January 25, 2021

Volume XI, Number 25

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January 22, 2021

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If Your Partner Won’t Give You (Accurate) Information, Subpoena the Accountant

The key to winning a shareholder oppression case is sometimes as simple as getting the information you need. And the key to getting the information you need can sometimes run through a reluctant accountant. Often, the company’s accountant will have the key to the case because he or she knows “where the bodies are buried.”

If one shareholder is a passive investor, with no direct access to financial information, it may seem as if you have no choice but to take your business partner’s word as to the state of the company. If you suspect that the books are not accurate, how can you test your suspicions when you must rely on your business partner to supply you with accurate records?

Subpoena the Accountant

Often, the accountant in such an instance will respond to a request for information by stating that he cannot release information or respond to inquiries without permission of the majority shareholder. But if business divorce litigation is filed, you now have the power of a subpoena to compel not only the production of actual accurate financial information but also his deposition.

In many cases, cocky majority shareholders believe they can get away forever with stonewalling document requests, and even providing documents that on their face could not possibly have been accurate. However, what such unscrupulous actors fail to count on is the limits of his accountant’s loyalty.

A “shady” accountant may be willing to help stonewall minority shareholders from receiving documents and may be perfectly willing to submit “creative” tax returns to the IRS. But lying under oath and committing perjury in a deposition for a majority shareholder is quite often simply asking too much. If a CPA knowingly lies under oath in a deposition, he is literally putting his accounting license on the line. Often, the accountant will do whatever possible to avoid being placed in that position. But once there, a majority shareholder who has been deceiving his business partner is taking a huge risk if he expects his accountant to lie under oath.

Business Divorce Litigation

If done right, your business partner can be made to see that everything leaves a paper trail – or an electronic footprint – and that nothing can be hidden forever. Instead of allowing your business partner to hide behind his accountant or the accountant to hide behind confidentiality, putting the accountant front-and-center early on can go a long way to making sure that the information you are getting is accurate.

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©2020 Norris McLaughlin P.A., All Rights ReservedNational Law Review, Volume X, Number 328
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About this Author

David C. Roberts Member  New Jersey fraud, fraudulent transfers, trade secret, restrictive covenant litigation, employment litigation, environmental matters, and insurance coverage litigation.
Member

David C. Roberts, Co-Chair of the firm’s Litigation Practice Group, devotes his practice to handling complex commercial litigation matters, such as fraud, fraudulent transfers, trade secret, restrictive covenant litigation, employment litigation, environmental matters, and insurance coverage litigation.

His practice has a particular emphasis on partnership and shareholder disputes, including oppression and dissenter’s rights cases, with a focus on attempting to resolve matters through mediation, if such an approach fits within client’s goals and objectives.  In 2007, Dave launched...

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