What is the most unethical business trick you have seen used that amazed you that it is still allowed?
answered by Lee Boueri, Grad Dip Business & Finance, University of Technology, Sydney (2004)
A friend of mine was working as a business consultant, he was recovering from a setback that saw him almost at the point of bankruptcy when a solicitor we both knew offered him a partnership in his legal practice if he came in and helped him grow the business. This friend had built and sold a number of businesses over the years so was very experienced at growing businesses.
This solicitor had at the time an administrative assistant, a conveyancing clerk and himself working out of the back of finance brokers office on a sub lease arrangement.
I would catch up with this friend every month or so and he would keep me abreast of how he was going.
Over the next 10 months, he had drawn up a business plan and began the process of executing it. He had identified unpaid invoices and set up a system to follow them up. He introduced a number of back office systems, took the firm out of the leased space into retail badged city office, began a digital marketing campaign, located and hired two additional solicitors to cope with the additional workload. Fitted out the new offices and managed to get a number of editorials into targeted journals. Had even managed to get his partner into a presentation on the highly acclaimed Ted X conference. The firm was on the move.
So I was surprised when he approached me one day to say the solicitor had decided he was no longer required, and without consultation had take him off as shareholder and director of the practice, removed him from the bank accounts as a signatory and told the staff he was no longer with them and they were not to let him in. He suspected his partner of syphoning fees out of the business and had begun the process of reconciling the bank accounts which he suspects was the impetus.
Knowing both of them, I met with the solicitor to get his side of the story.
“He’s done all he had to and the business didn’t need him any more.”
“But you made him a partner? How can you just remove him without his consent?”
“We did because he would never have agreed to go otherwise. I only care about what’s best for the business. He can’t fight me; he doesn’t have any money. If he tries I’ll drag it out for years and make sure he’s bankrupt.”
I couldn’t believe this friend’s attitude and decided I would help the other friend as much as I could, but he was right, he did not have the money to launch a legal battle against his ex partner who was, after all, a solicitor, so could represent himself. We decided to approach the regulators.
We wrote to the Securities Commission and to the Law Society detailing the fact that this solicitor had acted illegally by registering the resignation of a partner without any corresponding agreements or transfers signed and without compensation or consent, and that it was not only an illegal act but made more egregious by the fact that it was committed by a member of the bar.
The Securities Commission stated that they only maintained the company registers and did not have the power to police them, and we should take the matter to court.
The Law Society claimed they only acted on complaints by clients of solicitors and that this was a commercial matter, and my friend has the right to engage a solicitor and seek legal recourse.
Ultimately this brought to the surface the fact that lawyers can do what they like in business provided they know the people they are disenfranchising don’t have the financial means to fight back because they know regulators are not prepared to act against them.
While my friend has decided to shelve the matter and get himself back on track financially with the intention of taking his ex partner on in a few years, I suspect by then the wind would have been taken out of his sails and this solicitor will have gotten away with commercial fraud. This has made me very cautious when doing any sort of business with solicitors.