Moral/ethical dilemma

Moral/ethical dilemma

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We have a client who has been involved in a property deal, where to cut a long story short there has been collusion between parties to buy a property from a persons estate (unrelated third party) at a below market rate, with the view of selling it on later at its true value. The unrelated third party as far as I can tell is not involved and essentially is the victim of this.

Now I am only an office junior/client manager so cannot sack the client and work on what my superiors tell me, the superior responsible for the client knows about the deal but appears to have no issue with it (possibly due to the big fee involved with the work, but that is an assumption).

Legality wise I'm guessing it is illegal, but I know this is not the place for legal advice, and really do not want to go down that route. However morally/ethically I am now having a hard time justifying working with the client with my conscience, mainly from the point of view that if the above would have happened to me or a family member then I wouldn't be happy to say the least.

I wouldn't describe myself as an above and beyond moral/ethical person, and understand grey areas. But equally do believe in right from wrong, and that once you compromise on your conscience then it is a slippery slope.

So the question is what do I do, or what would you do? Regarding carry on regardless, and its a mountain out of a molehill that I have lost perspective, or refuse to work on the client etc. etc. (already investigating other avenues of employment due to this)

Replies (9)

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By Roland195
04th Jun 2015 10:39

Are you an accountant?

Or are you training to be with any of the institutes?

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By Lship
04th Jun 2015 10:43

Training for one of the institutes, but didn't want to go down their helpline route until I had some 'informal' advice from more experienced professionals.

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By Roland195
04th Jun 2015 11:01

How sure are you?

If you are certain of your facts regarding the collusion, and after discussing the matter with your superior (perhaps even playing dumb so he can explain to you why he doesn't think there is a problem) you are still convinced that illegal activity is occuring, your institute will expect you to report the matter up the company hierarchy including the firm's MLRO.

You seem to be realistic about the world we live in, but I have seen similiar deals between estates, IPs & trustees that while eyebrow raising, I could not bet the farm on actual illegal activity.   

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paddle steamer
By DJKL
04th Jun 2015 11:04

You are not very specific re the actual actions of the parties

What you are in effect saying is there is collusion between two parties to acquire a property from an estate where the executor, I presume, is not aware of said collusion? Is that a fair summary?

The catch here is what is fair value? Provided the executor fully markets the property then what he receives for it is , by definition, certainly market value.

Do you have any reason to believe the actions of any of the parties is criminal (fraud)? 

Collusion between two parties to acquire a property for less than they perceive its market worth is not of itself fraud, it may by particular actions be fraud but you have led no evidence yet for such a construction.

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By Lship
04th Jun 2015 11:28

I know I was a bit vague, partly due to knowing open forums can be viewed by most.

As I said, the legality wasn't something I wanted to focus on initially but as it maybe relevant, an example of the transaction is:

Executor (A) uses Estate agent (B) to market the property who sells to person (C)

There is a family relation between A & B and B&C (not talking employee/cleaner level).

B loans C money to purchase.

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Replying to DJKL:
paddle steamer
By DJKL
04th Jun 2015 11:44

If B has fully marketed

Lship wrote:
I know I was a bit vague, partly due to knowing open forums can be viewed by most. As I said, the legality wasn't something I wanted to focus on initially but as it maybe relevant, an example of the transaction is: Executor (A) uses Estate agent (B) to market the property who sells to person (C) There is a family relation between A & B and B&C (not talking employee/cleaner level). B loans C money to purchase.

If B has fully and openly marketed the property in his role as agent, and no other purchasers have become apparent, then there is no undervalue. So the key is has he done this or has he stifled other interest for his own nefarious purposes? i.e has marketing been via black book or has it been open and distributed widely?

The relationships do not of themselves indicate criminal activity, it is the actual actions that do. The lending of funds from B to C to purchase is not in itself criminal. There is obviously a breach of trust between A and B if B does not tell his principal, A, of the relationship with C, but is this criminal or merely civil. For all you know such information has been disclosed?

I would be somewhat careful in such a scenario of casting around accusations without having some clear evidence of criminality, unless you have more evidence than the relationships amongst the parties you will potentially be leaving yourself open to some dire consequences if you are wrong. Unless you hold more solid evidence, beyond your current suppositions based on the facts given, I believe you have done what you need to do in bringing the matter to the attention of your employer.

I would certainly not do anything further/ unilateral without  first seeking legal advice as to the consequences if I were to be wrong.

 

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paddle steamer
By DJKL
04th Jun 2015 12:09

Re the more general moral judgement point you make, you have to decide where your line in the sand is located, but if no criminal behaviour is involved it is your line , nobody else's line.

You will over the years no doubt come across many clients who act in a manner with which you are morally uncomfortable or whose beliefs are different from your own. The thing is be careful re imposing your moral certainties on others; within these boards there are posters who have very different views as to what is acceptable say re tax planning and what is unacceptable and if you have ever say studied philosophy you will possibly already be aware of the difficulties with judgement calls.i.e. is it ever possible to have moral certainty, discuss?

I do not believe anything you have posted is yet strong enough to support an accusation of criminal behaviour, the moral question is I am afraid your own internal decision, but be aware if your moral compass is more sensitive than most a change of employment could be a frying pan to fire decision.

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By Melody
04th Jun 2015 19:35

Get advice from your institute, +executors are personally liable

 I would say get advice from your institute, which you should be able to do in confidence, giving more info than you can on this forum while not revealing any details of the clients. We pay enough for membership so it's worth getting something for the money!

Without commenting on the legality or otherwise of this particular case, your red line should be to do nothing that would risk your membership or your ultimate qualification - the institutes can and do expel people for gross breaches of their ethical guidelines or of the law. Having said that, as others have said, this case may be nowhere near that red line - it might not be in breach anyway, and everyone understands that those in junior positions have less control over what they can do.

I found my own institute's advice helpful about 15 yours ago when my boss was putting a lot of pressure on one of my juniors in particular to do something that wasn't legal (I think the boss knew he wouldn't get very far asking me so he tried to bypass me.) In my discussions with the junior, he knew he didn't want to compromise his institute membership and eventual qualification,  and that gave him a good argument to stand up to my boss. I think the boss eventually got someone to do this from another department, who was not studying for a qualification, and eventually had to get it all reversed.

But, as I seem to remember being advised at the time, we ourselves were not compromised, we had made the boss aware of his legal obligations (easier for me as I was the only qualified accountant in the company),  and we were advised there was no need to inform any outside agencies in this case. There was no one to inform in the company, as the request came from the top level anyway. No one lost their job or anything. 

Every case is different and the institutes have moved on since then with their ethical policies, so you may be advised to continue with what you have been asked to do, having expressed your concerns, or you may be advised to take it further. Either way, you need to think first of your career, which includes getting your qualification.

Later in your career you will be in a better position to accept or decline work you find morally distasteful, and also perhaps to know better whether it is legal. Do continue to look at other job possibilities if you feel you would like to move on,  but try not to jump out of a secure job until you find one which would be a positive move for the next stage in your career (see previous comments about frying pans and fires). Or if your organisation is big enough, perhaps a sideways move, to expand your experience, might work for you.

One avenue worth pursuing is to read up a little on the duties of executors,  who are legally obliged to protect the assets of the estate. Many people do not know that executors are personally liable if they cause loss to the estate,  and can then be personally sued by the beneficiaries - for instance a beneficiary or a beneficiary's advisor might look at property prices in the area and realise it has been undersold.

So it may be in the best interest of the client (not just the 3rd party) to be informed of this personal liability - something you could include in discussions with your supervisor? Facts, figures and the law are often much more persuasive to those who are not unduly bothered by ethical concerns and that is part of the business we are in as accountants.

 

 

 

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By SlipperyJimDiGriz
05th Jun 2015 11:47

How was the property marketed?

I completely agree with the above comments re the marketing of the property. (As an ex mortgage broker with chains of estate agents.) Was the property advertised in their shop window or website? The latter will have a Google cache like as not. It used to be that an estate agent had a legal duty to put every offer made to the seller, even if the offer was an insultingly low one, so if it was in their window or website there might be at least enquiries. A good agent will be mailing out details of the property to prospective purchasers and then phoning them to get viewings. Or was the property "buried" and enquirers put off?

It could be that the property is dilapidated or has subsidence and so is in a niche market, not reflecting the surrounding properties. Zoopla would give you an idea as to what the market value of these has been. In this case the agent would probably only approach builders whom he knew would be interested in the property.

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