Basic Training: T is for Tough Choices

Posted on September 24, 2014 in Planning & Advisors

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I’ve been on a murder mystery/detective fiction kick for a bit. Having just devoured Sue Grafton’s T is for Trespass (and she’s already written books A-S), I realized that we’re both nearing the end of the alphabet. Today’s Basic Training–which brings me, like Grafton, to the letter “T”–involves a not-so-basic situation: What do you do when you’re an employee and the boss seems to be siphoning cash out of the business? Are you responsible?

Q.: I do the books for our company. My boss regularly uses corporate funds for personal use. Thousands of dollars of company money went to pay for a cruise, paying off his personal credit card debt; he bought his wife a car, pays himself a hefty salary and bonus–all while we owe more than $1 million to creditors. Could I be liable for not reporting this matter?If so, what agency do I report it to?

A.: Generally, employees of a company are not held personally liable for the actions of the company they work for or the actions of the company owners. “Whistleblower statutes”–that is, the laws that protect employees against reprisal from their employers for blowing the whistle on their fraudulent activities–tend to focus on areas where there are federal or state government contracts involved, not on privately held companies where the contracts are between private companies.

That said, laws of the different states vary, so it would be well worth speaking to an attorney familiar with whistleblower issues. Also, the state attorney general may take an interest in a company that may be defrauding creditors by diverting corporate funds for personal use. Either way, it sounds like you’d be better off finding another job–if the owner is taking as much money out of the company as you say, will there be enough to pay your salary when the time comes?

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