What To Do If You Suspect That Your Business Partner Is Committing Fraud

The Different Faces Of Fraud & How Can You Prove It

Working with business partners can pose unique challenges. Sometimes, business partners disagree on which direction the company should go, or one party may be overbearing and try to control everything. In some cases, one partner may violate the trust of the others and commit white-collar crime, such as fraud. This can be a challenging situation, especially if you and your business partner are already on tenuous terms.

In a business sense, fraud typically refers to financial crime and can have many different faces. It can range from a dummy business that falsely bills your company to incentives from a supplier to fraudulent checks. Whatever the fraudulent action is, it’s a violation of the partner’s contractual and fiduciary responsibility to you as well as potentially a violation of civil and criminal law. If left unchecked, fraud can tear down your business and you can even be implicated, so it’s important to act quickly and appropriately. Contact an experienced Arizona business attorney immediately for confidential legal guidance.

What To Do If You Suspect Fraud

If you suspect that your business partner is misusing his or her position, you need to take action, but it’s important not to let your emotions get in the way. Don’t immediately confront your business partner, make unsubstantiated claims, or talk to your employees about what you think might be happening. Instead, you need to document everything and collect some evidence. Once you’ve obtained some information about the situation, you need to retain the services of an experienced Avondale business lawyer. With legal counsel, you can gain an understanding of your rights and legal options. If matters cannot be resolved with negotiation, civil action can be initiated. In some cases, criminal action may be taken as well.

Types Of Fraud

Fraud can have many faces, but the most common types come under the umbrella of asset misappropriation. This make take the form of:

Authorized Signer Fraud: A person who is entitled to issue or sign checks for a business issues checks to themselves, family members, or friends, and then lists in the accounting records that the check was paid to someone else.

Check Forgery: Obtaining a company check and forging the signature.

Altering Checks: Changing the payee or amount on a check that is received.

Concealing Checks: Slipping a fraudulent check into a stack of legitimate checks, hoping that the authorized signer will sign it without noticing.

Expense Reimbursement: Submitting inflated or fabricated personal expenses for reimbursement. This may be difficult to detect initially, but is frequently discovered as a pattern over time.

Billing Schemes: Submitting false invoices to be paid to a fraudulent payee or shell companies, or double paying a legitimate vendor.

Cooking The Books: Another common type of fraud is non-asset misappropriation, which involves taking company materials or physical assets for personal use, or even selling them for personal gain, and then hiding or mislabeling the transactions.

Deceit: A business partner may also seek to increase the income of their business by defrauding or deceiving others. This only benefits the partner indirectly, but is still illegal and can create grave risks for the business. In other cases, a partner may make assertions or claims about your company’s products that are later found to be untrue. This sort of fraud can ruin the reputation of your business, as well as your own reputation since you are a business partner. Lawsuits from customers or vendors can result from these situations, especially if the harm from your products was substantial.

As a business partner, it’s important to monitor and prevent attempts to deceive or misrepresent your products. Even if you were not directly involved in the deceit, you are still involved as a business partner and may find yourself implicated. It can take months or years of working with a Chandler business lawyer to untangle the situation and exonerate yourself.

Proving Fraud in a Business Partner

It can take time and effort to prove fraud in a civil case. You’ll need to provide hard proof of asset misappropriation, such as copies of fraudulent checks or witness testimony from employees or vendors. Generally, proof of four elements is required for a successful court case:

False representation by the business partner, the defendant
An intent to deceive
Justifiable reliable on your behalf as the plaintiff
Damage resulting from the broken contract

If you suspect fraud, get a Gilbert business attorney involved right away so they can help you uncover evidence and provide legal advice on how to seek restitution.

Get the Experienced Legal Counsel You Need

If you suspect fraud in a business partner, move quickly before your entire business is destroyed. The attorneys at Denton Peterson Dunn have vast experience and extensive knowledge of Arizona business law, and stand ready to help you understand your rights and options. We can work to resolve matters internally and will take your case to court if needed. Call our office today to schedule your no-obligation strategy session!

Brad Denton – Denton Peterson Dunn