Other People’s Money

There was a funny movie many years ago starring Danny Devito called “Other People’s Money”.

While we are in the midst of the federal election, we will be hearing a lot about how our elected officials have been and how the wannabe MPs plan on spending other people’s money (that is, OUR money).  Some of those campaigning remind me of the ruthless character in the film.

It seems that people have no problem doing things with other people’s money.  One need only look at Enron, Worldcom, Adelphia, the Gomery Report, the MFP Report and the allegations against our own Conrad Black (as yet unproven) to see how easy to spend money when it is not your own. 

Wanna show your wife how much you love her?  Throw a birthday bash that costs tens of thousands (or more) of the shareholders’ money!  Have an anniversary coming up?  Take her to Bora Bora on the company jet. 

It seems that, to some people, having a public company or holding public office is an entitlement to spend or take whatever you can get your hands on.

“Other people’s money” has a legal name:  trust money.

If you give your buddy 30 bucks to get you a case of beer, he is holding that money in trust for you.  The deposit that you pay for a real estate purchase is trust money, held in trust by the realtor.

There are almost innumerable instances of trust in the law.  Your employer deducts EI, CPP and income tax from your pay.  That money is trust money, which the employer holds in trust for the government.  If the employer does not hand that money over to the government, then there will be big trouble for them!

The law reserves its finest civil penalties for those who treat trust money as if it is their own.

And, of course, the governments creates special penalties for those who collect, but don’t remit PST, GST, EI and other money that they deduct for others.

People cannot hide behind the veil of a corporation to escape liability for breach of trust.  In all cases that I can think of, the law allows you to seek relief personally against the individuals who committed the breach of trust.

If someone wins a lawsuit for breach of trust, you can expect to pay more in legal costs to the winning party. 

If you commit a breach of trust, the debt you will owe will follow you to your grave.  It will survive bankruptcy, so you cannot get rid of it.  You will either have to pay it or run from creditors the rest of your life. 

The law creates a lot of trusts.  If you are in business, you need to be aware of the trusts that are imposed on you by law and make sure that you follow the rules to the letter.