Hit Counter

Stealing from the Poor, or the Case of the Hood in Robin.

THE FICTIONAL ACCOUNT:

The hood was sanctified by the battered brick steeple of the Inner City Church of Apostles. Set in the grime and graffiti of Liberation Boulevard, it seemed to talk back defiantly to the liquor stores that dominated every corner. Seeking its share of the federal money for charitable organizations serving the poor, the Church had signed applications that committed it to using those funds only for the purposes stated-feeding and housing the homeless people of the streets surrounding the church. There were hundreds of such people, and the money was never enough to meet the need.

Sarah Makimba worked at the Church as a volunteer, and later, with the federal funding in hand, as a part time paid staff employee. She had some bookkeeping experience, and so was assigned to assist in tracking the Churches expenditures. The Church called its program "New Hope", and had dedicated its fellowship hall to offices and a kitchen with large dining room to provide meals 7 days a week to the poor. Sarah was in charge of maintaining invoices for food purchases and donations.

After the federal funding started to arrive, Sarah noticed that the senior pastor, always a flamboyant and assertive man, now began to show a more visibly prosperous attitude: his wore tailored suits, bought a new BMW, and took a number of extended vacations. He upgraded his home, and equipped it with a home theatre and new furniture. All this while Sarah noticed that the homeless services program was operating at a minimal level, despite increased amounts of funding.

One night, after others had left the office, Sarah, having persuaded her boyfriend, who was the I.T. person overseeing the Church's computer network, to give her security access. She traced records showing donations and funding against actual expenditures for food. She indeed found receipts, but she suspected they were false. There were invoices for deliveries she knew were not being made, there were inventory records of food stocks she knew did not exist, there were even payroll records for fictional employees, or persons she knew did not provide services. She checked out one of the companies allegedly providing job training that received tens of thousands of dollars, and discovered that the company did not exist. She realized she would have a hard time proving this information without the records, so she copies samples from multiple different files, and secretly took them home with her.

Sarah was a single mother, and she had difficulty finding anything but part time work. This job allowed her to bring her child to child care at the church without charge. She debated whether to disclose the information. She decided not to. In fact, she decided to use the information for job security. She approached the Pastor with a proposal: She could even assist in the fraud, and would keep matters quiet, but she wanted to work full time, and she wanted a pay increase. She got both, and the relationship continued for 2 years without event.

This "arrangement" changed when Sarah's child was injured at the Day Care. Although money had been designated in a funding proposal to upgrade the children's outdoor play equipment, the money had been diverted. The equipment was old and unsafe, and the ground below it hard, with neither sand nor cushioning material to soften the blows of children falling. Sarah's child had suffered a broken arm, and had lost several teeth. The event had a deep affect on Sarah-she realized how the fraud was hurting the community, while the senior pastor lived a now luxurious lifestyle. She felt guilt for collaborating in the fraud. She resolved to stop participating in the practice. She went privately to the Church's head elder to expose the scheme. What she didn't know is that the Elder was benefiting from the fraud as well. After assuring her he would investigate the matter, and hold the pastor accountable, he went to the Pastor to explain Sarah was no longer going to cooperate. The next day Sarah was called into the office, and fired because "it just wasn't a good fit" and because she lacked the accounting skills needed for the position. Someone with an accounting degree would be replacing her. She was quickly escorted off the premises to prevent her from removing any Church records.

Sarah sued the Church for wrongful termination in violation of public policy. She claimed she was fired because she protested fraud against the government. The Church stated in its defense that Sarah was an at will employee, and that Sarah made up the story of government fraud in retaliation for her firing. The church said Sarah had no proof of misappropriation, and that it had proof that that its report to the government were true, and that routine audits showed no misuse of funds.

During discovery, the Church asked for all documents Sarah had to support her case for alleged misuse of funds. Sarah's attorney was honest and provided the documents that Sarah had secretly taken as "proof" years before. The Church then brought a motion to the Court to dismiss Sarah's complaint on the grounds that Sarah had violated an important company rule against removal of confidential Church records, and that had it known she committed this violation at the time, it would have fired her. So, the Church argued, she should get no damages from the date it discovered her misconduct. Also, it claimed, Sarah's own pleadings indicated she was complicit in the fraud, and that she even extorted money on the threat of reporting it. The Church argued she had "unclean hands" and was barred by "equity" from claiming damages were due from the Church.

THE ISSUES RAISED: If you were the judge, would you allow Sarah to proceed with her suit despite her "unclean hands" in advancing the Pastor's fraud, and in extorting full time paid employment on the threat of exposing the fraud two years earlier?

The EQUITIES: Some arguments for and against: Sarah benefited only slightly compared to the new "wealth" acquired by the corrupt Pastor. She had a "change of heart", and sought to do the right thing. She was punished for challenging the practice. While we should not condone theft of an employer's records, the purpose was to obtain proof of the misconduct. However, she changed her original plan out of fear for her financial security, and while extortion of the Pastor is wrong, much more wrong is the massive fraud by the Church against the government. We want to encourage whistleblowers to come forward, including those with "changes of heart" who have "unclean hands" as accomplices or accessories. The Church on the other hand would argue that the Courts should have nothing to do with Sarah's case, because to give her a remedy would indirectly implicate the Court in condoning her complicity. HOW WOULD YOU DECIDE?

THE BASIC LEGAL PRINCIPLES: Two principles apply: "the After Acquired Evidence Rule" and "the Unclean Hands" Doctrine. The first principle states an employer's damages are "cut off" as of the date the employer discovers misconduct by the employee that would have been basis to fire the employee. The second principle states that the Courts will not give a remedy or even hear a case where the party seeking the remedy has engaged in seriously illegal conduct in the case.

BASIC ANALYSIS: How did you decide? This is a fictional account, but based on my research of the law, the question seems to be: just how bad was Sarah's misconduct, and what her motives in the misconduct were. Courts have allowed parties with "unclean hands" to proceed with their cases. If the employee cooperates in employer misconduct reluctantly, and only out of fear for losing his or her job, the employee sometimes may be allowed to continue in his suit. Also, courts have struck a balance in "after acquired evidence" cases. Whether the behavior is a terminable offense is the first question. Have others been fired for the same reason, or has this employee been singled out? Another question is whether the employee engaged in the misconduct only to gather proof because he or she anticipated being fired for raising objections to illegal employer conduct.

SARAH'S CASE: Sarah's case unfortunately would likely be dismissed before it got to a jury because she not only participated in the fraud; she committed extortion to obtain a full time position with a pay increase "to keep quiet". This degree of complicity is beyond passive, and shows criminal intent. The Court, even in the interest of advancing a public good (the proper application of government funding through charitable channels) cannot advance that purpose by condoning extortion. Sarah's decision to come forward after her child was injured is commendable, but her "unclean hands" prevent her from getting access to the help of the Courts.

SUPPORTING CASE LAW: McKennon v. Nashville Banner Publishing Co. (1995) 513 U.S. 352, 354-355; Cooper v. Rykoff-Sexton, Inc. (1994) 24 Cal.App.4th 614; Camp v. Jeffer, Mangels, Butler & Marmaro, 35 Cal.App.4th 620, 627-628, 635; Jacobs v. Universal Development Corp., 53 Cal.App.4th 120, 53 Cal.App.4th 692 [allowing a "complicit" whistleblower to proceed with his case].

Got a Business Need?
Use This Trusted List of Service Providers
Breakfast of Newport