Legal Question in Business Law in Illinois

Divorce, S-corp and money embezzelment

Hi,

Me and my wife own an S-corp where she is 51% owner and rest is me.

March 2006, I filed for divorce from her.

I have now discovered that she has been stealing money from the company in the following form:

Her sister-in-law was also employed by us. In 2006, her salary was 60K. However, checking the records, I notice that she has been given $97,000. Most of the extra money shows as bonuses and expense reimbursement. There is no paperwork for either (obviously) and there are time-sheets from the client where sis-in-law is employed proving that she was working at her primary job the whole time. So the expenses were false.

Later in 2006, (July), her salary was miraculously raised to $90K. That is a 50% raise. There is no precedence of such a raise and no-one else, including people in the same skillsets as her sis-in-law and with more than 5 years exta experience, were let go because we could not afford such raises (85K in that individuals case).

This is still continuing where even in 2007 (after even her 90K salary), she has received 8K over and above her already-inflated salary.

My wife, has been in-charge of running the companys payroll and noone else had access to it till now.

What is my recourse?


Asked on 8/21/07, 1:12 pm

2 Answers from Attorneys
Noelle Ansley Noelle Ansley

Re: Divorce, S-corp and money embezzelment

You can contact the police and request that they initiate a criminal investigation of her. You can sue her for fraud, conversion, and maybe a few other things. You can do both. You really need to find an attorney in your area and discuss it with him/her if you want to pursue this effectively.

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Answered on 8/21/07, 1:19 pm
Kenneth J. Ashman Ashman Law Offices, LLC

Re: Divorce, S-corp and money embezzelment

The issue here is the fact that your soon-to-be ex-wife is the 51% owner of the company. While that gives her control, it also instills upon her a fiduciary obligation to act in the corporation's best interests and, to some extent, in adhering to certain duties owed to minority shareholders, such as yourself.

Without knowing more of your circumstances and reviewing your corporate documents/records, it is not possible -- or wise -- to give to you legal advice. That said, you may have claims against her for breach of fiduciary duty and corporate waste, which may be brought individually or as what is known as shareholder derivative action.

You should probably consult with an experienced business/corporate litigator.

-- Kenneth J. Ashman; www.AshmanLawOffices.com; [email protected]

The information provided by Ashman Law Offices, LLC (�ALO�) is for general educational purposes only. No attorney-client relationship is established by this communication and no privilege attaches to such communication. ALO is not taking and will not take any action on your behalf and will not be considered your attorney until both you and ALO have signed a written retention agreement. There are strict deadlines, called statutes of limitation, within which claims or lawsuits must be filed. Therefore, if you desire the services of an attorney and decide not to retain ALO on terms acceptable to ALO, you should immediately seek the services of another attorney.

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Answered on 8/21/07, 2:53 pm


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