Community Magazine June 2012

According to the ruling of the Shulhan Aruch, a hired professional is responsible for damages caused by his inadequate performance. Since he is being paid a fee for his services, he is liable when found incompetent and must bear the consequences of his failure. In addition, when a paid professional acts in an unskilled manner, he is required to return any earnings received for his services. Since he was only hired due to his claimed expertise, when he fails to perform at the customary minimum level, he is not entitled to a salary. If, however, the reason for his failure or the damage is attributed to circumstances outside the realm of his responsibility, or due to an unforeseen occurrence, he is exempt from payment and entitled to receive payment for his services. Likewise, in instances in which it is uncertain whether the damage was a result of his actions, he is exempt from liability. Accountants are responsible for the validity of the financial statements they work on, and must perform their duties in accordance with applicable accounting principles, standards and laws. An accountant’s proven participation in fraud or embezzlement is obviously illegal, rendering him liable for the loss sustained by the client. However, it is generally hard to prove that an accountant was involved in illegal activity, since very often the crime is concealed by the principal owner or the management. While it is the responsibility of an accountant to examine the veracity of a company’s transactions, if the firm’s officers provide a reasonable explanation for seemingly unusual transactions, the accountant is generally not liable. Unless it can be proven that, under the circumstances, the accountant should have been suspicious enough to audit and further examine the transactional records of the firm, he cannot be considered negligent or irresponsible for not doing so. In short, determining the professional liability of an accountant is largely dependent on the specifics of the case at hand, subject to the discretion of the judges handling the dispute. The Shulhan Aruch rules that even long after a verdict has been issued, a litigant may bring new evidence to validate his claim and nullify the original verdict. By Torah law there is no statute of limitations on the submission of evidence, since it is forbidden to allow an undeserving party to retain disputed funds. Hence, a plaintiff or defendant who finds new evidence may submit it to the court, and thus may persuade the judges to reverse their decision. AN EMBEZZLER’S ACCOMPLICE Rabbi Max Sutton, Rosh Bet Din Aram Soba, Jerusalem, Israel FROM THE FILES OF THE Bet Din Although Samuel’s allegations against Jerry were very severe, he did not submit any concrete evidence to substantiate the claim of deliberate fraud or negligence. After numerous sessions debriefing all the parties involved, the picture that emerged seemed quite contrary to Samuel’s claims. Jerry had been hired by Albert, the president of the American division, and had been totally uninvolved with the Israeli organization. The embezzlement occurred over the course of 11 years, and the stolen funds were a very small fraction of the yearly budget. Though he embezzled the funds for his own private use, Albert had reported the withdrawals as a believable expense that many organizations really incur. Our Bet Din explained to Samuel that in essence he was the negligent party, as he should have been monitoring the activity of the American account. Although Jerry was the accountant of record, he was not hired to act as a private investigator. Jerry’s noticeable discomfort throughout the Bet Din session was also not a reason to rule against him, as such a reaction could be expected of one who is accused of being an accomplice to embezzlement in front of a panel of three judges. On these grounds, our Bet Din dismissed the case. We did, however, inform Samuel that if in the future he finds evidence to incriminate Jerry, we would accept his appeal and rule accordingly. The Case Samuel is the president of a soup kitchen which distributes food to poor and needy residents in Jerusalem. He regularly travels to the U.S. to fundraise for this worthy cause, and he set up a telemarketing network to contact smaller donors to help raise funds. Since Samuel is an Israeli citizen, he appointed Albert president of the American organization, and entrusted the collected funds with him and with Jerry, a certified public accountant. Samuel instructed Albert to wire collected funds to him in Israel in order to cover the monthly budget, and also to safeguard the monies in the US based account. After many years of operation, Samuel detected a small discrepancy in one of the wire transfers and began to investigate the matter. After doing some research, he discovered that over the years about $895,000waswired to several recipients he did not recognize. With concrete evidence that a severe case of embezzlement had transpired, Samuel proceeded to press charges in Bet Din against Albert and Jerry. Albert broke down and confessed in Bet Din, vowing to eventually pay back every dollar he stole. Samuel then accused Jerry of being an accomplice to the crime, as he had monitored all of the account’s activity and thus must have been aware of the misappropriated funds. Samuel insisted that Jerry return to the organization all the accounting fees he received throughout the years of embezzlement, since he was obviously not entitled to them. He also demanded that Jerry serve as a guarantor for Albert until the $895,000 was returned. Jerry was noticeably uncomfortable throughout the Bet Din session, but he refused to comply with Samuel’s demands. How should the Bet Din rule with respect to Samuel ’s claims against Jerry, and why? in favor of David or Jonathan, and why? Verdict: UNACCOUNTABLE ACCOUNTANT Torah Law Sources: Shulhan Aruch Hoshen Mishpat 306:4 ibid. 306:5, and Bet Yosef citing Rashba, Sema 16, Shach 17 Mishna, Sanhedrin 31a Shulhan Aruch Hoshen Mishpat 20:1 Shulhan Aruch Hoshen Mishpat 15:5. 52 COMMUNITY MAGAZINE