come in to try and find what what's going on with that money is there a secret stash of money somewhere are you sending money to you know mom who lives in Venezuela or I you know or your your girlfriend in the Philippines in the Philippines yes exactly yeah right that's where that thirty thousand dollar in travel to the Philippines once once a year for a business expense right so exactly and I've had those like I I've had to tell a couple of people a guy hey you know I think you're being scammed by a person in Guatemala or Costa Rica or the Philippines or whatever it's like but no no no she loves me I'm like she's scamming you I'm sorry she's she's scamming you and yeah tell a person that and they can believe you or they can not believe you know yeah sometimes their heart you know their heart takes over and they want to believe something that may or may not be the case so so have you been have you had cases though where you've had people say hey Mark you know I I know this is hiding this person is hiding money and when you dig through the records you're like no because this is where the money there's no hiding money. Yeah I I actually have had that and that's the hard part is being is telling the client that you know what you think is true actually isn't true. I've had a situation where um mom passed away and put everything into a trust and said the trust pays out whenever the oldest or the youngest child reaches a certain age.

Speaker 3 27:37

Okay.

Speaker 1 27:38

Right and then um and then mom passes away and then one of the siblings pass away and so now there's you know it would get split less ways right so it's more money. But everybody is under the instant under the understanding that mom had um a life insurance policy on on everybody. And when sibling number X passed away that insurance policy would have gone to the trust and so everybody would have gotten an additional you know $100,000 because the amount of the insurance and then when the at when the youngest person hits that age and they decide to pay out they're like where's the the rest of this money right well it turns out there was no insurance policy and you know there was there was the 401k that mom and dad had there was the value of the house that was sold and and and put into the 401 and uh um you know mom put mom wanted 10 000 to go into a certain trust account to take care of the dog that she loved dearly which is a a thing um and so now this is what's left over and it just there wasn't what you thought was there wasn't there wow also had the other side happen where um people didn't know that uh uh sibling b didn't know that mom had a $5000 life insurance policy sibling a knew and they were fighting over it right once uh sibling b learned through you know the the breeze the the the word through the breeze that mom had this this insurance policy then it's like okay well go hire a CPA to go figure out a forensic accountant to go figure out where where that money went so I've had both sides yeah have you have you had uh the situation where you had to help someone when they didn't know what to do because their spouse controlled all the money and so they don't even know what's in like the savings. Yeah yeah I'm actually working a case like that right now um and I I I work with a um I I guess the best way to describe her is a kind of a life coach for a person going through divorce and she's very good good on this side she's giving me some tips too I always try and learn things uh as much as I can as they come up but yeah so when it comes down to financial manipulation where spouse uh spouse A is like I've got financials you don't need to worry about it you know you can spend three thousand dollars a month on your card and what and and I'll take care of the rest right and uh then it gets into I have to say I need to go through the lawyer and say well I need bank statements credit card statements and all of these things and you've got to go subpoena those things so we can figure out the details so that that's that's the hard part I can't just go and say give me this I need to work through the lawyer to get that information a lot of times it's a lot of tricky information um uh small business owners use QuickBooks so I want a backup copy of their QuickBooks because if I have a backup copy I can just load it onto my side and it doesn't affect their side at all um but I can see everything right I can see where all the money goes in and out um I want to see bank statements bank statements are like you know cash is king right yeah right so um so I need those bank statements um and then investments investments is a big one um especially if you have people who are living off trusts um you need I need those trust statements to see what's coming in and out and in in situations where they both have trusts but they're really only living off of one now they're commingling trusts and 10 years later they want to get divorced and okay well now since they were commingling trusts the growth of e each of those trusts are shared assets now so and and then I assume you need the standard too right like pay stubs W-2s tax returns schedules yeah tax returns are good but they're uh you know they're good for things like um finding out where people are hiding stuff like I mentioned before you had the uh client who's uh was expensing um child care through their business right yeah so so I want the tax returns to see that um I want their like I said their QuickBooks um and and all of that all any business detail um investment investments I want to see their investment schedules their statements um um if they have if we're talking about physical assets uh we need to list all that stuff out the the truck the car the timeshare the you know if they own there was a there's a pro when I went was going through school there's this problem in my tax class that got me always got me hung up and it had to do with a horse right so you you are given part ownership of this horse and then the horse becomes this uh prize winning horse and is now worth like a million dollars but when you were given granted uh ownership of it it was only worth $50,000 so now how much do you get out of that right so I say that because one of the biggest fraud cases in the United States involved this uh uh controller for uh the a city in Illinois and she stole like $29 million from the city and she had like a hundred horses um she yeah so I I bring up horses because there's a significant amount of value in in well specifically horses but in livestock so you know that alpaca alpaca farming is another thing where you get a tax break for alpacas and really it's it's a kind of a a strange aside but I mean I I I heard I have not looked into this but Bon Jovi gets this huge tax break because in his he has a farm in New Jersey and so he gets a big tax break because he has farm alpacas oh wow I don't know if it's specific he has alpakas but he has a he has a farm that he gets a big tax break for you wouldn't think this like mega rock star is really working on tax breaks uh owning a farm but those are things that need to be listed out because they are assets that are attributable to uh division of assets during during a divorce or a separation.

Speaker 34:46

And you know you mentioned QuickBooks now is is there some somewhere like where someone can like hide something in a QuickBooks or delete a transaction and then you Yeah so uh the cool thing about QuickBooks is it keeps track of everything.

Speaker 3 35:04

Okay.

Speaker 1 35:04

Somebody logs in and does something it says Mark wrote a check and printed the check for $500 yeah right on whatever date. And if I go go in like after the check is cashed and cleared the bank and reconciled and I change it from 500 to 5000 right I could do that right and it's gonna say hey this this transaction has already been reconciled are you sure you want to do this okay I could just say yes yeah right so what does that do? It increases my expenses and lowers my net income right if I do that enough it becomes a material amount and that's where how you can turn you can turn a company that should otherwise have you know $2000 of income that would go to the family right that would be family income you can turn that into $100,000 by manipulating the transactions. And so QuickBooks tracks any changes that that that are in there. So I can go in and pull a transaction report and a transaction change report and see who made the change when they made the change what it originally was and what did they change it to and that my friends is what you call fraud.

Speaker 36:22

So that's yeah fraud that is fraud so um like for real fraud so that's when uh yeah you got to go find that stuff so so what so you would tell an attorney you know when the attorney does their interrogatories and request for production of documents because obviously we have to request more than than just a quickbook file right yeah that the so the trick with QuickBooks is that like it's the it's everything in the business right and people hold that like sacred right and if I give you this information I'm you know giving you keys to the castle.

Speaker 1 37:02

Yeah and so what they want to do is they want to you know print out and export to PDF right a couple of reports. And I mean I'm sure having a PDF is gives you some information but unless I tell you what I want printed out you're just gonna give me kind of a few standard reports like a general ledger and an income statement and a balance sheet I'm not gonna be be able to find stuff just find changes in transactions like I just explained with the $5,000 change you're just not gonna see that in a balance sheet or an income statement. What you have to really go in and look at the transaction detail. So um QuickBooks has a couple of features really a backup copy is best because um it's just a copy at as of a specific date and the user the end user you it doesn't affect their working right they can still work and they can still do whatever they're doing um reconcile accounts there's another thing called the accountant's copy oh but but the yeah it it's accountant's copy is good what it does is it freezes QuickBooks as of a certain date. So you can go ahead and do new things you can write new checks and write new invoices and do new payroll but you can't change any history until your accountant does whatever they're doing um and then you they upload the accountant's copy back into the working copy and the bank wreck is now done and um say you you know certain things like you the business owner have uh a cell phone and you pay your cell phone but you want the business to reimburse you $100 a month for cell phone right but you're not going to do that in cash you're gonna do that in equity right so you're not actually getting extra cash. So there's a uh a an entry that needs to be made into QuickBooks that the that the a bookkeeper will do the accountant will do in the accountant's copy and when they upload it now it loads any changes or any reconciliation differences uh and reconciliation differences are are pretty important right slip of the fingers you know the six and the nine are right in front of each other so if somebody writes you a check for $169 and it was supposed and you build them for $196, you have a difference there. Accountant can fix that right so do you want to go after that little slip of the finger or you know if if it's too many points this way of the decimal point yeah you're gonna go get it but if you're talking about nine bucks I mean right um so the accountant's copy really nobody's gonna give you that because it freezes history you really want the backup the backup backup copy yeah the backup copy is is still everything um and you got people like me can load it into our QuickBooks. I create a new instance just company okay and I would be able to see everything that's going on.

Speaker 40:19

Okay so then get you the backup copy and so you just don't have like just these PDF reports which really don't need much of anything.

Speaker 1 40:28

Well just give you a snapshot of the Yeah they really just make you have to ask more questions right wow so like you give me the general ledger as a PDF and that's 300 pages of line and line and line and line and number one now I'm now I have to charge you to and my hourly rate to go look through 300 pages worth of things um and I'm it it I may not find anything but I might my I might find journal entry you know 37 journal entry number 37 that changes $70,000 on December 31st. Okay. Well what is $70,000 on December December 31st right so yeah what happened it could be like when I was a controller I was like oh hey we're just gonna move this $70,000 from this one account to this other account right it should have been in the other account to begin with. So it's just a normal correction.

Speaker 4 41:33

Okay.

Speaker 1 41:34

But it could be you're taking payroll out of payroll and putting it into commissions because um you know you paid people cash under the table. Right? So you know and that is something that you would want to see and that should be plainly evidenced in in QuickBooks as you're you're going through and and they have to answer for that sort of thing. So so forensic accounting can determine because I hear that a lot of time right my husband runs a construction company he gets paid cash under the table so a forensic accountant could look at what what you look at the bank statements or the to determine yeah so that's number one where the lifestyle analysis comes in because if they're getting a lot of cash you're not going to see that come into the bank right however um most banks if you you ask the bank you get a transaction report not a bank statement. Oh and if you go to the bank they can say anytime someone goes to the teller yeah there will be a transaction on their account so for instance very good example for instance okay uh run a construction company or actually it doesn't have to be construct any kind of business and you have ten thousand dollars in your bank your business bank account you have ten thousand dollars in there customer paid you a three thousand dollar check made out to the business yeah you can go in and just cash the check right you don't have to deposit it you can just cash the check now you have three thousand dollars right your bank statement is not going to see that at all because you didn't deposit it but the bank has a transaction report that says that on I don't know what's today June 11th at at uh 223 there was a transaction at a teller where you cashed a check and the check is three thousand dollars and now you know now I know that some there's three thousand dollars floating around that's essentially unaccounted for so holy smokes yeah that's that's a that's actually a good way again limited by the person's imagination you can find it you just have to pull pull on the strings and figure out where the puzzle pieces are the you know the bank transaction report does it what what about like uh withdrawals that people make or depend

Speaker 44:00

Deposits from the ATM. No?

Speaker 1 44:01

Yeah, that'll that'll show up, right? That'll sh if you do any um deposits or withdrawals or write a check or anything like that, that's gonna be on your bank statement.

Speaker 44:11

Oh, okay.

Speaker 1 44:12

Um cashing a check, um it the tricky part is not the tricky part, the caveat is if you have a thousand dollars in your account and you want to cash a three thousand dollar check, yeah, you're gonna deposit the check first.

Speaker 4 44:28

Right?

Speaker 1 44:29

Because you own because the bank wants to make sure that you that you have cash to cover that, cover that check, right? So sometimes they won't even let you cash the check, they'll want to deposit it, and you know they put a hold on it for like three days or whatever before and that sort of thing. But if you have cash in excess of the amount of the check, they'll just cash the check for you, and you'll never you'll just never see that on a bank statement.

Speaker 44:55

So interesting.

Speaker 1 44:57

Yeah, right there. It's a way to hide money. And if you are trying to go find all the hidden money, that's where guys like people like me come in place.

Speaker 45:05

Yeah, and that's why they need to hire you to get the not only the bank statements, but the bank transaction reports.

Speaker 2 45:11

Yeah, exactly.

Speaker 45:13

Yeah, well, you know, thank you so much, Mark, for for coming on and being a guest today. Very, very illuminating, very helpful. And so if people want to work with you, how do they get a hold of you?

Speaker 1 45:25

Yeah, so uh I have a website, redthreecpa.com, and it's red three, like with a hyphen between the red and the three. Um, and my email is mark.martinez at red threecpa.com. Um, I'm also have uh like most everybody else, a good cell phone. Uh so my cell number is 425-492-0751. Um, I currently am taking new clients right now. Um, and uh my my my niche here is to work uh with family lawyers, um, whether it's a divorce or an estate or an elder case. Um I've done sell that several elder fraud cases where you know trying to figure out where parents' money goes. Yeah. And then I'm also, you know, I'm on on LinkedIn as well.

Speaker 46:14

So okay, and we'll be sure to have your your and then when you said your email address, that that hyphen goes in the email address as well.

Speaker 1 46:23

Yeah, yeah. My email is red hyphen three, right? Um, red three. So I was in the Marines, right? And so my call sign was red three. Um, so when I drove, when I drove my tank here, that was my call sign, and uh I actually had to answer to the Washington Board of Accountancy why my name isn't like Mark or Martinez or MM or something like that, isn't in my firm name. And I'm like, it it was my call sign in the Marines, and that was sufficient for them. And I I don't know, I just thought it's cool.

Speaker 46:56

So yeah, that is cool. I like that. I mean, it's nice to have that, you know, that tie-in with your service.

Speaker 1 47:02

Yeah, yeah, it's a big, big part of my life. So, you know, it's always nice.

Speaker 47:06

And uh before we sign off, and I will make sure to have folks who make sure to include Mark's contact information as well in our podcast description when this goes live. But Mark, before you sign off, what's some fun fact about yourself that no one would know just from looking at you?

Speaker 1 47:24

Well, uh, fun fact, I am highly involved in scouts, scouting America. Um, I sit on the board of the Chief Seattle Council, um, BSA, and I'm the district uh executive for my territory. So um my area that I'm 100% volunteer, volunteer. Um but my territory is essentially from we'll say from Renton to Auburn and from I-5 to the top of the the cast the the the pass.

Speaker 3 47:59

Okay.

Speaker 1 47:59

So a huge area, um, a lot of troops, a lot of packs, a lot of crews. Um, and you know, Scouting America has is uh changed a lot over the time. Used to be Boy Scouts of America.

Speaker 3 48:10

Oh, okay, yeah.

Speaker 1 48:11

And now it's Scouting America. Uh uh pretty much every unit that I know about is um has troops that accept uh units that accept both boys and girls. Um and we have set up patrols that is a girl patrol and a patrol that is boy patrol. So it's not they go and do things together, but on the on the small unit level, they're we keep them separate.

Speaker 3 48:38

Okay.

Speaker 1 48:39

But you know, it's it's building building character for the next generation of of Americans is really kind of the whole uh with through the oath, uh, scout oath and scout law is really the the mission of scouts and watching you know watching some 12-year-old girl on a camping trip who just comes up to you and says, Mr. Martinez, I want to learn how to build a fire. And sitting down with uh with a uh at the fire pit and watching her lear b build a fire and start a fire with one match. One match. Her excitement is like it's amazing. It's just I mean, really right there in the heart. It's uh it's it's cool to watch people, um, specifically kids learn learn new things and then succeed at those things.

Speaker 49:29

So you know, and that's so important. Like, I don't know how to build a fire, but that's so important for a young girl's confidence too, just anyone's confidence to do those types of things.

Speaker 1 49:40

And it's tricky because you know, when you're like me and you're 50 and you have this wealth of experience, at certain point of time, I didn't have the the experience to learn to light a fire. And fire is dangerous, and you your parents always yell at you, you'll burn the house down and all that sort of stuff. But you let you play with matches, and now here we are giving you know 12-year-old kids teaching them how to light a fire and how to properly use a pocket knife and how to make uh uh uh how to make a uh mac and cheese on a stove, right? A lot of self-sufficiency. So really it's really cool to see kids succeed succeed at stuff like that. Build, like you said, build their confidence and and succeed at something cool like that.

Speaker 50:25

That's amazing. You know, thank you so much for being a service to our community, Mark. And again, it was such a pleasure to have you on today um on the Akiana Law Podcast. Yeah, thank you. It's been my pleasure. And so again, uh if anyone uh wants to work with Mark, you can contact him at his firm. It's called Red-3 CPA and Forensic Accounting. And so for all of my guests out there, thank you again for joining us on another episode of the Akiana Law Podcast, wherein we talk about anything and everything that intersects in the world of family law and divorce. Uh, I am Lani Akiana until until the next time, be well. The information in this podcast is general advice only and should not in any respect be relied on as specific legal advice.