How Does a Company Deal with a Family Member Who Steals?

When company members suspect that a family member is stealing from the business and using company money for personal gain, there is no time to wait around. Instead, decisive action is needed, but what should be the first course of business?

First, we suggest holding a serious meeting among the company’s leaders, without the problematic individual’s presence. While every situation is different, here are some useful suggestions regarding what the meeting should cover.

What Should the Company Discuss During the First Meeting?

• What parties should the company contact immediately, and who should be involved overall? Should the company contact a business lawyer, let the board of directors of the company know, or get in touch with a corporate psychologist? What about a CPA? The goal is to make two lists: one of those people to fill in about the situation and another regarding individuals to count on as valuable resources.

• What can the business expect from interactions with the offending family member? First, who will fill them in on the situation? Do they know this is coming; will they be angry? Does security need to prepare to usher them out the door? What about dealing with:

– Passwords and computer security

– Physical locks

– Assets

– Bank accounts

– Social media

– Paychecks

• Before simply expelling the person from the company or pressing charges, what evidence is there of the misdoings? Is there verified proof? How is it documented?
  
  
• Is this an issue for the legal system and a court of law?
  
  
• Is there a chance that the person can be penalized but continue working at the company differently? Usually, the company asks this question when the offense is relatively minor, and the board believes the individual seeks to change their ways.
  
  
• Does the entire family know, or must they be told? How should other employees be alerted of the situation? Does anyone else need to be questioned about the individual’s actions; is there reason to believe anyone else was involved?
  
  
• How did the company’s actions, culture, or lack of actions contribute to the problem at hand?
  
  
• What steps can the business take to prevent this issue from reoccurring? Sometimes companies consider education or including new material in training, for example.
  
  
• Is there a history of problems with this employee/family member?
  
  
• If a whistleblower was involved, are they going to be protected?
  
  
• Does the family need to come together to deal with this violation as a company and as a family? Is there a need for family counseling or therapy?
  
  
• Do the employee training programs need to be completely overhauled?
  
  
• Do the company’s employment contracts include non-compete clauses if the offending family member is to be dismissed from the company?
  
  
• Does the company run legitimate background checks, or can that be improved?
  
  
• Is there hope for the family member to learn from what they have done and move on?

What Should the Company Members Discuss in the Second Meeting?

Once the family has discussed the situation and developed a logical strategy for dealing with the problem, it is time for an even more difficult meeting. But, first, the company leaders must meet with the problematic family member.

While the evidence is key, the company should begin the meeting slowly and not confront the individual all at once. Instead, begin by expressing the business’ concerns and giving the suspect the floor. What is their perspective? How do they perceive their actions? Do they think what they did is wrong?

It is time to lead with evidence based on the answers to these questions. The leaders of the meeting should bring hard proof to the meeting so that the discussion does not lapse into a “he said, she said” type of argument. It will be difficult for the suspect to debate or refuse substantial, vetted evidence.

While discussions among family members can rapidly become emotional, try to keep emotions out. Some family members are unaware that they are stealing from the company. Every offense is different, so pay attention to how the individual justifies his or her actions and if they appear to be reacting honestly. If their actions seem pre-rehearsed or insincere, they knew this meeting was coming and may have already contacted an attorney.

While sometimes it is possible to give family members another chance, embezzlement often grounds termination. Explain to the suspect, if warranted, that the board must set an example for the rest of the company, or embezzlement and stealing will become routine.

Company owners should also ask themselves:

– Would I act this way if the employee was not part of the family?

– Will I ever be able to trust this person again?

– Do I think this person intends to further damage the company, or have they learned their lesson?

How Important is Education in Preventing Embezzlement?

Employees who learn about positive, honest company culture during training are less likely to steal from the business. If the company already relies on strict policies for using assets and resources, these also should be reintroduced. If not, these policies must be instated, and all employees should be retrained.

Employees of all levels usually are keen to learn more about the company. No one wants to work at a place where drama is center-stage and employees take what isn’t theirs. If embezzlement occurs at your business, use it as an opportunity for new planning, new education, and new, stricter policies.

Many new options, in computer software and otherwise, exist these days. New controls, when properly enforced, can help owners, presidents, and CEOs manage the company in an orderly fashion and prevent theft. Prevention is vital when dealing with a profitable family business, regardless of the industry.

When Should a Business Partner Contact an Attorney?

When family members start a business, they never expect theft to occur, and they also do not expect a family member to commit the violation. However, sometimes temptation, greed, a lack of morality, or simply a lack of training leads to embezzlement. When a family member steals from the business, the company must address the problem immediately.

Business owners must understand their legal options if a family member withdraws funds without the family’s consent. Careless company spending can quickly lead to larger offenses and toxic company culture.

There is nothing worse than being unprepared when faced with, for example, a family member who decides to take advantage of the company credit card, breach an agreement, or even commit fraud. Unfortunately, while these acts are difficult to imagine, especially among family members, they are not uncommon in the business world.

At Nakase Wade, we want our clients to understand that they have rights when their employees do not act honorably, even when they are part of the family. We have represented numerous businesses and individuals seeking to take legal action against family members, and we understand the importance of these cases to the business and their delicate nature. Our experienced business lawyers and corporate attorneys are skilled and professional, and we will listen to the facts of the situation and explain your rights.

If you have questions about a family member’s inappropriate spending or are wondering if the employee’s offense is enforceable, contact our California business lawyers and corporate attorneys. We offer free consultations and will quickly begin helping you get back on track with your business goals.

Do not let a family member’s lapse of morality damage the company you have worked so hard to build or disrupt the happiness of your family. Contact Nakase Wade today, and let’s get started on your case.