Discovering that a business partner has absconded with company funds can be devastating. When a trusted business partner breaks that trust, it becomes not only a legal situation but an emotionally charged one – and that emotion can be as difficult to overcome as the legal hurdles. However, if you follow the right steps, you can navigate the complexities to a resolution. This guide provides a structured approach to dealing with the aftermath.
Immediate Steps
- Secure Remaining Assets:
- Conduct a thorough inventory of all physical and digital assets of the company.
- Change all digital access codes, including online banking passwords, social media logins, and any other platforms where financial information could be compromised.
- Contact financial institutions to halt any ongoing transactions that have not yet been processed.
- Gather Documentation:
- Compile bank statements, emails, text messages, and any written agreements that detail the responsibilities and rights of each partner within the business.
- Organize evidence of the transactions that led to the depletion of the bank accounts, noting dates, amounts, and any corresponding communications.
- Notify the Bank:
- Inform your bank(s) about the unauthorized transactions immediately. This could potentially enable some transactions to be reversed, depending on their policies and the timing.
- Request a freeze on the accounts to prevent further unauthorized access.
- Ask about the procedure for contesting the unauthorized transactions and what documentation will be required.
Legal Actions
- Report to Law Enforcement:
- File a report with the local police or sheriff's department. Be prepared to provide them with all collected documentation and evidence of the theft.
- The amount stolen will dictate whether this constitutes a grand theft, potentially elevating it to a felony charge under Florida Statutes, Chapter 812.
- Consult a Business Attorney:
- Find a lawyer with expertise in business law and, ideally, experience with partnership disputes and fraud.
- The lawyer will assess the viability of criminal versus civil actions and guide you through the legal proceedings specific to your case.
- Consider a Civil Lawsuit:
- Discuss with your attorney the possibility of suing for breach of fiduciary duty, fraud, or conversion. These civil claims can lead to the recovery of stolen funds and possibly punitive damages.
- A lawsuit might also aim to dissolve the partnership or business entity if continuing operations is untenable.
- Partnership Agreement Review:
- An in-depth analysis of the partnership agreement by your attorney can reveal specific clauses that dictate the course of action for disputes, including the rights to arbitration or mediation before litigation.
- Injunctions and Asset Recovery:
- Your attorney might file for a temporary injunction to freeze the personal assets of the errant partner, preventing them from disposing of stolen funds.
- Engaging a forensic accountant could be necessary to trace the missing funds, especially if they have been transferred through complex networks or used to purchase assets.
Practical Considerations
- Business Continuity Planning:
- Evaluate the immediate operational impacts and identify critical functions that must be maintained. This may involve securing emergency funding or restructuring business processes.
- Communicate openly with employees, customers, and suppliers about the situation, without disclosing sensitive legal strategies.
- Insurance:
- Review your business insurance policies to identify coverage that may apply, such as fidelity bonds or crime insurance, which could offer financial relief.
- Reputation Management:
- Develop a communication strategy that balances transparency with discretion. Consider the potential long-term impacts on your business reputation and customer trust.
Long-term Strategies
- Reevaluate Business Structure and Agreements:
- Use the incident as an opportunity to strengthen governance structures, implement stronger financial controls, and revise partnership agreements to protect against future fraud.
- Regular Financial Audits:
- Schedule regular, independent audits of business finances to detect irregularities early. Educate staff on the importance of these audits as a deterrent to fraud.
- Educate and Train:
- Implement training programs on financial management and fraud prevention for all relevant staff members. Knowledge is a powerful tool in preventing similar incidents.
Conclusion
Reacting swiftly and strategically to a partner's fraudulent actions is imperative to protect your interests and potentially recover lost assets. The process, governed by the complex interplay of criminal and civil law in Florida, demands professional guidance. This guide underscores the importance of immediate action, legal recourse, and the long-term restructuring of business practices to safeguard against future vulnerabilities. If you have questions on how to deal with this type of situation or some advice on making plans to minimize the risk, contact the Business attorneys at MSD-Business for a free consultation.
About the Author:
Chase Carpenter is a partner in the Business Division of Law Offices of Moffa, Sutton, & Donnini, P.A.. His practice revolves around business transactions and business litigation. Mr. Carpenter handles a wide range of cases including contract drafting, partnership disputes, commercial leases, and construction litigation. These cases encompass diverse industries, including healthcare, technology, real estate investment, and government contracting.
About the Firm:
The Law Offices of Moffa, Sutton, & Donnini, P.A., also known as MSD Business, is a local business law firm in Tampa, FL, serving clients throughout Fort Lauderdale and statewide. Our firm has a long history of helping clients navigate all types of complex legal matters, including local and state tax issues. In our business law practice, we assist clients with everything from mergers and acquisitions to contract disputes, business litigation, general counsel, and more.