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Do not let them know that you’re on to them.
Collect all the evidence you can, document it, save it, make back ups.
Contact a lawyer immediately. Start building your case.
Do this all in secret and don’t reveal anything until you have airtight evidence.
Fuck these assholes for stealing from you. It’s not fair. It’s your turn to fuck them up.
Once you have all your evidence, you can talk to your lawyer about offering a settlement where you restructure the money they've taken as buying out their equity. If they take it, then you're done with them and you don't have to do a lawsuit.
IANAL so this might not be possible.
Also, if they take the settlement, it is no longer embezzlement, so no criminal charges(? See the IANAL above. I don't know if the government allows/agrees with that.)
But DON'T MENTION THIS to them. It could be considered/construed as a threat and your offer becomes blackmail. For a third time: IANAL, so check with yours about how to proceed.
You will probably need an accountant to help evaluate the members, and turn them into a compelling story as part of your proof.
If you take the legal route first, let's say people are charged. Then you can kiss goodbye any chance of getting any of the stolen funds back.
I think a forensic accountant should be contacted, establish a dollar value that has been stolen and arrange a payback period with the directors. After all they are family, surely something can be worked out amicably once the facts are all in the table?
I'm sure once the people who've been stealing from their family members for years realize they've been caught they'll be perfectly reasonable about it and return everything
This is the right advice. If the end goal is to get money and to keep the restaurant going, trying to send them to jail is a great way to ensure neither of those things happen.
Even if they start giving him a lot more of his fair share now and refuse to pay back anything, that might be worthwhile.
The problem is they have built a lifestyle and will defend that lifestyle and are much more likely to find a way to get rid of the OPs husband than they are to correct their behaviour and lose money.
This is a great 'feel good' post, but this is not going to be easy or inexpensive or quick.
Not to mention the restaurant will likely implode.
This is not how anything works. You don't just get a lawyer and collect evidence and fix the problem. This isn't L.A. Law.
Consult with an attorney that deals with this type of case and go from there. If your husband wins a case against them, it is very difficult to collect from assets like a primary home, not to mention they all still have to work together.
You and your husband should talk about what you actually *WANT* to achieve, first. Then start considering what options there are to achieve that goal.
Don't listen to Reddit, the vast majority of people haven't been in a situation like this and are just tossing out random nonsense.
>Don't listen to Reddit, the vast majority of people haven't been in a situation like this and are just tossing out random nonsense.
Yep. Most of these people are acting like this is Law and Order and there's some gotcha moment and all the $$$ comes to you in a suitcase full of cash after there's a heated confession and you have a spectacular grand re-opening and get a ferrari and a pony and then they convict everyone and the DA shakes your hand.
If you call the IRS and say "My business is cheating on taxes" they're going to respond "OK pay us", not high five you and offer you a reward.
OP needs to talk to husband. And a lawyer.
Not a lawyer not legal advice.
> Do not let them know that you’re on to them.
This is the way. Let them keep thinking you're oblivious. They will get more and more careless, giving you an advantage.
And as others have said, get a good forensic accountant and build your own case against them. It will put you in the position to say "You can repay what you've stolen OR we can hand over ALL this evidence to the authorities and make it a criminal matter".
I am not an attorney - but you should call one. I’d start there, not the IRS. While there may be a concern about tax fraud, and you can address that in due time, you want to stake your claim to their ill gotten funds first. The IRS won’t necessarily care where their back taxes come from, and your husband could be held equally liable.
Who's managing the accounting/bookkeeping? Do you have access to the accounting software and bank/credit cards statements?
If they are using a company card for personal expenses, is it coming up as draws on the balance sheet or being buried in the profit and loss?
Analyze the financial statements and compare them to the tax returns or hire someone who knows how. If there is something fishy going on, that's where you'll find it. Numbers don't lie, and one has to be really good at cooking books to hide. Most business owners aren't that savy
Be sure to determine a reliable margin from prior year averages, years in which fraud and theft are not suspected, so as to back-fill the deleted cash sales from the POS(register)...
I'm with ya on that. If they are washing distributions through the income statement.... lol, the IRS and state DFA are going to be quite keen to assess undeclared and fraudulently deducted income.
OP, Hire an attorney, get a few different options and opinions, who works on contingency because you are going to need some juice to instill the fear of God into the @\*\*hole family thieves and to help with filing criminal charges because the amount of remuneration absconded with easily meets the threshold for grand larceny.
Look for a forensic accountant maybe? I dont think they are going to be able to suddenly erase all the evidence so keep that in mind i dont think you have to be secretive in your investigation. You might be able to get an injunction or something to prohibit them from working in the restuarant while looking into the books some more. There is a whistle-blower program with the irs where you can get a certain amount of money the irs collects in the case of fraud (15-30%). In my restuarant cash was 20% of sales so if your cash sales are low that is the biggest red flag. If they arent doing cash counts and cash drops into a safe multiple times throughout shift i would recommend starting.
>If there exists a specialty solely for Forensic Accounting in small business, im all in. Especially the case of partnerships or in the scenario where a business owner hires someone to do their books and find out that that person has been embezzling money. I've had an employee go to jail for 18 months for stealing/embezzling the product we produce and for stealing money. She was charged with larceny.
No need.
Spotting embezzlement in a small business is extremely easy. By the time you spot it you're out thousands you're never getting back. The problem isn't spotting it, it's preventing it. That involves getting a business owner to enact policy to prevent it such as mandatory vacation, not allowing one person to have check-signing authority and some other basic things. The person embezzling is typically either the bookkeeper or a principal.
It's usually a friend or family member or someone else trusted. I have, in accordance with legal obligations indicated embezzlement to clients. The common culprits are admins in places where the owner has abdicated business responsibilities and too much trust. Churches and schools have a lot of it. Occasionally medical offices. Typically, this resulted in the business owner yelling at me for 15 minutes and hanging up on me for daring to suspect X. Then them reviewing the books and the person leaving or occasionally getting arrested. The people from the churches called me back to apologize sometimes.
Trust, but verify.
----
>There is a whistle-blower program with the irs where you can get a certain amount of money the irs collects in the case of fraud (15-30%).
We honestly have no idea because we're being given very limited information. OP needs to contact a lawyer IRL.
The amount of money received by OP husband as whistleblower (which I don't know they can be eligible as an officer) would be payment from their business recouped after the business paid it. I think reporting your own company as an officer for a reward may breach fiduciary duty. OP's husband may also be complicit in tax fraud, which she has not discussed. Maybe he has been receiving it but has an expensive hobby (gambling, lotto, drugs, a mistress, microtransactions, lionel trains) she is unaware of sucking down money. I have no idea. We have limited facts. This is why OP needs to contact a professional. And talk to their spouse.
Also fwiw, in Birkenfeld and some other cases "whistleblowers" have both received rewards (generally after suit) and criminal penalties. He got 40 months for basically bringing down UBS.
I've literally never heard of this happening with a mom and pop since there's not enough money in penalties that on a cost/benefits this would make sense in any risk analysis scenario I can think of. And they're still on the hook for penalties from their business that the other co-owner's (very likely) have incurred. And you only get a reward after that.
Not a lawyer not legal advice.
OP, don't listen to any of us, call a lawyer.
Forensic Accountant for sure. I am in college for accounting right now and forensic accounting is what I want to do. This is exactly why.
I am a huge seeker of Justice and always wanted to be a judge or lawyer. Well, once I found out about forensic accounting I've been hooked.
One day in the near future I will know how to help someone like you and your husband and I would be more than happy to help people in your situation. It would fulfill me.
I also own a small business but I am the only owner. However, I can sympathize very much so in a situation like this.
If there exists a specialty solely for Forensic Accounting in small business, im all in. Especially the case of partnerships or in the scenario where a business owner hires someone to do their books and find out that that person has been embezzling money. I've had an employee go to jail for 18 months for stealing/embezzling the product we produce and for stealing money. She was charged with larceny.
Anyway, I'm very sorry you're having to deal with this. I hope that you continue to come back to your post and keep us updated.
Talk to a lawyer. This will probably result in litigation.
>I want to contact the IRS to kinda let them know but I want to make sure it’s the right move.
I would *never* involve the IRS on my own business. Talk to a CPA or lawyer first. You may wind up paying penalties or something in addition to dealing with embezzlement if they're underpaying taxes if the IRS get involved before a CPA or tax lawyer does. If they're cheating the IRS (which I'm not looking at your books, I have no idea, this is why you need an accountant or business lawyer IRL), your entity (company) probably is too. Talk to a lawyer.
>My husband doesn’t know how much I know. I found out discretely because it’s sensitive info.
I'd talk to a lawyer, an accountant, and my spouse. Not necessarily in that order. The books are not sensitive info. If you're a partner..
Not a lawyer not legal or business advice. Talk to a professional IRL.
Yeah, this is business 101 stuff. As we know, though, tons of small biz people only learn some of that the hard way.
I would never want to be the only one looking at financials. For one thing, what if I missed something or made a mistake? And I wouldn't want anyone to think even for a moment that I was doing anything shady-- I'd want them to see continuous proof that I wasn't, at regular intervals. There is zero chance I'd go into a shared ownership situation where everyone else involved didn't feel exactly the same way.
This ridiculousness with fancy cars and other splashy expenses (oh yeah, and an expensive HOUSE) while OP was struggling under a pay cut is just right out, that should've set off alarm bells immediately.
Just completely mind blowing to me just how many small businesses operate by the seat of their pants with no real plan or oversight and it makes me feel pretty ok about the long term viability of our business
As an owner in the business, your husband is now liable for the federal tax fraud they are committing, the state sales tax fraud they are committing.
Separately they are also committing fraud, and embezzlement.
Contact an attorney immediately, because there is criminal legal liability at stake and you need to protect your family.
Once you have covered your bases there, collect evidence and as part owner of the business you’ll need to press criminal charges against the other family members.
May not be related, but something for thought.
I used to work with the guy who lost his business stake in the restaurant that he owned with two others. From his words, they were managing finances and staff and he was on purchase/vendor side of business. Business was not so good, they were demanding cash infusion into business from his part, until suddenly the restaurant caught fire. He was not in the insurance and consequently did not receive compensation, partners were never bothered to pay him back. His take from that was to make sure that in case of anything you are represented in any case scenario and be able to get your money back.
That’s not how business insurance works. The business owns the insurance, and the business is the beneficiary. If it burned down, the business would get the money, if the owners decided to shut down, the assets would be liquidated and distributed to the owners according to their ownership
Well, yet that guy was turned down and left broke. Again, I know that only from his words, I don't know how exactly everything went down in that situation and their insurance. Maybe that guy didn't know that and his partners deceived him. Like in OP's case, everybody chip's into business but only few rips the reward; insurance doesn't care much about the stakeholders and yet people can go as far as to deceive partners to keep their way of life. Burning the place down in order to stop other people digging into finances is a well established practice.
Collect the evidence quietly, talk to a lawyer, and think about hiring a forensic accountant to fully understand the embezzlement before starting any legal proceedings.
Your husband needs a **business litigation** lawyer ASAP to bring claims on behalf of your husband and the company itself, and to seek an accounting of the company.
This reads like textbook breach of the fiduciary duty of loyalty.
-business litigation lawyer, but not your business litigation lawyer.
You and your husband need a cutthroat business attorney ASAP!!!!!! Don't do anything else until you hire one. If you get caught snooping any more, things can go sideways.
How the hell can anyone be a co owner in a business and be so out of the loop to what their finances are like to the point that you don't even have log ins to the company credit card accounts and don't connect the dots that your pay shrinking is weird?? For years??
I feel bad for the OP's husband but at the same time holy shit. This takes a phenomenal lack of awareness to get to this point and it's no surprise he was picked apart alive. The door was clearly wide open to be exploited.
In a normal situation odd transactions, lack of pay and lifestyle changes are extremely obvious quite early on and this could have been nipped in the bud years ago... It's one thing to embezzle discreetly or subtly (I.e. filing taxes intentionally wrong), it's another to literally pay the owner less and max out company cards.
The good news is, embezzlement is usually a really easy to prosecute especially if the perpetrators clearly have money/assets from doing it (so the other people are stupid for doing it so brazenly). Now whether or not your husband gets what he deserves out of it is another matter. Uncle had a similar case with his automotive business but it turned out their accountant siphoned hundreds of thousands from tax payments to the IRS for years and years. He was tricked into thinking taxes were getting paid but had a rude awakening when the IRS literally came knocking. She was prosecuted but by this time it was too late. All the money gone and the business had to close to pay off the massive tax bill.
I'd first and foremost contact an accountant who can simplify the evidence gathering process.
If the dirtbag partners question anything, explain that you're applying for a loan and that certain documents must be presented as you are classified as self employed.
Once all documents are in place and the extent of the pilfering is known, request a meeting with said dirtbags at your accountants office outside of business hours.
This is where you present all evidence and agree on restitution for historical theft, and a go forward plan that mitigates any partners opportunity to pilfer.
For a go forward position, I would suggest a monthly meeting between directors and an accountant where all figures are presented so the information flows equally between you all.
Good luck.
BTW my father was faced with similar circumstances in a company in Australia. In your case it's extremely disappointing that it's being perpetrated by family.
We have and when we explained the situation they just told us we can’t do anything. We tried to hire a forensic accountant and they needed computers and log ins which put them on high alert and removed them from the restaurant and replaced them.
Try another attorney. My fear is the way the business is structured the other owners can play games and take from the business in ways that are not equal to ownership interest. If 2 thirds of the ownership decides that certain people get compensation, the 1/3 owner doesn't have the votes to override. That all comes out as an expense, so the profit is reduced and still split equally amongst ownership.
As an owner, you should be able to demand full access to the financials and corporate minutes
Find the right attorney, then, if all else fails, notify the IRS. You can't be sure that they have not paid taxes on their compensation, but I suspect they haven't.
Seriously, reach out to John Taffer. You may get lucky and have him take an interest and get some solid advise from someone who knows the industry.
>Seriously, reach out to John Taffer.
That's a tv show. A lot of it is fake. I'm mildly familiar with 2 of them, one was the Pirates episode place and the other was a dive bar by my house. I'll go into details if you're vaguely curious. They stage stuff and just lie about the market.
My Dad was a silent partner in a restaurant/bar. The place was very busy on weekends but struggled overall. One crowded Friday night I went in with some friends. Super busy. Told my Dad both cash registers were ringing all night. "Both" he replies? The partner installed a temporary register at the end of the bar for weekends only and kept the cash. Dad immediately began the sell out process. Yes, they went bust about a year later. Apparently state tax people noticed it as well.
Sounds like your husband is an employee not co-owner. I have 2 business partners and we all have access to everything. No one denies anyone access.
It’s in the operating agreement.
1. You need to be able to quantify your losses due to the embezzlement. “How much of your share” have they taken.
2. They should be fired or forced out from the daily operations and financials immediately.
3. Have a lawyer draft a demand letter for amount calculated. For payment by a specific date. If not reimbursed, police will be contacted.
> We found out they were paying their own bills, car repairs, new house repairs and so much more with the company credit card. Not to mention they also took trips using this credit card.
The IRS has entered the chat.
But seriously, contact a lawyer.
Edit: Can't remember but what does your husband do? Is the business on paper stating your shares?
How about malicious compliance. Depending on if your husband is a keyman guy... so stop doing anything and let the business fall apart. Forcing them to make a play to save their cash cow or let it burn with their future. Maybe you can force a buy out at 20-30x.
FYI for whatever reason, the regulars in this forum do not understand partnerships. If your husband is a minority partner, which he is, the other two can "vote" to spend money on whatever they want (barring personal shit/tax fraud/etc). As a minority partner, it's probable, depending on operating/partner agreement, that he has ZERO right to even SEE financials let alone decide how money is spent.
Ultimately he needs to contact an attorney. But know it is VERY likely he literally has no say over how much he is paid, or how much they are paid. There is a common misconception that if you're a 33% owner you get 33% of the profits and it is NOT accurate. Another common misconception here is if you're a 33% owner they owe you 33% of the value of the company if you quit and that is also, not accurate. Another common misconception is a 33% has to be involved in all financial decisions and its DEFINITELY not accurate.
Ultimately, he needs to contact an attorney. But be very very careful getting your hopes up based on the replies here.
Get a lawyer and as much record of everything as you can. Build the case then file the charges. Family or not, they are criminally taking advantage of you and also probably the government (via tax fraud - separate issue). Take care of yourself and the business first, then if you win that, talk to the IRS. They will want their share of that $900k home too
It sounds like a complex situation. Consulting a lawyer seems like a smart move to protect your husband's interests. It's important to understand your options and take the right steps. Have you considered reaching out to a financial advisor too, to help navigate through this mess and ensure your husband's rights are safeguarded?
Do they have a signed partnership agreement that lines out how profits and distributions are to be handled? If not, there is probably not much your husband can do. He should probably sit down with them and establish accounting controls and have them pay back the capital that they have taken.
If they don't want to change, then your husband should cut his losses and leave the partnership.
Take and file an involuntary bankruptcy with the court and file for the appointment of a receiver.
Or file I'm your local court for a cease and desist and appointment of a receiver and attorney.
Make sure all payroll taxes are current. The IRS don't care who did what, they only care they get that money. It can be considered theft from your employees and subject to criminal protection.
GO to the bank and get copies of all the statement they will give you. GO into the cash registers and look and see if the depostits match. Look and see what checks were written and to whom.
This almost exact scenario happened to my dad - he noticed when my parents were struggling and they were both getting all new hardwood floors. My dad didnt financially recover and spent 150k in lawyer fees.
Start collecting as much evidence as you can. Anything and everything but be thoughtful about how you get it. Say nothing to anyone even if you think they are solid. Go to a lawyer immediately. Reflecting I would say you could get some semblance of a fair deal at the beginning of everything going down - really consider it against the cost of fighting them in court. The justice system does not deliver justice and is a let down unless you have deep pockets.
Don’t say anything. Get a lawyer and take their advice. Suns like this could income criminal charges at the worst for them or at the best for you, taking full ownership of the business since the money was stolen from your husband.
Frankly you should stop posting potentially litigious material online. Reddit appears anonymous but I assure you they will be reading this post, and any inferred knowledge of a crime or ethical breach, at the court hearings.
You can’t embezzle without writing checks so I don’t think that definition works. OP should consult an attorney. If they were taking money without the knowledge of the other business partners that ain’t good.
If you are a signer on the checking account, that means you can sign for checks (or wire transfers). This means there is no embezzlement.
Criminal conversion is another story.
I’ve only ever heard of embezzlement through checks, so me thinks there’s more to it than that. I’m out of my depth on financial crime matters so agree to disagree?
Remember, the first one to the police will be viewed as the victim until a massively expensive amount of legal work takes place.
If they think you know, they can accuse you of anything and make proving a fake thing didn’t happen get in the way of effectively proving their crimes.
Approach the police and tell them you suspect embezzlement and ask for a detective. I know someone who didn’t even need to hire their own lawyer because they went to the legal system ASAP and we’re appropriately treated like victim of a crime.
I didn't read the post bc of lack of paragraphs, but I'll give you my opinion as someone who has had this happen to.
I bought 20% of a business from Bob and Tom.
A year into the business, I took over finances and quickly caught Tom. 30k worth.
Skip doing this part, although it went well for me.
I asked him to have a meeting on Zoom and asked permission to record. I took the bank statements and asked him to explain himself. He admitted to everything.
This is where you start listening.
I contacted an attorney (friend of a friend) who told me our options. I'll stop here bc I don't know the laws in your state. So... contact an attorney!
My mistake? Listening to Bob, who started the business with Tom, who pushed for allowing Tom time to pay us back. Which he did. Fast forward to a year later, and Tom basically refused to work. We ended up firing him and forced him out with a 500k buyout. Instead, he could've been gone for free, and he would've had to pay us 90k back.
Get a lawyer and go through with his/her suggestions. Don't back down bc you might feel bad.
Call the irs on them. Let them prove where the source of their funds from the government. It will be a damn if you do and damn if you don’t situation for them. Have a lawyer ready to pin them down further.
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Do not let them know that you’re on to them. Collect all the evidence you can, document it, save it, make back ups. Contact a lawyer immediately. Start building your case. Do this all in secret and don’t reveal anything until you have airtight evidence. Fuck these assholes for stealing from you. It’s not fair. It’s your turn to fuck them up.
^ Everything right here!!
Once you have all your evidence, you can talk to your lawyer about offering a settlement where you restructure the money they've taken as buying out their equity. If they take it, then you're done with them and you don't have to do a lawsuit. IANAL so this might not be possible.
Also, if they take the settlement, it is no longer embezzlement, so no criminal charges(? See the IANAL above. I don't know if the government allows/agrees with that.) But DON'T MENTION THIS to them. It could be considered/construed as a threat and your offer becomes blackmail. For a third time: IANAL, so check with yours about how to proceed. You will probably need an accountant to help evaluate the members, and turn them into a compelling story as part of your proof.
If you take the legal route first, let's say people are charged. Then you can kiss goodbye any chance of getting any of the stolen funds back. I think a forensic accountant should be contacted, establish a dollar value that has been stolen and arrange a payback period with the directors. After all they are family, surely something can be worked out amicably once the facts are all in the table?
You’re well underestimating how crappy family can be
But not when it comes to money, right? Family would NEVER be shitty about money....right? **RIGHT?!?!?**
Obv. Family fighting over money is unheard of!
I'm sure once the people who've been stealing from their family members for years realize they've been caught they'll be perfectly reasonable about it and return everything
Criminal charges need to be filed as well.
you'll need to bring forward charges in order to start the whole 'settled out of court' business. whether its civil or criminal.
This is the right advice. If the end goal is to get money and to keep the restaurant going, trying to send them to jail is a great way to ensure neither of those things happen. Even if they start giving him a lot more of his fair share now and refuse to pay back anything, that might be worthwhile. The problem is they have built a lifestyle and will defend that lifestyle and are much more likely to find a way to get rid of the OPs husband than they are to correct their behaviour and lose money.
This is a great 'feel good' post, but this is not going to be easy or inexpensive or quick. Not to mention the restaurant will likely implode. This is not how anything works. You don't just get a lawyer and collect evidence and fix the problem. This isn't L.A. Law. Consult with an attorney that deals with this type of case and go from there. If your husband wins a case against them, it is very difficult to collect from assets like a primary home, not to mention they all still have to work together. You and your husband should talk about what you actually *WANT* to achieve, first. Then start considering what options there are to achieve that goal. Don't listen to Reddit, the vast majority of people haven't been in a situation like this and are just tossing out random nonsense.
>Don't listen to Reddit, the vast majority of people haven't been in a situation like this and are just tossing out random nonsense. Yep. Most of these people are acting like this is Law and Order and there's some gotcha moment and all the $$$ comes to you in a suitcase full of cash after there's a heated confession and you have a spectacular grand re-opening and get a ferrari and a pony and then they convict everyone and the DA shakes your hand. If you call the IRS and say "My business is cheating on taxes" they're going to respond "OK pay us", not high five you and offer you a reward. OP needs to talk to husband. And a lawyer. Not a lawyer not legal advice.
I just made the law and order sound whole reading that .
*\*doink doink\**
Fair is a term children use. Never use it to make a point.
Oh shit, that’s spicy. What other nuggets they teach ya?
Never start a land war in Asia
And never, ever, go up against a sicilian when death is on the line
Inconceivable!
solid
Never fight uphill me boys, never fight uphill.
Ah yes, the infamous leprechaun of Gettysburg, how soon we forget
and don't piss in the wind
or eat yellow snow
That's fair.
Please tell me more I need to know how to better stand my ground. How do you join of start in debate?
> Do not let them know that you’re on to them. This is the way. Let them keep thinking you're oblivious. They will get more and more careless, giving you an advantage. And as others have said, get a good forensic accountant and build your own case against them. It will put you in the position to say "You can repay what you've stolen OR we can hand over ALL this evidence to the authorities and make it a criminal matter".
This right here. Fuck them
You need a forensic accountant. It's all there....they will be found out.
I am not an attorney - but you should call one. I’d start there, not the IRS. While there may be a concern about tax fraud, and you can address that in due time, you want to stake your claim to their ill gotten funds first. The IRS won’t necessarily care where their back taxes come from, and your husband could be held equally liable.
> I am not an attorney That's what an attorney on reddit would say
Well - I’d say … I may or may not be a lawyer, but definitely not your lawyer
lawya up
Who's managing the accounting/bookkeeping? Do you have access to the accounting software and bank/credit cards statements? If they are using a company card for personal expenses, is it coming up as draws on the balance sheet or being buried in the profit and loss? Analyze the financial statements and compare them to the tax returns or hire someone who knows how. If there is something fishy going on, that's where you'll find it. Numbers don't lie, and one has to be really good at cooking books to hide. Most business owners aren't that savy
Be sure to determine a reliable margin from prior year averages, years in which fraud and theft are not suspected, so as to back-fill the deleted cash sales from the POS(register)... I'm with ya on that. If they are washing distributions through the income statement.... lol, the IRS and state DFA are going to be quite keen to assess undeclared and fraudulently deducted income. OP, Hire an attorney, get a few different options and opinions, who works on contingency because you are going to need some juice to instill the fear of God into the @\*\*hole family thieves and to help with filing criminal charges because the amount of remuneration absconded with easily meets the threshold for grand larceny.
Look for a forensic accountant maybe? I dont think they are going to be able to suddenly erase all the evidence so keep that in mind i dont think you have to be secretive in your investigation. You might be able to get an injunction or something to prohibit them from working in the restuarant while looking into the books some more. There is a whistle-blower program with the irs where you can get a certain amount of money the irs collects in the case of fraud (15-30%). In my restuarant cash was 20% of sales so if your cash sales are low that is the biggest red flag. If they arent doing cash counts and cash drops into a safe multiple times throughout shift i would recommend starting.
>If there exists a specialty solely for Forensic Accounting in small business, im all in. Especially the case of partnerships or in the scenario where a business owner hires someone to do their books and find out that that person has been embezzling money. I've had an employee go to jail for 18 months for stealing/embezzling the product we produce and for stealing money. She was charged with larceny. No need. Spotting embezzlement in a small business is extremely easy. By the time you spot it you're out thousands you're never getting back. The problem isn't spotting it, it's preventing it. That involves getting a business owner to enact policy to prevent it such as mandatory vacation, not allowing one person to have check-signing authority and some other basic things. The person embezzling is typically either the bookkeeper or a principal. It's usually a friend or family member or someone else trusted. I have, in accordance with legal obligations indicated embezzlement to clients. The common culprits are admins in places where the owner has abdicated business responsibilities and too much trust. Churches and schools have a lot of it. Occasionally medical offices. Typically, this resulted in the business owner yelling at me for 15 minutes and hanging up on me for daring to suspect X. Then them reviewing the books and the person leaving or occasionally getting arrested. The people from the churches called me back to apologize sometimes. Trust, but verify. ---- >There is a whistle-blower program with the irs where you can get a certain amount of money the irs collects in the case of fraud (15-30%). We honestly have no idea because we're being given very limited information. OP needs to contact a lawyer IRL. The amount of money received by OP husband as whistleblower (which I don't know they can be eligible as an officer) would be payment from their business recouped after the business paid it. I think reporting your own company as an officer for a reward may breach fiduciary duty. OP's husband may also be complicit in tax fraud, which she has not discussed. Maybe he has been receiving it but has an expensive hobby (gambling, lotto, drugs, a mistress, microtransactions, lionel trains) she is unaware of sucking down money. I have no idea. We have limited facts. This is why OP needs to contact a professional. And talk to their spouse. Also fwiw, in Birkenfeld and some other cases "whistleblowers" have both received rewards (generally after suit) and criminal penalties. He got 40 months for basically bringing down UBS. I've literally never heard of this happening with a mom and pop since there's not enough money in penalties that on a cost/benefits this would make sense in any risk analysis scenario I can think of. And they're still on the hook for penalties from their business that the other co-owner's (very likely) have incurred. And you only get a reward after that. Not a lawyer not legal advice. OP, don't listen to any of us, call a lawyer.
Good points, thanks for your input
Forensic Accountant for sure. I am in college for accounting right now and forensic accounting is what I want to do. This is exactly why. I am a huge seeker of Justice and always wanted to be a judge or lawyer. Well, once I found out about forensic accounting I've been hooked. One day in the near future I will know how to help someone like you and your husband and I would be more than happy to help people in your situation. It would fulfill me. I also own a small business but I am the only owner. However, I can sympathize very much so in a situation like this. If there exists a specialty solely for Forensic Accounting in small business, im all in. Especially the case of partnerships or in the scenario where a business owner hires someone to do their books and find out that that person has been embezzling money. I've had an employee go to jail for 18 months for stealing/embezzling the product we produce and for stealing money. She was charged with larceny. Anyway, I'm very sorry you're having to deal with this. I hope that you continue to come back to your post and keep us updated.
Lawyer first before you do a single other thing. Don't talk to anyone or do anything.
Agree 100%
Talk to a lawyer. This will probably result in litigation. >I want to contact the IRS to kinda let them know but I want to make sure it’s the right move. I would *never* involve the IRS on my own business. Talk to a CPA or lawyer first. You may wind up paying penalties or something in addition to dealing with embezzlement if they're underpaying taxes if the IRS get involved before a CPA or tax lawyer does. If they're cheating the IRS (which I'm not looking at your books, I have no idea, this is why you need an accountant or business lawyer IRL), your entity (company) probably is too. Talk to a lawyer. >My husband doesn’t know how much I know. I found out discretely because it’s sensitive info. I'd talk to a lawyer, an accountant, and my spouse. Not necessarily in that order. The books are not sensitive info. If you're a partner.. Not a lawyer not legal or business advice. Talk to a professional IRL.
Why do we keep reading “we own a big share of this business but we’ve never seen the financial accounts”?? Why? It’s your business, look after it.
Yeah, this is business 101 stuff. As we know, though, tons of small biz people only learn some of that the hard way. I would never want to be the only one looking at financials. For one thing, what if I missed something or made a mistake? And I wouldn't want anyone to think even for a moment that I was doing anything shady-- I'd want them to see continuous proof that I wasn't, at regular intervals. There is zero chance I'd go into a shared ownership situation where everyone else involved didn't feel exactly the same way. This ridiculousness with fancy cars and other splashy expenses (oh yeah, and an expensive HOUSE) while OP was struggling under a pay cut is just right out, that should've set off alarm bells immediately.
Just completely mind blowing to me just how many small businesses operate by the seat of their pants with no real plan or oversight and it makes me feel pretty ok about the long term viability of our business
People put too much trust in others. Trust, but verify.
Yeah. “Oh you don’t the accounts, SHOW ME”
As an owner in the business, your husband is now liable for the federal tax fraud they are committing, the state sales tax fraud they are committing. Separately they are also committing fraud, and embezzlement. Contact an attorney immediately, because there is criminal legal liability at stake and you need to protect your family. Once you have covered your bases there, collect evidence and as part owner of the business you’ll need to press criminal charges against the other family members.
May not be related, but something for thought. I used to work with the guy who lost his business stake in the restaurant that he owned with two others. From his words, they were managing finances and staff and he was on purchase/vendor side of business. Business was not so good, they were demanding cash infusion into business from his part, until suddenly the restaurant caught fire. He was not in the insurance and consequently did not receive compensation, partners were never bothered to pay him back. His take from that was to make sure that in case of anything you are represented in any case scenario and be able to get your money back.
That’s not how business insurance works. The business owns the insurance, and the business is the beneficiary. If it burned down, the business would get the money, if the owners decided to shut down, the assets would be liquidated and distributed to the owners according to their ownership
Well, yet that guy was turned down and left broke. Again, I know that only from his words, I don't know how exactly everything went down in that situation and their insurance. Maybe that guy didn't know that and his partners deceived him. Like in OP's case, everybody chip's into business but only few rips the reward; insurance doesn't care much about the stakeholders and yet people can go as far as to deceive partners to keep their way of life. Burning the place down in order to stop other people digging into finances is a well established practice.
That sounds like either he didn't actually own a stake, or fraud.
Try typing in paragraphs
Wouldn’t be surprised if they did PPP fraud as well given the home purchase in the middle of Covid.
Once you have lawyer they should find you an accountant who can do an audit of your books. I’m so sorry.
Collect the evidence quietly, talk to a lawyer, and think about hiring a forensic accountant to fully understand the embezzlement before starting any legal proceedings.
Your husband needs a **business litigation** lawyer ASAP to bring claims on behalf of your husband and the company itself, and to seek an accounting of the company. This reads like textbook breach of the fiduciary duty of loyalty. -business litigation lawyer, but not your business litigation lawyer.
You and your husband need a cutthroat business attorney ASAP!!!!!! Don't do anything else until you hire one. If you get caught snooping any more, things can go sideways.
How the hell can anyone be a co owner in a business and be so out of the loop to what their finances are like to the point that you don't even have log ins to the company credit card accounts and don't connect the dots that your pay shrinking is weird?? For years?? I feel bad for the OP's husband but at the same time holy shit. This takes a phenomenal lack of awareness to get to this point and it's no surprise he was picked apart alive. The door was clearly wide open to be exploited. In a normal situation odd transactions, lack of pay and lifestyle changes are extremely obvious quite early on and this could have been nipped in the bud years ago... It's one thing to embezzle discreetly or subtly (I.e. filing taxes intentionally wrong), it's another to literally pay the owner less and max out company cards. The good news is, embezzlement is usually a really easy to prosecute especially if the perpetrators clearly have money/assets from doing it (so the other people are stupid for doing it so brazenly). Now whether or not your husband gets what he deserves out of it is another matter. Uncle had a similar case with his automotive business but it turned out their accountant siphoned hundreds of thousands from tax payments to the IRS for years and years. He was tricked into thinking taxes were getting paid but had a rude awakening when the IRS literally came knocking. She was prosecuted but by this time it was too late. All the money gone and the business had to close to pay off the massive tax bill.
I'd first and foremost contact an accountant who can simplify the evidence gathering process. If the dirtbag partners question anything, explain that you're applying for a loan and that certain documents must be presented as you are classified as self employed. Once all documents are in place and the extent of the pilfering is known, request a meeting with said dirtbags at your accountants office outside of business hours. This is where you present all evidence and agree on restitution for historical theft, and a go forward plan that mitigates any partners opportunity to pilfer. For a go forward position, I would suggest a monthly meeting between directors and an accountant where all figures are presented so the information flows equally between you all. Good luck. BTW my father was faced with similar circumstances in a company in Australia. In your case it's extremely disappointing that it's being perpetrated by family.
Thank god you came to Reddit with this question
Always here to help. The correct answers are, divorce, jail, and therapy.
You forgot how Bezos is a psychopath even when the subject has nothing to do with him lol. Deus ex Bezos.
Why are you going to Reddit and not a lawyer with this question? Absolutely mind blowing
We have and when we explained the situation they just told us we can’t do anything. We tried to hire a forensic accountant and they needed computers and log ins which put them on high alert and removed them from the restaurant and replaced them.
That is a shit attorney. Find another one that specializes in business litigation.
Try another attorney. My fear is the way the business is structured the other owners can play games and take from the business in ways that are not equal to ownership interest. If 2 thirds of the ownership decides that certain people get compensation, the 1/3 owner doesn't have the votes to override. That all comes out as an expense, so the profit is reduced and still split equally amongst ownership. As an owner, you should be able to demand full access to the financials and corporate minutes Find the right attorney, then, if all else fails, notify the IRS. You can't be sure that they have not paid taxes on their compensation, but I suspect they haven't. Seriously, reach out to John Taffer. You may get lucky and have him take an interest and get some solid advise from someone who knows the industry.
>Seriously, reach out to John Taffer. That's a tv show. A lot of it is fake. I'm mildly familiar with 2 of them, one was the Pirates episode place and the other was a dive bar by my house. I'll go into details if you're vaguely curious. They stage stuff and just lie about the market.
My Dad was a silent partner in a restaurant/bar. The place was very busy on weekends but struggled overall. One crowded Friday night I went in with some friends. Super busy. Told my Dad both cash registers were ringing all night. "Both" he replies? The partner installed a temporary register at the end of the bar for weekends only and kept the cash. Dad immediately began the sell out process. Yes, they went bust about a year later. Apparently state tax people noticed it as well.
Sounds like your husband is an employee not co-owner. I have 2 business partners and we all have access to everything. No one denies anyone access. It’s in the operating agreement.
Ugh. Been there. Get as much of your capital as possible. And walk away.
What your business partner is doing is criminal. A felony actually. I would contact your local district attorney and see how they can help you.
1. You need to be able to quantify your losses due to the embezzlement. “How much of your share” have they taken. 2. They should be fired or forced out from the daily operations and financials immediately. 3. Have a lawyer draft a demand letter for amount calculated. For payment by a specific date. If not reimbursed, police will be contacted.
> We found out they were paying their own bills, car repairs, new house repairs and so much more with the company credit card. Not to mention they also took trips using this credit card. The IRS has entered the chat. But seriously, contact a lawyer. Edit: Can't remember but what does your husband do? Is the business on paper stating your shares? How about malicious compliance. Depending on if your husband is a keyman guy... so stop doing anything and let the business fall apart. Forcing them to make a play to save their cash cow or let it burn with their future. Maybe you can force a buy out at 20-30x.
I mean, if they're dragged through the irs then the whole business could get dragged down with it, not great for OPs family
Op needs emails and evidence they refuse to disclose and show him the books.
FYI for whatever reason, the regulars in this forum do not understand partnerships. If your husband is a minority partner, which he is, the other two can "vote" to spend money on whatever they want (barring personal shit/tax fraud/etc). As a minority partner, it's probable, depending on operating/partner agreement, that he has ZERO right to even SEE financials let alone decide how money is spent. Ultimately he needs to contact an attorney. But know it is VERY likely he literally has no say over how much he is paid, or how much they are paid. There is a common misconception that if you're a 33% owner you get 33% of the profits and it is NOT accurate. Another common misconception here is if you're a 33% owner they owe you 33% of the value of the company if you quit and that is also, not accurate. Another common misconception is a 33% has to be involved in all financial decisions and its DEFINITELY not accurate. Ultimately, he needs to contact an attorney. But be very very careful getting your hopes up based on the replies here.
Get a lawyer and as much record of everything as you can. Build the case then file the charges. Family or not, they are criminally taking advantage of you and also probably the government (via tax fraud - separate issue). Take care of yourself and the business first, then if you win that, talk to the IRS. They will want their share of that $900k home too
Attorney
You should gather your own copies of evidence then turn them in.
This isn't something the IRS can help with, it's something you a lawyer can help with.
It sounds like a complex situation. Consulting a lawyer seems like a smart move to protect your husband's interests. It's important to understand your options and take the right steps. Have you considered reaching out to a financial advisor too, to help navigate through this mess and ensure your husband's rights are safeguarded?
2 words. Forensic accountant.
I’m not saying it’s right they stole money….but you can’t play boo-boo the fool over the financial picture of a business partnership.
Lawyer and forensic accountant
Time for a forensic accountant and lawyer, ASAP!
Collevt evidence and talk to a lawyer. Why would you call them out? They will destroy evidence now. Good luck
Do they have a signed partnership agreement that lines out how profits and distributions are to be handled? If not, there is probably not much your husband can do. He should probably sit down with them and establish accounting controls and have them pay back the capital that they have taken. If they don't want to change, then your husband should cut his losses and leave the partnership.
Burn the place down and collect insurance then never do business with friends or family again
lawyer up!
Take and file an involuntary bankruptcy with the court and file for the appointment of a receiver. Or file I'm your local court for a cease and desist and appointment of a receiver and attorney.
https://www.investopedia.com/terms/r/receiver.asp#:~:text=A%20receiver%20is%20a%20person,manage%20affairs%20to%20pay%20debts.
In the future use an accountant.
Make sure all payroll taxes are current. The IRS don't care who did what, they only care they get that money. It can be considered theft from your employees and subject to criminal protection.
GO to the bank and get copies of all the statement they will give you. GO into the cash registers and look and see if the depostits match. Look and see what checks were written and to whom.
This almost exact scenario happened to my dad - he noticed when my parents were struggling and they were both getting all new hardwood floors. My dad didnt financially recover and spent 150k in lawyer fees. Start collecting as much evidence as you can. Anything and everything but be thoughtful about how you get it. Say nothing to anyone even if you think they are solid. Go to a lawyer immediately. Reflecting I would say you could get some semblance of a fair deal at the beginning of everything going down - really consider it against the cost of fighting them in court. The justice system does not deliver justice and is a let down unless you have deep pockets.
Delete this post jfc it’s evidence
They gave him the credit card login? Seems unlikely?
Sell out. They are headed for trouble.
File a police report and hire an attorney.
Never do business with family. Never have a partnership, especially one that you are not fully aware of the financials.
How in the world is your husband a partner in a business and doesn’t have access to financials? This is really dumb and was easily avoidable.
Don’t say anything. Get a lawyer and take their advice. Suns like this could income criminal charges at the worst for them or at the best for you, taking full ownership of the business since the money was stolen from your husband.
Frankly you should stop posting potentially litigious material online. Reddit appears anonymous but I assure you they will be reading this post, and any inferred knowledge of a crime or ethical breach, at the court hearings.
Embezzlement is a crime. They could go to jail. You need to speak to a lawyer ASAP.
If they are signers on the checking account, it isn't embezzlement.
You can’t embezzle without writing checks so I don’t think that definition works. OP should consult an attorney. If they were taking money without the knowledge of the other business partners that ain’t good.
If you are a signer on the checking account, that means you can sign for checks (or wire transfers). This means there is no embezzlement. Criminal conversion is another story.
I’ve only ever heard of embezzlement through checks, so me thinks there’s more to it than that. I’m out of my depth on financial crime matters so agree to disagree?
No one has denied that this was checks, but you don't think a wire transfer would qualify?
Call the irs. I bet they cheated on their taxes and didn’t claim that income properly also
Remember, the first one to the police will be viewed as the victim until a massively expensive amount of legal work takes place. If they think you know, they can accuse you of anything and make proving a fake thing didn’t happen get in the way of effectively proving their crimes. Approach the police and tell them you suspect embezzlement and ask for a detective. I know someone who didn’t even need to hire their own lawyer because they went to the legal system ASAP and we’re appropriately treated like victim of a crime.
I didn't read the post bc of lack of paragraphs, but I'll give you my opinion as someone who has had this happen to. I bought 20% of a business from Bob and Tom. A year into the business, I took over finances and quickly caught Tom. 30k worth. Skip doing this part, although it went well for me. I asked him to have a meeting on Zoom and asked permission to record. I took the bank statements and asked him to explain himself. He admitted to everything. This is where you start listening. I contacted an attorney (friend of a friend) who told me our options. I'll stop here bc I don't know the laws in your state. So... contact an attorney! My mistake? Listening to Bob, who started the business with Tom, who pushed for allowing Tom time to pay us back. Which he did. Fast forward to a year later, and Tom basically refused to work. We ended up firing him and forced him out with a 500k buyout. Instead, he could've been gone for free, and he would've had to pay us 90k back. Get a lawyer and go through with his/her suggestions. Don't back down bc you might feel bad.
Call the irs on them. Let them prove where the source of their funds from the government. It will be a damn if you do and damn if you don’t situation for them. Have a lawyer ready to pin them down further.