My husband and I own a wholesale nursery. As he is in his early 60s, we are contemplating retirement. For the past year, we have been working on a plan to sell the nursery to a long-time (over 15 yr) employee. Due to the downturn, the employee is backing off from putting money into the firm, and we thought that was fine. No problem holding off 'til the economy improves.
However, we have discovered something that I think is a very serious issue, not to mention illegal.
Some background: Credit was approved for a new customer in April, 2008. This was over my objections as the credit manager. There was not sufficient credit history to give him credit. Flash forward to November of this year. The customer is in arrears to us for over $75,000. As the customer was sub-contracting landscape jobs, my husband has been calling the general contractors and has been able to receive payment on $25,000, or the debt would be worse. He continues to call and file liens and we will likely receive much of the payables.
Upon calling one contractor, my husband was told that our firm had already been paid for the nursery materials. In fact, the contractor said that the check (for over $40,000) had been a two-party check written to our customer and us. The check had been issued because the contractor had received an invoice from our company. The invoice number sounded like one of ours, but was nowhere to be found in our software system. Our long-time employee had produced an invoice with more, higher priced merchandise than we had supplied. We were not aware of this. He also signed his name on behalf of our company on the check. (He has check signing authority.) He never asked us if this was alright, and he never told his this happened. According to our employee, the customer wrote us a check for part of the amount owed, and used the rest for other uses. My husband believes that our employee made an honest error in judgement. I however, am not convinced. Even if it was an honest judgement error, it is unethical, not to mention illegal. He committed fraud. He says he has never done this before.
Needless to say, we are no longer considering selling the company to this employee. In any other company, I believe he would be fired. Am I correct? At the very least, he should receive some form of unpaid suspension. I feel there should be a signed statement from him acknowledging this behavior in his file. My husband feels that we can't survive without him managing our re-wholesale facility, but all of my trust in this employee is shattered. It doesn't look as though the contractor will take action against the employee (or us), buty we are out the rest of the money owed on the job.
Any thoughts?
However, we have discovered something that I think is a very serious issue, not to mention illegal.
Some background: Credit was approved for a new customer in April, 2008. This was over my objections as the credit manager. There was not sufficient credit history to give him credit. Flash forward to November of this year. The customer is in arrears to us for over $75,000. As the customer was sub-contracting landscape jobs, my husband has been calling the general contractors and has been able to receive payment on $25,000, or the debt would be worse. He continues to call and file liens and we will likely receive much of the payables.
Upon calling one contractor, my husband was told that our firm had already been paid for the nursery materials. In fact, the contractor said that the check (for over $40,000) had been a two-party check written to our customer and us. The check had been issued because the contractor had received an invoice from our company. The invoice number sounded like one of ours, but was nowhere to be found in our software system. Our long-time employee had produced an invoice with more, higher priced merchandise than we had supplied. We were not aware of this. He also signed his name on behalf of our company on the check. (He has check signing authority.) He never asked us if this was alright, and he never told his this happened. According to our employee, the customer wrote us a check for part of the amount owed, and used the rest for other uses. My husband believes that our employee made an honest error in judgement. I however, am not convinced. Even if it was an honest judgement error, it is unethical, not to mention illegal. He committed fraud. He says he has never done this before.
Needless to say, we are no longer considering selling the company to this employee. In any other company, I believe he would be fired. Am I correct? At the very least, he should receive some form of unpaid suspension. I feel there should be a signed statement from him acknowledging this behavior in his file. My husband feels that we can't survive without him managing our re-wholesale facility, but all of my trust in this employee is shattered. It doesn't look as though the contractor will take action against the employee (or us), buty we are out the rest of the money owed on the job.
Any thoughts?
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