FRAUD IN A FAMILY COMPANY

THE STORY

JM was the personnel manager for a successful family-run engineering firm. To help with its expansion plans, it had recently raised investment capital. When in the past the directors had put through the books some private work done on their own homes, JM had let it pass as it was a family business. Two employees had recently told him that the scale of these private works was now reaching new heights. JM was worried about this and doubted that the non executive directors the new investors had put on the Board would approve. He thought something should be done but knew that the directors had a well-earned reputation as hard men in the local community. He feared that if he said anything to the non-executive directors he would lose his job or something worse might happen. Not surprisingly, the dilemma had undermined JM’s commitment to the firm. He rang us for advice.

WHAT WE ADVISED

We advised JM that if he wanted to stay with the firm and deal with the issue, the best way was for him to raise the concern with the family directors. By referring to the fact that staff were talking about it and the risk that they might report the wrong doing elsewhere, he could help the family see why the private works should be stopped. As this approach made his role part of the solution, it was unlikely he would be victimised. If the malpractice continued,we would then discuss with him what other options there were. We explained that if he lost his job, he would be protected by PIDA. However, this meant he would be fully compensated - not that he couldn’t be sacked. The other option was for JM to find a new job and then decide whether to raise the concern himself.

WHAT HAPPENED

Thankful for the advice, he took the second option.