I used to advise clients who were involved in shareholder disputes. I would always ask whether the shareholders had been less than angelic in their dealings with each other and the tax department. Although businesspeople tend not to judge people who only steal from the tax department to be all that bad, for the sake of simplicity I will refer to both shareholders who steal from each other, and shareholders who steal from the tax department, as crooks.
I was usually faced with one of four situations, in order of frequency:
- the other side was a crook;
- my client was a crook;
- they were both crooks; or
- (very occasionally) neither my client, nor the other side, was a crook;
Why did I have to know this?
If neither side were a crook, the odds would be better that we could resolve the situation without the matter ending up in litigation.
If the other side was a crook, I had some leverage to use in the negotiations.
If my client was a crook, I had to worry that the other side would use this in negotiations.
If they were both crooks, I had to figure out who had stolen more. If they both ripped off the company and/or the tax authorities for roughly the same amount, that was usually fine. But if one of them had stolen a whole bunch more than the other, the one who had stolen less might have some additional leverage.
It is for this reason that I always counselled clients (very carefully because as lawyers we cannot tell people to break the law) that it was important that if they were going to steal, against my advice, from the company or the tax department, they had to do so in proportion to their shareholdings.
Which brings me to the credit cards that my firm used to give to the partners, who were permitted to use them for firm expenses, including promotional expenses. They could also use them for auto repairs and gasoline, but that would be charged back to their draws. In effect, the firm was financing their car expenses.
You might be surprised to learn that the principle of proportional theft applies in law firms also. One of my partners either had the worse gas mileage in the history of the free world or owned twelve cars. So much gasoline was being charged to his card, that the accounting department suspected that he must be filling the gas tanks for everyone that he knew. He was stealing disproportionately, and the rest of us partners did not like it one little bit. Another partner charged an awful lot of meals to his card and never seemed to remember to provide the details of who he was treating to lunch and dinner, and sometimes breakfast and snacks.
And so, we discontinued the use of firm credit cards by the partners, made everyone pay for their own fuel, and submit their expenses for approval and reimbursement. Suddenly the expenses claimed were more reasonable.
The lesson for lawyers in law firms? Don’t steal. Or be sure that all your partners are stealing equally.
This article was originally published by Law360 Canada, part of LexisNexis Canada Inc