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Ask Dimitry K., Esq. Your Own Question
Dimitry K., Esq.
Dimitry K., Esq., Attorney
Category: Legal
Satisfied Customers: 41221
Experience:  Multiple jurisdictions, specialize in business/contract disputes, estate creation and administration.
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I have an ethics question. I am in house counsel and suspect

Customer Question

I have an ethics question. I am in house counsel and suspect that the CEO is hiding assets from his wif from whom he is divorcing. Furthermore, he is dating a subordinate and now taking her on overseas trips that normally she would not attend, and therefore in my mind, abusing corporate assets. They have no disclosed their relationship to anyone in the company, but they did admit it to me when I confronted them and asked them to sign a consentual relationship agreement to avoid a sexual harrassment suit down the road. What are my legal obligations? Also, am I forbidden to discuss these matters with anyone outside the firm?
Submitted: 4 years ago.
Category: Legal
Expert:  Dimitry K., Esq. replied 4 years ago.
Thank you for your question. It is a pleasure to try to assist a fellow member of the Bar.

Boy, that is a tough situation. Is the wife in any way a separate owner in her own right? Do you know by chance if the CEO's position and any ownership stake was obtained while married or prior to marriage? Are you the sole counsel? Is there a Board?
Customer: replied 4 years ago.

There is a board of directors, but they are mostly made up of his buddies. I am not sure how to address it with them at all. I am the sole counsel.

The hidden assets would be in this form: the CEO is owed backpay from the company during a time in which they were married. He is going to get a piece of that backpay as a cash bonus when the company sells. I suspect the ex-wife does not know of this arrangement with the company. In my eyes, she is due half of the cash bonus.

Expert:  Dimitry K., Esq. replied 4 years ago.

Thank you for your follow-up.

You are correct, she is due that amount. But since you aren't her attorney and she isn't on the board, you do not owe her a duty to inform her of this withholding. As in-house counsel the most you can do is formally advise the Board at a monthly meeting or a special meeting regarding this behavior and the potential risks to the company if this deception is ever found out by the spouse. Explain that if she subpoenas the records of the business including wages or 'backpay', the company and you would have to comply so then court costs, legal fees, and other expenses could be borne by the company in defending this situation that the company will ultimately lose. This will place you on record within the company and absolve you personally of liability. Then it becomes the Board's issue as to whether to take this further or not. It is not an ideal solution, I agree, but this does not violate your duty to the business and it permits you to act in a responsible manner.

Good luck.