|
Posting by: Jacqueline Thompson
Date: June 23, 2009
There are many resources available to assist family members in working together, for creating the right governance structure, the correct management style, and the most desirable compensation practices for a successful family-owned business. But what happens when the unthinkable occurs – when a family member commits fraud? When one family member steals from the business, and, in essence, from the rest of the family? To where does a business, and in many cases, a shattered family, turn at this point?
First, it is important to remember that the business practices are not
at fault. There is no good reason to commit fraud under any
circumstances, although there may be no shortage of excuses from the
perpetrator. The perpetrator may feel underpaid, underappreciated,
used, abused, or entitled. Remember that while these may be valid
reasons to leave the family business, they are not acceptable reasons
to steal from it.
Once the determination is made that there has indeed been fraud, the
offending employee should be temporarily or permanently relieved of
their duties. Next it’s prudent to bring in a Certified Fraud Examiner
(CFE) – a practitioner who is trained in detecting and determining the
extent of a fraud. At the same time, it is suggested to get another
advisor, such as a family therapist or counselor working with the
business. This trained professional can help a family see that there
is, and should be, a separation of the family and business. They can
assist in handling feelings of resentment, jealousy, and betrayal among
family members; thus dealing with both the personal and professional
sides of the family business coin.
Many family businesses often opt to not prosecute a family member who
has committed fraud. Of course, the closer the family member, the less
likely criminal charges become. If the family consists of first/second
generation parents, children or siblings, management is less likely to
press charges than if the fraud is committed within a fourth generation
cousin consortium. The dollar amount of the fraud may also play a part
in this decision.
Many business management teams in family-owned businesses choose civil
over criminal proceedings when they choose to press charges. In these
cases, a settlement is reached whereby the family member will make
restitution to the company over a certain period of time. Most times,
the family member leaves, or is forced to leave, the family business.
I have seen cases where the perpetrator continues their employment, but
I have yet to see it work without major resulting conflicts within the
business.
It’s never easy, but with time and appropriate professional
guidance, a family business can overcome a family member who commits
fraud.
 |
Subscribe to this comment's feed