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Dentist accused of wrongly expensing $559,888 from partnership

| Dec 7, 2012 | Business Litigation |

A dispute between two Winston-Salem dentists over allegedly unauthorized expense reimbursements has resulted in a $2.34 million award from a North Carolina Business Court. $559,888 was ordered for repayment of the reimbursements, which included items such as Prada shoes, fancy hotel rooms, and even her brother’s condo mortgage payment. Another $1.68 million was ordered as punitive damages.

LLC-membership and partnership disputes often lead to the dissolution of the business. If allegations of fraud or breach of fiduciary duty by one of the partners is involved, it will be critical to work with legal counsel to reach a fair and legal resolution.

The two dentists graduated from dental school together in 1999. They decided to open up a dental practice as business partners in 2000. That meant that they jointly owned the business including three real estate ventures. Their businesses were operated as limited liability companies.

One of the dentists assumed the role of president, while the other acted as the administrative manager. Both dentists were friends and trusted each other with the business.

Beginning in 2007, one of the dentists allegedly began to made a series of complicated fund transfers from the businesses accounts for marginal items such as expensive clothing and accommodations, and clearly non-reimbursable expenses such as her brother’s mortgage payment and membership in a dating website.

After hearing the evidence, a judge recently ruled that this business partner committed constructive fraud. The fraud involved many complicated, wrongful transfers of funds from the jointly held businesses to one business that was solely owned by that partner.

After this complex business litigation was filed, the judge ordered the joint LLC’s to be dissolved. The judge recently granted the defrauded business partner more than $2.3 million in restitution for the money that was improperly expensed.

A receiver was also appointed to pursue collection of this financial obligation if the debt-owing dentist does not pay it voluntarily.

Source: Winston-Salem Journal, “Judge orders dentist to pay her former partner $2.34 million,” Richard Craver, Nov. 28, 2012

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