I have written many times over the years about business owners suing because their partner has stolen from them.  Whether it is outright embezzlement, overpaying yourself dramatically, or running unwarranted personal expenses through the company – theft is theft.  But what if it is not your business partner stealing from you, but your business partner’s son who is stealing from both of you?

In one recent case, two 50-50 owners hired the son of one of the owners, who was essentially left in charge.  He ran the business, the finances – everything.  Apparently, though, he felt it was somehow “unfair” that he was not given shares and made an owner.  (The fact that he would inherit his father’s half of the business in the future was not good enough.)  Every year when shareholder distributions were made, he did not get one, since he was not an owner.  He was paid handsomely and received a substantial year-end bonus.  But his father and uncle were “undeserving” (in his view) of dividends that “he created” with all his hard work.  So he decided to level the playing field and pay himself while hiding the payments.

The details are not important – it involved a shell company he owned being paid on invoices for non-existent work.  The issue was, my client viewed it as theft that needed to be prosecuted.  The concept that they would not even ask for the money back unimaginable.  But that is exactly what happened – his business partner – the thief’s dad – did not want to do anything about it.  Not contact the police.  Not sue for the money back.  Nothing.

The issue I was dealing with was not between the thieving employee and his father, but between the two owners.  One saw over $200,000 being stolen, and a partner who was “covering” for his thieving offspring.  The other saw a son who broke his heart, and a heartless business partner who could not understand how he felt.

This issue could have broken the relationship.  It almost broke the company.  But the partners got advice about how disruptive such litigation would be, and about how bad such publicity would be for business.  So they reached an agreement whereby the father of the employee would reimburse his partner for his half of the stolen proceeds when the company was sold in the future.  Had they hired attorneys who did not understand the impact that shareholder dispute litigation could have on a business, they might have been led down the path of fighting instead of negotiating peace.

When you are having a serious issue with your business partner, make sure your attorney is able to explain the impact of business dispute litigation, understands how important it is to avoid, and is experienced enough to win.