"Several consultations and meetings later, however, the company’s board faced a dilemma. We had to make a decision. The costs of pursuing the case would simply exceed any compensation from winning it. So, should we then pursue the case?"
Maybe I don't know how your countries legal system works, but surely the cost is borne by the state? I assume then you mean the cost of the time you would need to spend to support law enforcement? But the thing is, now you:
a) can't name this fellow,
b) if someone does a background check of him and his father in the future, they will not find this
c) his father, a layer (?!), stands a lose a LOT if this really is true, and would probably be smart enough to settle this ASAP,
d) if a customer had not paid, you'd probably consider writing off that as a bad debt, but still possibly engage a collection agency to attempt to recover the debt - you would only get a fraction of it, but you'd get some. You might have found a willing law firm to pursue the case, in return for a % of the settlement/award.
e) assuming a successful prosecution, most countries would block this young man from being a director of a company for a LONG time - that should be enough reason to follow through alone
I understand it's expensive but I, for one, feel that you have a moral obligation to take the evidence to the correct authorities, and let them make the decision on whether they have a case and to proceed or not.
The site is down, so I'm working from inference - but robbery is a violent crime. Theft is a non-violent crime. Both are matters for the police, not civil litigation.
Since it's up to the board to decide to pursue the case, it sounds like it's neither - probably some sort of breach of contract we're looking at, which is bad enough, but not robbery.
The question is whether it would be pursued under criminal law or civil. If under criminal law, you would expect the state to bring a prosecution if there was sufficient evidence and be responsible for all costs.
However, in the UK for example, cases of breach of fiduciary duty are not often of interest to the police unless there is a public interest angle.
Consequently, I presume that the OP is talking about a civil case where costs would be incurred to bring the case.
Although there is likely to be an ability to claim some element of costs from the losing side, there is still obviously the risk that the case may not be successful regardless of how solid the case is due to the inherently risky nature of litigation.
There is a moral obligation. That's kind of the dilemma I'm trying to put forward. We prefer, as you say, to let the authorities decide on what's the best way to handle it.
Yes I'm not sure about this. It might be a local issue. In many countries though if you win you will have your legal costs covered along with the original funds returned. Otherwise, many would not pursue injustices. Of course, if you don't feel like you have a great chance of succeeding then the risks do become "Well, it'll cost us $100,000 to try and get the $50,000 back and we're not even sure we'll win" Then it might make sense to drop it but that is because your case isn't really rock solid.
I was involved in a company in which one of the co-founders used the company debit card as his personal card to purchase food, snacks from vending machines, gas and groceries. He ended up spending almost half of the money we had made from contracts and equity we had put in and refused to pay it back.
We had a choice here, we could have taken it to the police, we could have used the law to our advantage because technically he was embezzling. Instead myself and the other co-founders called for a board meeting, we sat him down and talked to him. We considered his misappropriation of the funds ground enough to fire him from the board/company and considered the money taken to be more than enough compensation for his share of the company (to which he agreed), in return we wouldn't pursue him. This worked out for the better for all of us, since it meant we didn't have to spend time and money on a lawyer/court case and he could walk away without any penalties.
We had him sign a document stating that he no longer held any interest in the company (we had already long deactivated any and all accounts he had on the company network/services and his access to the bank account) and let it go.
Every so often I will still get calls from people looking for references (his name can still be found on Google to be associated with this company), and I will simply state that I have worked with him the past, and he was let go.
Unfortunately due to various reasons it never really did work out and the company fell apart. We made some money, I learned a boat-load and had my first failure. We were trying to bootstrap the company ourselves, so the only thing lost was the equity we all put in to start the company.
Wow, I'm actually in the middle of exactly the same situation right now (significant untracked and unauthorized personal spending by a co-founder), except I don't have a board, it's just me and the other co-founder.. We tried to work things out together to balance everything, but I finally gave up out of frustration and hired a lawyer.. Something I should have done from the start..
I'm going the opposite route though, and forcing him to buy me out of the company instead (with the alternative resolution being litigation against him), so he can keep the mess he created, and I'll get out of the liability and get a lump sum payment on the way out..
Why don't you tell people what he did? After all that's the kind of information they're looking for and it doesn't really seem like he saw the error of his ways.
I don't know if it's a real issue or not, but I've heard before that giving a detailed report on a past employee's misdeeds can open you up to litigation, especially if you can't prove your claims.
You could always respond to reference calls by saying, "I'd love to tell you all about him, but don't want to open myself up to litigation." That sends a clear message without you having to say anything.
Just say "He worked here. I do not recommend his services".
That's not a particular statement about the person, it gives no version of events. If pressed, explain that this all you can say. You simply don't recommend him.
It sounds like a lot of obvious mistakes were made here. #1 on my list would be to never give direct access to the company's bank account if possible, and definitely not without limits. There should be 1 or 2 names on it max.
What has personally worked for me is providing company credit cards with a max limit of $25k to anyone who actually needs to be actively spending. Right now that's head of tech, head of marketing and CEO. My company is larger and spends quite a bit. If you are bootstrapping or have done an angel round, perhaps this number should be $5k or $10k. Either way, the important part is the limit.
As far as withdrawals go, a 2-signer system on all checks is a no-brainer, though in this case it sounds like an in-person withdrawal from a branch is what got you. I would check with your bank to see if they can setup a similar system for withdrawals over $X. I've worked with Silicon Valley Bank and they are super flexible to any of these custom needs.
Best of luck with getting back up after this. These are the kinds of events that you need to creatively persevere through.
I worked with a company where there were 2 founders and one of them told the other guy he would like to retire so he got bought out.
He was still working for the company while the other guy went on vacation.
2 weeks later he came back, not a single one of all the orders was finished and he had introduced his new company to all customers.
In the months leading up to all this, the "evil" partner had bought an exact copy of all the machinery and software.
It was illegal what that guy had done and he was at risk of doing some time in jail.
They eventually settled for a price that was way too low because the victim was tired of it, he couldn't stop thinking about it, he couldn't sleep, he wanted it to stop.
Here's the kicker. The evil partner had done it 2 times before and his latest victim knew about it when they founded the company, but figured it wouldn't happen again because the evil guy was close to retirement.
The lesson to be learned is that the biggest predictor of what someone will do is what they have done.
This doesn't only apply when dealing with others, but also with yourself. I've gotten quite good at recognizing when I'm bullshitting myself about something that I will do, and often now find myself saying, "Yeah Oz, but that's what you said last time. What's different this time?" When I don't have a good answer, I know I need to take a different approach.
Sebastian Marshall (HN:lionhearted) said it best. "Track records don't lie."
It doesn't sound like the person in question was actually a co-founder this just seems a bit too sensational:
My co-founder didn’t have any formal position or rights at the company at the time. Despite several attempts at formally hiring him, he had insisted on not being employed. Rather, he wanted to function as a board member and a contractor.
Co-founders are generally there right from the start (or very close) and don't become contractors -- they hold equity and are deeply committed to the success of the company. Also, I'd not been able to find any references to a 'co-founder' in a search, and given that LingoSocial has a lot of mentions, it seems unlikely that all traces have been scourged.
Talked to him, and he pretty much laughed at this, but he cba commenting. However he is one of my best friends, and he has told me this story a few times.
He, lets call him Mr X. Created a software product which got quite popular and started making money, so he decided to start a company with this guy (Tor). Tor isn't a computer engineer, he is just an entrepeneur who like making companies or something. Anyway, they recieve some money from the norwegian governement through something called Innovation Norway. They both keep working in the company, but in separate offices, so none of them knew what the other was doing. Mr X keeps coding on the product, and Tor does something else (Mr X isn't really sure what). After some time, Mr X checks the bank account and notices that almost all the money they recieved from the Innovation Norway is gone. Thats when he makes the statement "give me 30 per cent of the companies cash", because he wanted out. Mr X had done all the work, Tor handled finances, Mr X realizes he can't trust Tor, so he wants his share and leave.
Long time since I've heard the story (happened like 4-5 years ago), so probably don't got all the details.
Just had to post this since Mr X wouldn't.
TL;DR
- Co-founder (Mr X) created a product
- Starts company with this guy
- Mr X does the product dev. This guy does the business part (I assume this also include finances)
- This guy takes money
- Mr X found out, and wants to bail with half the money left
I hope everyone takes the above comment as hearsay, 'best friends' and all. Do you know how many friends say someone 'was a great pilot' after a pilot dies in a crash caused by their own actions and mistakes?
Clearly not everyone is, plenty of calls in the comments here for the real name of the person in question to be exposed (so that they can - potentially illegally - avoid doing business with them or hiring them)
So this is basically a he-says-she-says situation where:
* Tor blames X for withdrawing all the money
* X claims he has no idea where the money went and suspects Tor was the one who stole it
The father and director of board in this case has a very high position in the government. This is why X did not pursue this legally, due to the publicity and stuff. It is also very unlikely that he would risk his position to cover up that his son stole ($25k-$75k, unsure of the actual amount).
Thanks for elaborating. An interesting counterpoint. I suppose how much money the company started with, what it was spent on, what sort of payment agreement the founders had, were all left out of the original story.
There are cases where what Mr. X did would have been justifiable.
Either the OP was being very deceitful, or your friend Mr. X did a very poor job communicating his position.
it doesn't help that he keeps calling him a cofounder, when he says the guy made it clear he wanted to be a consultant + board member. If your cofounder is charging you by the hour, he's not a cofounder.
It sounds like he wanted to collect his remuneration by invoicing as a contractor rather than being made an employee. It can be quite 'tax efficient' to do this if you don't need the cash straight away.
(In the UK at least) being a director is quite separate from being an employee. I'm a director of two companies but employed by neither.
How much money was at stake here? How many actual employees? It sounds like it was you, a friend, and his dad trying out a startup that didn't work, from the way the post was written.
If any of this is true then you should at least make this blog post the #1 result on google for their names. So at least future parties they're involved with stand less of a chance of getting fucked.
I am undergoing a very similar experience, I don't think it is wrong to name the parties involved. It would be a benefit to your local community. In the USA at least, you don't have to worry about "libel" or "defamation" as the burden of proof is on the plaintiff.
Libel tourism only matters if you can be affected by UK judgements. I think the US no longer honors them, but I guess if you are in the EU, it is a problem.
European Libel laws are much more...liberal than they are in the US. Frequently, truth is not a defense to libel as it is in the U.S. In much of Europe, the primary element is that the defendant suffer harm to his reputation. See, for example, the British aristocrat who was truthfully outed as a Nazi sex fetishist...but won a judgement against the tabloid that published the pictures.
He was outed as a sex fetishist. The libel action was brought over the Nazi label, and the judge found there was no evidence of a Nazi theme. If the judge had found there was a Nazi theme, then the libel action would have failed - truth is a defence.
http://news.bbc.co.uk/1/hi/uk/7527319.stm
Yep, you're right. I mixed up the libel action with the invasion of privacy action. Truth is a defense to the libel claim but not to invasion of privacy. For IOP, truth is an element in newsworthiness, which can be a defense to IOP. (See eg http://www.lse.ac.uk/collections/law/news/libel.pdf for a long boring legal discussion.)
> See, for example, the British aristocrat who was truthfully outed as a Nazi sex fetishist...but won a judgement against the tabloid that published the pictures.
I know of a similar, somewhat high-profile case in the US[0]. The point is not even whether or not the plaintiff can win; the issue is whether they have enough of a case to make your legal fees + opportunity cost of time wasted in court sufficiently high.
[0] I'd try and find it, but I'm hesitant to Google the keywords at work!
The website is down currently but if it really is money which was embezzled from a bank account then I agree. You do not need to sue the guy. Embezzlement and theft are both crimes in most jurisdictions so the police can handle the case for you.
EDIT: Seems they were aware it was a crime and just did not want the hassle of appearing in court when they were busy with the company.
It's not US, it's in Norway. See the link at the top of the blog: Norwegian Startup List. As well, a link to his company's website: http://businessmodelpress.com/
An ordinary suburban accountant can give you good advice about the basics of cash control.
That the director of the board had access to the accounts boggles my mind. Board members are not management, they shouldn't have this kind of access.
Also, if you've kicked someone out in a dispute over cash ... get on the phone at 8am and lock them out of your accounts. Or get onto the internet banking admin screen (you know where that is, right?) and lock them out of your accounts.
While you don't announce it in your blog, I certainly hope you're giving your local startup community a heads-up about this guy (and the board director).
I would be extremely wary about taking someone's word that someone else did something criminal, with zero evidence to back it up. What if this author has lied to us and you then refuse to hire "this guy" based on those lies - I imagine he would have a good case against you.
I figured it out! The name of the thief was "James Sanderson", whatever you do do not start a company with this person.
And if I'd ended the post there, you might have actioned my advice.
It's terrible that this person has lost out, and more terrible that the person that wronged them got away scott-free. That's not fair, it offends my sense of fairness and justice, and even though I have no connection to the author I would be happier if justice was served.
But what would be far more terrible is if someone else, completely innocent, was caught in the cross-fire amongst our demands for justice. This could happen lots of ways. Someone with all good intentions could make a mistake when snooping, and post the wrong name (in this example, I used my own name). At the other end of the goodness-of-intentions scale, the submitted post could be a complete fabrication, designed especially for people to snoop out and target a specific victim.
Acting based on the say-so of someone on the internet that someone else did them wrong is a very bad idea: you have no reason to trust this person, and if you do believe what you hear on the internet then whether or not justice prevails comes down to which party submits their story to Hacker News first - not ideal.
Where is the evidence? Searching for that person's name in quotes along with either the author's name or the startup name does not seem to return any evidence.
clearly you only read the name not the entire post. the original commenter mentions that it is his own name and was just pointing out that by doing research you could post the wrong name and adversely affect someone who was otherwise innocent.
I find it enlightening that the post was not read (which takes very little effort to complete), YET google was opened up and queries commenced.
Not only that, but you were able to successfully determine that this was the action that took place.
I do the same thing myself far too often - skim something quickly, pick a key word and then google it myself out of context. Wonder how many things I misinterpreted because of this behavior.
> I find it enlightening that the post was not read (which takes very little effort to complete), YET google was opened up and queries commenced.
This is exactly what terrifies me when the mob starts baying for personal information. I've seen it go wrong too many times now (personally I think HN should follow Reddit's example and add a rule about posting personal information)
A bit unfair to say that these days, given that on Reddit posting personal information is now a bannable offence, and Hacker News has no rules against it.
Reddit has that rule because vigilanteism became a serious problem among the userbase. Hacker News has no rules against it because it has not been a serious problem among the userbase.
But really, it's a few hundred bucks to have a lawyer draft one that is precisely configured to your requirements. With the added bonus that it will be written to your local legal situation, which generic templates can't be.
Maybe I don't know how your countries legal system works, but surely the cost is borne by the state? I assume then you mean the cost of the time you would need to spend to support law enforcement? But the thing is, now you:
a) can't name this fellow,
b) if someone does a background check of him and his father in the future, they will not find this
c) his father, a layer (?!), stands a lose a LOT if this really is true, and would probably be smart enough to settle this ASAP,
d) if a customer had not paid, you'd probably consider writing off that as a bad debt, but still possibly engage a collection agency to attempt to recover the debt - you would only get a fraction of it, but you'd get some. You might have found a willing law firm to pursue the case, in return for a % of the settlement/award.
e) assuming a successful prosecution, most countries would block this young man from being a director of a company for a LONG time - that should be enough reason to follow through alone
I understand it's expensive but I, for one, feel that you have a moral obligation to take the evidence to the correct authorities, and let them make the decision on whether they have a case and to proceed or not.