Legal Question in Business Law in California

Start up Corporation - Credit Embezzlement

Mr. X got his Girl-Friend & her Mother to start a corporation to sell computer components. Miss GF & Her Mother opened a California S-Corporation. The Mother was Chief Stockholder, Miss GF was Secretary and Mr. X was made Chief Financial Officer. Mr. X also convinced them to open a Bank Account and a Credit Card. Mr. X had all financial record sent to his address. Mr. X then used credit cards to run up $10,000+ of charges. Some of Mr. X's charges were cash advances, car payment and piano payment as well as many day to day living expenses such as gas, food and vacation expenses. When Miss GF found out when the credit card company notified her of the overdue and high balance she confronted Mr. X. He told her not to worry he will repay all the charges with a check he would soon receive. Unfortunately Mr. X just used this as a delay. Mr. X cannot and will not pay. It appears Mr. X runs this scam frequently as he starts many corporations with similar results.

What can Miss GF do?

What is necessary for criminal prosecution?

How can she get Mr. X to write a declaration that he won't pay?

How can she demand payment and warn Mr. X failure may lead to criminal charges without being construed as blackmail?


Asked on 1/23/07, 8:33 am

2 Answers from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Start up Corporation - Credit Embezzlement

I think you start with asking your local law enforcement (police or sheriff) to put you in touch with one of their white-collar crime report-takers or investigators. Nearly all criminal prosecutions start with a complaint to the police; occasionally the D.A. or Attorney General will initiate action directly, but I think this is rare.

You avoid extortion (blackmail) by not saying anything to Mr. X such as "pay up or we'll call the cops." Threats of this sort can easily slip into the extortion area, even if Mr. X is guilty as accused. Don't threaten it, just do it.

Two final thoughts. First, I doubt there is any way to get Mr. X to sign anything. No harm in asking, but why would he do it? Also, I'd suggest considering bringing a civil action against him for breach of fiduciary duty, fraud and conversion.

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Answered on 1/23/07, 11:30 am
Terry A. Nelson Nelson & Lawless

Re: Start up Corporation - Credit Embezzlement

Just contact the police and file theft charges. Don't overthink this, or believe that you will magically get repaid. Don't threaten him, let the police handle it.

I would advise you file civil suit against him, so long as you think he actually has income or assets to collect against, but con men like this seldom do. You also need to clean up the corporation and remove him.

Feel free to contact me for help if interested in doing it right.

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Answered on 1/23/07, 1:08 pm


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