Phony Invoices Led To $4 Million Breach of Fiduciary Duty

Companies often utilize contractors to help complete jobs and fill gaps in their workforce. While this creates a mutually beneficial relationship, some individuals will abuse it. This was the case for an investment company that discovered one of its contractors was creating phony invoices totaling $4 million.

Forest Investment Associates filed a lawsuit against a couple the company alleges defrauded them by creating phony invoices. The couple worked at Kingwood Forestry Services, which was frequently retained by Forest Investments. The wife worked as an administrator and her husband worked as a contractor. The couple would submit invoices for work that was never performed, which would in turn be paid by Forest Investments and its clients. Because the wife worked in administration, she kept an eye on all of the false invoices and made sure the amounts were not too suspicious so as to raise eyebrows. The scheme, which began in 2011, totaled $4 million worth of false invoices. Forest Investments has filed a lawsuit against the company for breach of fiduciary duty.

Protecting Your Business

No business exists in a vacuum. Businesses rely on other companies and individuals to operate. These relationships need to be carefully and thoroughly defined by contracts to help prevent disputes. When a dispute or outright fraud does arise, business owners have the right to seek compensation for economic damages. While many types of fraud bring about criminal charges, the criminal prosecution will not provide any financial compensation for wrongdoing to the victims.

Businesses that are victims of fraud can seek compensation directly related to the fraud and can pursue damages for harm done to their reputation. Because these matters can be extremely complicated, it’s important that only experienced business fraud attorneys handle them.

Texas Business Fraud Attorneys

At Feldman & Feldman, our Texas business fraud attorneys fight aggressively for our clients. We understand how business fraud can impact your company, so we work to get your legal issues resolved quickly. To learn more about your legal options, contact us today to schedule an appointment with one our lawyers.

Was There A Breach In Fiduciary Duty In The Taco Cabana Empire?

When Felix Stehling opened the first Taco Cabana restaurants in 1979, he likely didn’t anticipate how quickly the restaurant would grow. While Stehling had a number of successful restaurants and businesses before Taco Cabana, the little taco shack would be the one that cemented him in the culinary history books. Sadly, the current status of the Taco Cabana empire is nowhere near what it used to be, and Stehling’s stepson alleges that’s due to a breach of fiduciary duty.

Stehling passed away in December 2012. At the time of his death, his assets were valued at approximately $20 million. Fast forward seven years, and there is little left. Stehling’s stepson and heir has filed a lawsuit against Stehling’s longtime investment advisor claiming the fortune was squandered by over-leveraging the assets to generate cash.

While the investment advisor has been accused of fraud and self dealing, he has pointed to other causes for empire’s decline. The planner blames the trouble on the 2008 financial crisis and poor investment decisions made by Stehling in the years leading up to his death. However, what makes this fiduciary liability case particularly interesting is an arbitration agreement over twenty years old.

When Stehling hired the investment advisor in the 1990s, he signed an arbitration agreement. The financial advisor has asked a judge overseeing the case to dismiss the claim stating all disputes must be resolved through arbitration as agreed to in the original contract. For his part, Stehling’s stepson has fought against arbitration proceedings because the agreement was only between the investment advisor and his stepfather. He never agreed to such an agreement.

Fiduciary Duty With Financial Advisors

Fiduciary duty has a broad and complicated legal definition. Because of this, disputes between financial advisors and their clients can be come complicated. Matters can be complicated further if the parties agree to arbitration agreements like the one used by Stehling.

If you believe your financial advisor has breached his or her fiduciary duty, do not wait to call Feldman & Feldman today. Our fiduciary duty attorneys are experienced trial lawyers and litigators that can help you hold fiduciaries accountable for financial losses they cause. Contact us today to schedule an appointment.

Fiduciary Duty Could Change With New SEC Rules

A fiduciary duty is the highest duty imposed by law, and while there are many types of fiduciary relationships, the definition is very broad. Generally speaking, a fiduciary duty exists between a fiduciary and a trustee. The fiduciary is expected to act in the best interest of the trustee. This relationship applies to lawyers and clients, doctors and patients, and legal guardians and their wards. However, these are all very different relationships, so a one size fits all approach to the handling of a fiduciary duty can often lead to litigation. But, the definition of fiduciary duty could see some changes in the near future when it’s applied to brokers and investors.

The Securities and Exchange Commission (SEC) has been under pressure to address whether or not a fiduciary duty exists between brokers and financial managers and their clients. In April of this year, the SEC released a proposal to “address retail investor confusion about the relationships that they have with investment professionals.” Under the proposal, a broker-dealer making recommendations to retail customers would have a duty to act in the customer’s best interests. However, the proposal carefully referred to this as a “care obligation” rather than a fiduciary duty. While the proposal took steps to more clearly define the relationship between brokers and investors, the Investor Advisory Committee (IAC) of the SEC had several strong recommendations.

Fast-forward seven months, and the IAC voted to adapt the SEC’s proposed standards to include a more fiduciary-focused set of standards. The committee voted that the proposal should explicitly state the relationship between a broker and a client is a fiduciary one. The SEC will move forward with revising its proposal, but it is not yet clear exactly how the relationship will be defined. The SEC has expressed interest in defining the relationship in such a way that it can remain flexible.

Broker-Investor Relationships

Although the broker-investor relationship may see a more specific definition in the months and years to come, it is absolutely clear brokers do owe a duty of care to investors. Brokers should operate in good faith and without self-dealing. When people trust brokers with their financial assets, they deserve to have their best interests protected.

Fiduciary Duty Attorneys

If you believe your broker or other financial advisor has breached his or her fiduciary duty, do not wait to call Feldman & Feldman today. Our fiduciary duty attorneys are experienced trial lawyers and litigators that can help you hold fiduciaries accountable for financial losses they cause and other applicable damages.

Everything You Need To Know About Fiduciary Duty

A fiduciary duty is the strictest duty of care recognized by the legal system. Because of this, it is incredibly important that fiduciaries fulfill their responsibilities correctly and faithfully. Many people would be surprised by how broadly fiduciary duty can be applied and how unintentional actions could cause a breach. Here is everything you need to know about fiduciary duty, whether you were appointed a fiduciary or principal (the party to whom the fiduciary owes a duty).

Defining Fiduciary Duty

Fiduciary duty is broadly defined as the legal duty of one with superior knowledge and/or power to act in the best interest of another party. It’s pretty easy to see how broadly this can be applied; however, there are a few parties commonly serving as fiduciaries in relationships with those they serve. These include:

  • Lawyers
  • Accountants
  • Doctors
  • Real Estate Brokers
  • Guardians
  • Trustees
  • Executors
  • Corporate Officers
  • Employers

One of the most common breaches of fiduciary duty has to do with conflicts of interest. You wouldn’t want your real estate broker making recommendations that also benefited him. This might make him more inclined to make recommendations that aren’t necessarily best for you, but are good for him. Any conflict of interest or self-dealing is not allowed in a fiduciary relationship.

When fiduciaries do not put their principals’ best interests first, they can be found responsible for breaching their fiduciary duties. Breaches are not always intentional. Sometimes, fiduciaries fail to do their due diligence before making a big decision. While this isn’t done maliciously, it still constitutes a breach. But, just because principals suffer damage from a fiduciary’s decision doesn’t mean a breach has occurred.

Breaches Are Complicated

Fiduciaries make many important decisions on behalf of their principals. Fiduciaries can’t always predict the outcome of a decision, but they are expected to exercise reasonable caution and to be fully informed before making any decisions. If a breach is suspected, it will require the help of an experienced breach of fiduciary duty lawyer. A lawyer will be able to investigate the circumstances surrounding the breach and determine if the fiduciary can be held responsible for any resulting damages.

Breach of Fiduciary Duty Attorneys

If you have been accused of breaching your fiduciary duty or if you believe your fiduciary’s actions constitute a breach, Feldman & Feldman can help. Contact us today to schedule an appointment with one of our dedicated breach of fiduciary duty attorneys.