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When Trusted Advisors Break The Bank: How Can You Keep It From Happening To Your Family?

Members of the band Deep Purple are suing their former accountant for allegedly stealing up to $4.9 million from their two financial companies.

The accountant, who started working for the band in 1994, admitted to "borrowing" or "lending" at least $2.8 million. The band has recovered $585,000.

The financial misappropriation was discovered after a former band member sued the current band members for unpaid royalties. After discovery of the financial discrepancies, the court froze the accountant's assets. "Deep Purple sue former accountant," (Jan. 6, 2017).

Commentary and Checklist

Entrusting your money to another individual is a serious choice, and family employers cannot afford to take it lightly as the above account illustrates.

A background check of anyone performing work on your behalf, including talking to references and other clients, is essential to building trust. 

Family employers should have routine independent, third party financial audits performed. External auditors provide unbiased review and are trained to spot any financial discrepancies. If auditors uncover any suspicious accounting, do not ignore the problem. Any signs of fraud should be addressed immediately so that the situation does not become worse.

No person, even the most trusted, should be exempt from your financial oversight system. Best practice requires that everyone be treated equally when it comes to audits and financial reviews. 

Here are some ways you can keep your finances safe when employing a financial advisor:

  • Only hire someone who has the required qualifications and is capable of performing the job duties well. If certification, such as a CPA license, is necessary, ask them to provide evidence of annual renewal to keep on file.
  • Implement a systematic policy for auditing financial records that includes routine third party auditing, and carry out the policy religiously.
  • Train staff on the procedure for reporting suspected wrongdoing and make sure that all reports are managed anonymously and result in a thorough investigation.
  • If another member of the staff suspects that your financial manager has acted unethically, investigate the matter right away.
  • Routinely check your credit score and investigate possible illegal causes if your score is unjustifiably low.
  • If only one person does your accounting or has access to money, make sure that person takes vacations periodically and another person looks over the accounts while he or she is gone.
  • Never let one person have total control of your finances without any oversight, no matter who that person is.
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