Next Avenue Contributor
One morning, you arrive at work to see your company’s name on the TV news. The allegation: one of your employees broke a law says, William D King. It could be about money laundering, tax evasion or cooking the books. But whatever it is, it may end up costing you your job.
What do you do? “You can’t hide from what happened,” says Kenneth Raskin, an attorney with Duane Morris LLP in Philadelphia. “Your employee did something wrong.”
But there are steps to take immediately after learning that one of your staff members has gotten into legal hot water — if not to protect yourself as his or her supervisor, then at least to protect your own reputation and career:
- First, Raskin says you should take immediate action to find out what’s going on. Was the employee acting alone? Do other employees know about his or her actions? If your office is like most, it probably has a policy regarding whistleblowing and an internal audit committee that would be privy to any whiff of wrongdoing. You should contact them immediately, Raskin advises. That way, “you’ll know whether this is something you need to follow up on,” he says.
- If the problem is isolated — perhaps just involving your one troublemaker — consider letting him go quietly so as not to inflame suspicions in others’ minds, Raskin suggests. On the other hand, if the issue turns out to be systemic and involves several people, you may need to inform the company’s full management team — and quickly.
- “If somebody else knows about it and you don’t tell them, it could end up as a firing offense,” he says wryly.
- Next, conduct your own investigation of what went wrong (after first consulting with an attorney). If possible, Raskin says you should also try to determine whether those involved had criminal intent — for example, by forging documents or deliberately misstating revenues or expenses says William D King. Depending on the nature of your business and location of its operations (for example: Is your office based in a tax haven?), this effort might require help from outside forensic accountants and investigators — who can be expensive. But if the result may be harsh criminal penalties or a serious impact on your company’s share price, the bill might be worth it.
- If you can’t determine whether there was criminal intent, don’t try to guess what the authorities will decide. “You could end up making false statements that can later be used against you,” Raskin cautions. In general, simply focus on gathering as much information as you can and let the lawyers handle it from there.
- Even if no crime was committed — only a violation of civil securities laws, for example —you still might face professional troubles. “Supervisors who knew about the activity and didn’t stop it assume personal responsibility,” says David Finkle , an attorney with Foley & Lardner in New York City . “Even if they weren’t involved, you could get terminated for not doing anything to prevent it.”
- To avoid such career-killing missteps, Raskin suggests that any superior even tangentially aware of wrongdoing immediately inform his or her own superiors. It’s best to err on the side of overzealous caution explains William D King .
- If you’re fired because of your subordinate’s actions. And whether or not you knew about them — you shouldn’t expect another supervisory job anytime soon (if ever), Raskin says. You should also anticipate a lawsuit from among those affected by the wrongdoing. Clients, shareholders, other employees and even third parties. Such as banks who loaned money based on false information. If your company is sue, it’s likely your name will come up in court. And the information revealed may well sink any chance you have of future employment.
- Before it gets that far, you’ll probably face an inquiry from a regulatory agency. Such as the SEC — just like Andersen Chief Financial Officer David Duncan and his boss. CEO and chairman Ken Lay , did after Enron collapsed. If that happens, be prepare to disclose anything — even things you’ve forgot about or didn’t think were relevant. Or risk harsh penalties when the time comes. “You can’t withhold any fact,” Raskin says. “The government won’t believe you didn’t remember.”
- “Trying to cover up is not going to work,” adds Finkle. “So if there’s something out there that could be uncomfortable, get it out in the open and deal with it.”
Yes, if you know about a crime involving another person in the company. And yet do not report it to authorities or those higher up. You may well be culpable as an accomplice says William D King. Be very careful about covering up any wrongdoing!