What to Do if You Suspect Your Business Partner is Committing Fraud

by | Nov 11, 2015 | Business Litigation

When someone forms a business partnership, the primary goal is usually to combine resources and talent to make a profit. However, there are times when things don’t go as first planned…

In some cases, a business partner may become greedy or lose sight of the initial goal. Loyalty is no longer a focus and the business partner might start stealing money from the joint business account.

In such a case, you have various legal options since the other partner has breached his or her fiduciary duty.

The Suspicion

If you are suspicious of fraudulent activity from a business partner, what do you do? Do you speak up right away or do you take an investigative approach? Which is better? It probably depends on the extent of the financial damage done. You also cannot assume anything until you know the facts for yourself.

Fraudulent Activities

It might be better to take a conventional wisdom approach by hiring a professional investigator in response to the . However, you should also understand the important steps to fixing the problem.

In retrospect, you should also be proactive in making sure that the fraudulent activity ceases right away unless you are going to set up a ‘one time’ sting operation after you get the facts from a private investigator.

Be aware…Fraudulent activities result from three distinct factors; namely opportunity, motive, and character.

Don’t Act Irrationally

Once you are aware of the fraudulent activity, try not to panic, even though, it can be quite scary and feel as if the rug is pulled from under you. You can also be tempted to retaliate irrationally by confronting your business partner as soon as you discover the disloyalty. However, it is better to plan on how you will handle it and then gather the evidence and assess the situation.

Remember, emotions are not going to help in this case; they will only make matters worse.

Approach and Investigate with an Attorney

Work with your attorney and your accountant to understand what happened, investigate, and approach the matter step by step. Then, organize your plan of attack with your attorney.

When approaching the investigation, assume that your business partner is innocent until you can proven otherwise. There could be an innocent explanation to disprove any suspicions of fraud. Record any exculpatory evidence found. Your investigation is going to be conducted on someone that you once valued and trusted.

Note that…Your business partner is the one with the most inside information to commit fraud and be caught in the misappropriation of funds. Be aware that most fraudulent activities end up more complicated than they initially appeared to be. Therefore, it is best to ask a business litigation attorney for help.

Confronting the Case

After a complete investigation, it is time to confront your business partner—but tactfully and with your attorney present. Depending on the case, it may also be best if your attorney manages all correspondence with your business partner and his or her attorney.

Contact an Experienced Business Litigation Attorney

Seek the help of a legal professional and don’t attempt any handling of this fraudulent activity on your own. Your next contact should be with an experienced business litigation attorney. However, the attorney’s job is of a high priority because fraudulent activity within the scope of a business partnership is filled with legal issues.

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