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Old 08-24-2008, 11:58 AM   #1 (permalink)
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S-Corporation banking fraud

I am a 50% share holder in a S-Corp. Since 2003 I did most of the physical work and my in-laws were the President and Treasurer. I was never given any financial info, even though I requested it. I found some old banking records along with Quickbooks Backup files. The Quickbooks info. stated that I had received payroll checks on regular basis. When I found the cancelled checks the majority of payroll was made payable to my wife, their daughter and to themselves. They also paid personal credit cards and then started direct deposits to their personal accounts. I have went through the records that I acquired and so far the total is around $160,000.00. I have talked with attorneys and they all seem to want to avoid a family dispute. The way I figure it is that I will end up doing a civil case on my own! I sure would like some advice or perhaps a referral.

Thanks!
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Old 08-24-2008, 12:13 PM   #2 (permalink)
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I have never yet met an attorney whose priority was to avoid upsetting a family member. Attorneys, if they feel the law is being violated, usually have no problem rigorously pursuing the propery venues to right the wrong. Perhaps issues such as living in a small town, or perhaps if the issue isn't as clear cut as you say, could be factors in their apparent reluctance to assist.

I would suggest you consult with another attorney---keep beating the proverbial bushes---there IS the possibility of fraud on such issues as tax evasion/misrepresentation, etc.

Good luck.
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Old 08-27-2008, 07:08 AM   #3 (permalink)
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Quote:
Originally Posted by morganks View Post
I am a 50% share holder in a S-Corp. Since 2003 I did most of the physical work and my in-laws were the President and Treasurer. I was never given any financial info, even though I requested it. I found some old banking records along with Quickbooks Backup files. The Quickbooks info. stated that I had received payroll checks on regular basis. When I found the cancelled checks the majority of payroll was made payable to my wife, their daughter and to themselves. They also paid personal credit cards and then started direct deposits to their personal accounts. I have went through the records that I acquired and so far the total is around $160,000.00. I have talked with attorneys and they all seem to want to avoid a family dispute. The way I figure it is that I will end up doing a civil case on my own! I sure would like some advice or perhaps a referral.

Thanks!
You need to get your information lined up first. The type of share you hold is important. The bylaws of the corporation would be the second stop. If you have voting rights then you should have been given notice of stockholder meetings... at least one per year complete with financial report. If you have an employment agreement, bring that. If you don't have an employment agreement, then please write down exactly what your duties have been. Surely you have not worked for free. Then you should take the QuickBooks to a CPA for an audit. Tell the CPA the story and ask him to determine what transactions appear to be personal versus reasonable expenses of the company. Outline what job each person does. Get a full outline of amounts paid to others and to yourself... if any... with a timeline. If you have not had access to any of the money paid to your wife and have not received a salary for your duties, then I'd say you might bring this information to the folks' attention. I'll bet you already have. Depending on your status with your wife, you could go either way on where to file: criminal or civil. In any case, if you want to sever ties, it doesn't matter unless you have children. I've seen a reluctance on the part of law enforcement/ states attorneys to get involved in closely held company disputes where you might withdraw after they have spent time and money investigating.

There are many ways to approach this. It could be that an arbitrator could be your best bet... but I'd pick a lawyer to do this job, because if it falls apart with rancor, your lawyer will need to know what there is to be done.

S-corporations often pay much of the personal expenses of the owners based on the fact that the payments to credit cards or expense checks are for expenses in doing business. That allows them to have the big ticket items owned and paid for by the corporation. The only legality stipulation is that the item should be used for business purposes. The accountant should be able to pick out those items which are not normally business expenses. When you get the tally, then you can make a decision as to what you want to do.

Just keep in mind that by putting information into evidence in a civil court, you are opening that information to anyone who wants to look... including the IRS. Unless your wife has been filing tax returns separately, you could still perhaps not want that information to be in court.

Good luck.
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Old 08-28-2008, 04:48 AM   #4 (permalink)
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S-Corporation banking fraud

I have already taken the books to a Quickbooks Audit Specialists firm, and yes they confirmed that alot of fraud had taken place. I have also called the IRS and they have suggested that I contact the Tax Payer Advocate. I have spent about all the money I can afford, so I am seeking help, (unfortunatly) that is free. I have been gathering and putting together all the information that I have accumulated over time. One of the main corp. resolutions that protects me is that on July 11, 2003 they resolved that I would remain the designated agent of the corp, but I could sign contracts only of agreement for work to be done by the corp., but may not pledge its credit or render it liable for any purpose or for any amount, according to the ByLaws-contracts.
Thanks for the comments. If you can think of anything else, Please let me know.

THANKS AGAIN!!!
KENT
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Old 09-09-2008, 06:47 PM   #5 (permalink)
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In what state are you and the S-corp?
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Old 09-11-2008, 04:31 AM   #6 (permalink)
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S-Corp Banking fraud

In the state of Utah.
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Old 11-11-2008, 04:31 PM   #7 (permalink)
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Well obviously with what you have provided there is fraud taking place even if the family wanted to take money off the table for themselves there are proper ways to do it.
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Old 12-16-2008, 09:11 AM   #8 (permalink)
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S-Corp Banking fraud

I have finally completed most of the documentation. I have an Attorney that is willing to send letters on his stationary, but I have to do most of the document writing. I have a letter that the Attorney has written noting some of the actions that were done while my father in law was president. I need to write the formal complaint to send with it. Please any help would be great!


Thanks!
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