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Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Criminal Law
Satisfied Customers: 88353
Experience:  Attorney with over 20 years law enforcement, prosecution, civil rights and defense experience
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Business Partner is alleging fraud - do I have personal criminal

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Business Partner is alleging fraud - do I have personal criminal exposure?

As part of an ongoing dispute with a business partner over what they believe is their due return on investment (of which none was promised or outlined in any of the partnership documents or any other discussion/documents related to the business)... they now seem to be moving towards accusations of fraud.

What they seem to believe is as follows:
1. That the jointly-owned air cargo business somehow owes them $450,000 (the amount they put into making the aircraft fly-able). This is despite my other business entities not related to the partnership supporting salaries for pilots and mechanics, paying 100% of rent at the office location for the partnership business, and various other aircraft maintenance expenses over the past three years. To date, I have placed nearly $650,000 of funds towards the partnership business. I have withdrawn/transferred these funds from other businesses I own outright (not in partnership).

2. They seem to believe that approximately $250,000+ worth of expenses claimed by the partnership airline have been "manufactured" and are "fictitious." Specifically, they are referring to charges on a credit card owned by one of my own companies to pay for fuel for the cargo airline, which did not have a credit card. That company was then reimbursed for the charges out of payment for each cargo flight in which the situation occurred (this happened approximately 10-15 times). Despite showing the partner the credit card statements to this effect, they refuse to believe these charges are real without a receipt (which, in some cases, we do not have as purchases were made over the phone, out of the country). They believe that a relative who serves as president of the company that owns the credit card has been "paid off" with this money even though they have not drawn anything more than the same salary since before the partnership and since all charges due to the credit card were, in fact, repaid to the credit card issuer

3. Similarly, the company's cash account, which has been used for fuel, ground handling, and landing permit charges out of the country (in Central American and South American countries where often only cash is accepted) has been disputed by the partner... claiming that the $70,000 has gone to "line my pockets" rather than pay the above vendors. Again, while we cannot produce receipts for every one of these transactions, we can, in fact, prove that the aircraft flew (through FAA records, flight plans, etc.) and can document the international average cost of aviation gas at the time which reflect the stated costs with reasonable symmetry. My point has been that if the aircraft flew, it flew on gas, which had to be purchased in some way. They believe the contrary.

4. The spoken agreement in the partnership would be that my partner would pay for the aircraft hangar in full, and that we would pay for the office in full, since they were both similar amounts. The hangar was always leased under the name of one of my partner's other companies and the office was always leased under the partnership company. Despite being 50/50 owners of the partner company, and despite the fact that my other companies outside the partnership have been funding the rent in full for the office, they are stating we had no permission to operate those businesses out of our space (their offices were always kept locked and off limits to all other business personnel and actions). They have since contacted various state organizations, alleging that we "fraudulently" filed company documents (such as annual reports), because we are using that address as our address of record.

5. (LASTLY) Due to the beliefs of the client on items 1-4 they have recently indicated that they will be reporting Tax Fraud to the IRS as they believe we have falsely reported incomes for various companies, employees, and, of course, myself. They believe that our late filings for tax years 2010, 2011, and an ongoing delay for filing 2012 (because they have demanded access to bank records for my other companies in which they have no ownership) - are proof of their suspicions, even though we filed those returns late in order to have them reviewed by an outside CPA because we were not confident in the work of our internal employee. They have asserted that they believe this outside CPA has conspired with us to falsify returns.

My long and drawn out question is, what is my personal criminal exposure on this? They have asserted that they intend to report criminal charges, but I fail to see what they may be. As well, they have threatened similar action against the president of a related company (a close relative as described in item 2), as well as the director of the cargo airline (another relative). Do any of us face criminal charges?
Submitted: 8 months ago.
Category: Criminal Law
Expert:  Law Educator, Esq. replied 8 months ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.

Have they sued you personally or is these allegations they are making against your company?

What type of business entity is your business?

You do have an attorney representing the business?
Customer: replied 8 months ago.

1. They have not actually filed suit to date - though they keep threatening to do so. The only actions they have taken are the reports of fraud to the IRS and state organizations described above...


 


2. The partnership business is a corporation (C-corp). The other businesses I own are C-Corps as well.


 


3. We have a business attorney who has advised us to make sure our documentation is in order... My concern is that, with the accusation of criminal activity, I will need to retain a criminal attorney - and I'm concerned/curious as to the likelihood of criminal charges being filed against me or various relatives that work for me or my non-partnership companies.

Expert:  Law Educator, Esq. replied 8 months ago.
Thank you for your response.

Personal criminal liability could attach to the owner of a corporation who was found to have committed criminal acts. Really, the things you have mentioned above seem tenuous at best for breach of contract claims, much less criminal actions. It does not sound like what he has alleged according to you would rise to the level of anything the DA would want to even touch as it seems more like some type of contractual squabble and he is using them to try to bully you to settle and pay him money.

Business investments, as you know, are risk propositions where risk is borne by the owners/shareholders. If your agreement did not promise him full return on any investments and his expenditures were his investments into the corporation, if he has no evidence of actual fraud or theft by you, then personal criminal liability would not attach to you.

You will not need a criminal attorney at this point, if as you said you can document everything in this matter. As I said, it sounds from what you are saying is that he is posturing.

From the information you disclosed above, it seems like there is no real evidence of theft or fraud, it sounds like he just thinks he should get all of his investment money back. If all of the money was properly spent by the company, then you or your relatives would not have criminal liability here. Just make sure your company attorney has all of your documentation so he can head this off and it is not likely any DA would touch this contractual dispute unless they actually prove you personally or one of your relatives personally took this money from the company.



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Law Educator, Esq., Lawyer
Category: Criminal Law
Satisfied Customers: 88353
Experience: Attorney with over 20 years law enforcement, prosecution, civil rights and defense experience
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