Arthur R. Lehman, L.L.C.

Partner sues NYC doctor misuse of company funds

Doctors may be brilliant when practicing their medical specialties, but they can also be difficult business partners. A lawsuit filed this week in Manhattan Supreme Court accuses a prominent urologist of using funds belonging to a magazine that he and the plaintiff founded in 1996 for personal expenses. The lawsuit provides an example of how business partners, regardless of their professions, can engage in bitter business litigation.

The two physicians were life-long friends who, in 1996, founded a medical journal called MedReviews. The journal is headquartered in New York City. The complaint alleges that in 2005 one of the founders, who has his professional office in New York, began using the company's funds for personal expenses after he took over accounting duties from the wife of the other partners. The alleged misspending was discovered when the New York-based partner tried to buy out the 20% interest of the partner who lived in Seattle.

The complaint alleges that the Seattle partner asked to examine the business' financial records. The examination allegedly revealed a list of lavish personal expenses incurred by the New York partner that were paid for with company funds. The expenses included ski vacations in Colorado, ski lessons, $21,500 for his daughter's bat mitzvah, $160 for a WiFi system in a Maryland beach house, and trips to Italy, Israel and Peru. The complaint alleges that the expenses were charged to the company as "business expenses" but that the business purpose of the items was never documented. The complaint seeks repayment of all improper expenses, $3 million in damages and interest.

The failure to maintain proper financial records may be the leading cause of business disputes. The missing or incomplete records often lead to arguments about company income and profits or, as in this case, the legitimacy of certain expenses. Anyone who is involved in such a dispute may wish to consider consulting an experienced business lawyer. Such a consultation may provide a helpful analysis of the law and facts that govern the case and useful legal strategies to maximize the chances of a favorable outcome.

Source: New York Post, "Urologist blew company funds on ski lessons, bat mitzvah: suit," Julia Marsh, May 2, 2017

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