Fraud by a Project Manager

      A responsible employee talked a client into writing him a check, then skipped out with the money. Who's in trouble now? April 24, 2006

Question
I recently had a project manager tell a client that he could get the particular job he was working on done faster than our shop and that the client should write a check to him personally and he would handle it. The client agreed and wrote him a check.

He then went off to England, taking the client's money (possibly buying the ticket with it) and none of the work has been delivered. Of course, the client didn't call me when he wanted the check written to him personally. She didn't call until he put off the delivery date a few times.

I am not looking for bona fide legal advice, but wondering what you would do. I'm blown away with the audacity of the fraud. Couldn't imagine it in a million years. Although I was not the one defrauded, my company name is involved and I have to do something about it, because essentially I brought this person into this client's life, so I will have some responsibility if not an actual legal obligation to help her.

Is there a system that can be put in place to prevent anything like this, or at least make it easier to detect and prosecute? I am looking to expand my sales network, and crap like this just scares me.

Forum Responses
(Business and Management Forum)
From contributor F:
I wouldn't feel any responsibility here. Two people decided to not use your company and they both thought they would benefit from it. One of them made a bad decision. The client is at fault here - they wanted to save money and cut you out of the deal, so the risk and the problems are theirs. Anyone so stupid to write a personal check direct to an employee to save money deserves what they get. One way to stop this kind of thing is to not allow employees to do side jobs. Another is require your signature on all contracts.



From contributor K:
I agree that it is the client's decision to bypass you. As the owner of my shop, I can't see how you can send anyone to do contractual work, collect funds, etc. unless it is a partner or rmo of sort. I think it is good that you feel responsible in some way, because it was your time to learn the lesson. Never trust anyone to do business transactions for you unless the person has obligations in contract to promote your business. If the person had signed a contract with you saying he cannot sell himself during business hours, he may not have done it. Then if he had, there would have been legal things you could have done to stick it to him for screwing you. Then you would have been sitting with the client as a plaintiff, not a defendant. I would probably do some of the work for free, as long as she paid for materials or something.


From contributor H:
You did not get the job. You did not get the money. You have no legal responsibility. You don't even have a moral one. You just feel bad for the greedy, sneaky, looking for a shortcut client who in a sense got what they deserve. Guess they never heard of the "sounds too good to be true" adage. Stop it by having every job, every contract, require your signature or initials.


From contributor C:
I strongly agree with all of the above. It sounds like the job was sold using your company's portfolio and reputation, then these two cooked up a scheme to cut you out of your fair share of the deal. One crook put a knife in the other crook's back, imagine that! Your responsibility ended when they decided to leave you out. Lucky you.


From contributor D:
You are not the only one to go through this. You have no legal responsibilities or liabilities. Everything said previous to this response I have to agree with.


From contributor A:
You should be glad to find out that your PM was a thief before he stole from you. And who wants a client like this one? He/she got what they deserve.


From contributor P:
Did the project manager work for your company or someone else? If he was an employee of yours, I hope you fired him. It seems that you have no liability here, but you might want to ask a lawyer just to be sure.


From contributor W:
An employee of yours, working while on your payroll, solicited a client of yours to do business with him as an individual, directly bypassing you and your company. That client elected, voluntarily, to accept the offer and to pay him. And that client got burned.

Your reputation isn't at all what is at stake here - your client's reputation, business ethics and personal credibility are all on the line. The call should have been made when your employee made the solicitation. Not after that solicitation was accepted, not after the employee failed to keep the commitment he was offering. The only reason the client is complaining is the fact that he/she got stiffed. Had the employee delivered, you would have been the only victim in that scenario. So do you have any responsibility at all? Not a scrap. Should you feel any responsibility? Not a scrap. Should you compensate the client in any fashion? Absolutely not. The client should apologize to you for failing to call and give you the heads up that you had an employee making an unethical offer. He/she didn't, wanted the short-term gain, and paid the consequence.

This, by the way, is the sort of non-compete agreement that can be made binding. In exchange for the compensation you're paying, the employee can be expected not to solicit business in competition with you from your current clientele.

By the way, the language you'll need on your estimate/quotation forms is pretty simple, and an attorney can give you the specific verbiage for your locale. The essence of it is: no commitment can be made regarding schedule, pricing or specifications and no order accepted by anyone other than an officer of the company.



From contributor N:
I do work for myself as well as for a company and have been asked by clients for my employer if I would give them a bid on the job. I tell them that as long as they called my employer first, I will not bid against them. If they call me first, whole new ballgame. Not all employees are crooks. I hold my employer in high regard, as I feel they show me the same respect.


From contributor K:
If you are an employee for a company and you are out at a potential client's house soliciting your boss's company, why the heck would you then solicit yourself? If you are working in a client's house that your boss already has and they have more work, why would you offer to bid on the work at all? If you want to take your own work, especially work that pays your income if your boss gets it, start your own business! Never bid on jobs that your boss is bidding on unless you are knowingly trying to get fired or going to start your own business.


From contributor J:
I'm surprised that some people here think that this kind of problem can be prevented simply by making a rule about it, or incorporating something into their paperwork. Fraud is fraud, and if an employee it attempting fraud and some of the paperwork is going to make that difficult, then all they need to do is not show that paperwork to the client.


From contributor E:
It's time to find out what you can do to clean up your company. Was this the first time anything like this happened? Did he act alone? The right kind of auditor or investigator could figure out what happened, and who did it.


From contributor Y:
Maybe you should check to see if past clients have any information about this fellow's dealings with them. He may have been trying for a while.


From contributor S:
Be thankful that your manager didn't run the work through your shop, let you pay for the materials and time, and then bill it on his own. That one happens also. You got out of this one scott free. You were lucky even though it may not seem like it right now.

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