Chapter 13 – Bad Behavior & The Fraud Triangle

There are numerous legal defenses that embody a common sense conclusion that the plaintiff or defendant is not entitled to relief because they have committed some sort of wrongdoing or are themselves liable for an offense. One of the things I clamor for is the application of common sense. It just does not seem to have a place in arbitration. And by example if one of your employees intentionally sets your business on fire and you fired him or her on the spot, you might not think you’ll have to actually prove later that you actually fired them that day. If no one heard you talk to that employee, you might be challenged on that in the future. You can write an email as we did and someone like M will challenge that claiming it was never received. You might send a letter via regular and a M will claim it was never received. You might give an employee 30 days notice and he might in that time try to act like a whistle blower because he heard somewhere you can make some money doing that. The legal process allows this to drag on when it should not. Because an arbitrator is being paid by the hour, you will not likely prevail on summary judgment. This may appear to be a jaded conclusion, but I fear it is not.

So in our case we supplied a huge amount of evidence that Mhad already been fired before he filed his false complaint. That evidence was written (email and letter) and we also provided testimony affirming his termination date to be about month before he filed his complaint with the ODJ. But in addition we put on a huge amount of evidence about Max’s behavior leading up to his termination, to show that no employer could afford to have him around very long and still hope to survive it. That showed that his termination on October 2nd was not only supported by the documents or evidence but was no surprise to anyone.

During Max’s employment with us, he had set up a competing company, solicited employees and clients to join him and Paul Bower, withheld documentation on his programs and processes, failed to learn key processes causing the department to fail to timely meet its processing and reporting obligations, refused to provide programs created by him while and employee, destroyed company assets by deleting files and reformatting a hard drive, converted company property to his own personal use, engaged in public file sharing putting confidential personal data at risk, copied movie and music from said file sharing site resulting in copyright and trademark violations, etc., etc. etc.

We had given Mup to 45 days to work with us while he looked for a new job. No good deed goes unpunished. After his termination, before his last day with us, he continued to withhold our programs, removed them from or never put them on the hard drive he turned over, failed to adequately train staff so they could operate after his last day, fabricated a spreadsheet and with his girlfriend filed a complaint with the ODJ (and for which they refused to provide evidence support).

But immediately before Max’s termination date we had a final incident. M refused to file client reports for several days. He wrote me an email wanting a bonus and a raise before proceeding. I refused to embrace this scam. After all, had he properly trained our other two IT staff members then there would have been no failure. Now I can attest to the fact that once a process and programming are in place, files and reports can be easily processed with limited probability of error. I’ve done it. I know. I’ve also in my quest to understand this level of incompetence have learned a bit of Foxpro (which we used at the time) and now SQL. No programmer in his right mind creates processes that are not stored and tested and as a reminder the reporting data came right from our database.

Here are a few email excerpts showcasing that the relationship had to come to an end:

From Timothy C. Rote
Code Page 1252
Created 09/28/03 07:20:22PM
Received 09/28/03 07:22:00PM
Sent 09/28/03 07:22:00PM
Subject RE: Outstanding Dispos
Last Modification Time 09/28/03 07:22:00PM
Message Size 36975

You have my home phone number Max, 503-722-4259, if you need to talk to me, but you know what needs to get done. –
—-Original Message—–

From: MZ []
Sent: Sunday, September 28, 2003 6:49 PM
To: Timothy C. Rote
Subject: RE: Outstanding Dispos
I really think you need to call me about this. —–Original Message—–

From: Timothy C. Rote []
Sent: Sunday, September 28, 2003 9:34 PM
To: MZ
Cc: John Weil
Subject: RE: Outstanding Dispos
You seem to want that. You need to get your job done Max. If you are refusing to continue to do work, let me know. Sandy P. will believe what we tell her and these e-mails seem to be clear support our conclusions. I cannot allow you to think that you can extort money from the company in order to get these dispositions done. You are responsible for your department. I would be careful about any legal strategy you and Sandy have put together Max. If you think you can get more money for your work effort, elsewhere, you should seek other employment and give your notice according to the terms of your contract. Given the profitability of the industry and this company, there will be no raises in the immediate future. You are a salaried employee. You do what you must to get the job done. —–Original Message—–

From: MZ []
Sent: Sunday, September 28, 2003 6:31 PM
To: Timothy C. Rote
Subject: RE: Outstanding Dispos
I have known Sandy for many years, and can prove I have been working on this beyond a doubt. I am sorry it has come to this between us, so I take it I am fired. —–Original Message—–

AND on OCTOBER 2, 2003, M was fired. Enough is enough. You can only turn the other cheek so many times. Even with this evidence and all the other evidence, Bill Crow found in his favor and I just have to say WOW. You can’t run a company and allow any department to hold you hostage. The objective facts refute Max’s claims.

The image I have provided for this post is I think a reflection of an all too human trait, maybe even a condition. For the most part we as individuals and even as society try to be honest and forthright. But as pressure builds we start to descend into a zone of rationalization. And if an opportunity exits or presents itself, all too often we take it. That is not then an indictment on Malone. He is human and he feared for his future employment and perhaps financial survival. He paid for his girlfriend to go to law school and then she instead of practicing wanted to sell used books on ebay. He was the sole provider. I understand his stress and did not relish having to let him go. It was necessary. A competent IT manager would not have pulled what he pulled, realizing that there are lots of IT jobs for programmers who can actually program. He could not program much as it turned out. I conclude this because he claimed he did not generate programs necessary for us to continue on after his departure. He did not teach his employees to use them. It was just a game.

The Fraud Triangle reflects the human condition of a though process leading to action. I always like to ask opposing counsel why they are pursuing a claim they know to be bogus and of course I usually get a blank stare from them. Max’s claim was for more than $1 million. At that level I can imagine that an attorney would look the other way as would many others. That does not make it right.

And what this blog explores is really to warn others that you must deal with threatening employees as sson as you can. You must deal with bias in the litigation as soon as you can and by all means you must complain to all who will hear you. The process is set up to award attorneys. It is also set up to fleece business.

The element of the Fraud triangle, as it applies to Crow, is “pressure.” What pressure did he feel to make this event profitable for Max? Who was putting pressure on him? What did Linda have on him? What economic gain would influence him or cause him to rationalize this decision? The opportunity exists.

Beware of The Fraud Triangle.


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