Legal Question in Business Law in New Jersey

Realestate investment partnerships

We are involved in an investment partnership for land with a few multiple members. In this partnership there is a managing member who created the partnership. This partnership is governed by the operating agreement.

It was recently discovered that the managing member has been loaning the funds from the partnership to his other entites and then returning the funds. The managing member still has funds loaned and has not completely restored the account.The operating agreement clearly states and loans made from the partnership must have approval from all members. The managing member is now blaming a terminated employee for the funds being loaned out to different companies he controls. The managing member would also request more capital that the partners assumed was being used for the land deal, when in turn was used to re-establish the account balance that was loaned.

My question would be 3 part

1) Is this a classic case of embezzlement or some sort of crime commited commingling the funds

2) Is what happened considered cooking the books

3) what legal action do i have

Thank you


Asked on 11/02/03, 9:48 pm

1 Answer from Attorneys
Walter LeVine Walter D. LeVine, Esq.

Re: Realestate investment partnerships

This activity should be reported to all members. It is improper under the operating agreement and could call for the removal of the managing partner. It is not cooking the books, as loans do not effect income or expenses, but it places your assets at risk if the loans are not repaid. You should insist on immediate reimbursement of any improper loans, get an accounting, make a claim for interest, and remove this partner as agent. It might be close to embezzlement, but this is questionable.

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Answered on 11/03/03, 9:49 am


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