Office manager is big loser in accounting fraud

Her participation with boss was wilful

We reported in our last issue that the accounting firm of Thorne, Ernst and Whinney owed two partners the purchase money for a merger — even though the partners had failed to disclose that their smaller firm, in Windsor, Ont., had been engaged in a fraud.

It seems that the big loser, instead, is to be the office manager at the target firm, Patricia Spendlove, 70.

Spendlove, 58 at the time, reported directly to Wallace Robson, who set up the fraud scheme for a client seeking to evade taxes and hide income from his estranged wife. Spendlove allowed Robson to “launder” some of the client’s money through her tax forms.

Robson then reimbursed Spendlove for any taxes she had to pay on it.

Perhaps surprisingly, the trial judge found that, as Spendlove was taking direction from Robson, her employer, she could not be faulted.

Thorne dismissed her wrongfully, the trial judge concluded, by firing her for her participation in the fraud.

But the Ontario Court of Appeal has ruled that, as Thorne, not Robson, had become Spendlove’s employer, it had every right to fire her.

It had discovered the fraud only after a raid on its offices by the Royal Canadian Mounted Police, and Spendlove had participated with Robson in breaching her duties to Thorne as well as in misleading Revenue Canada auditors.

“It is difficult to think of anything more antithetical to the mission of a national accounting firm,” Justice Steven Goudge writes for the court, “than effecting a major tax fraud for a client.

“Hence, there is no doubt that, absent the involvement of Mr. Robson, Ms. Spendlove’s actions constitute just cause for her dismissal.

“They constitute a marked departure from the broad duty of fidelity that is an implied component of the common law employment relationship...

“It does not avail her that she did not benefit personally, nor that her actions were not directed against her employer.” Thorne, therefore, had good cause for summary dismissal.

For more information:

Spendlove v. Thorne, Ernst & Whinney, Ontario Court of Appeal docket C25770, December 9, 1999.

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