Liability for Member Misconduct Amy Hereford, CSJ, JD 6400 ...

Liability for Member Misconduct Amy Hereford, CSJ, JD 6400 Minnesota Ave.; St. Louis, MO 63111 (314) 678-0389; a.hereford@yahoo.com; www. ahereford.org Overview • Primary Liability: the Members – Sources of Liability – Responses • • • • Put out the fire Address the damage caused Address the underlying causes Address systemic issues • Secondary Liability: the Order – Sources and Theories of Liability – Responses • Member • Order Primary Liability: the Members • • • • Financial Misconduct Personal & Sexual Misconduct Substance Abuse Emotional & Psychological Disturbance Financial Misconduct • Cause: – Spending, Gambling, Substance Abuse – Other addictive behavior • Personal Debt – personal credit card • Embezzling – From sponsored institution or a third party – Civil and Criminal Liability • From community – Abuse of community credit card – Misuse of community funds Personal Debt • Personal credit card – Personal Loan • Presenting facts – Excessive debt • More than 1 year's budget • Carrying a balance – Multiple cards, unless for accounting purposes – Unexplained purchases, funds – Protectiveness about financial responsibilities – Tends to spiral out of control Personal Debt – Discovery • Member Self Reports ● To Leadership ● To Treasurer • Suspicion of Leader / Treasurer ● Fiduciary responsibility – follow the money ● Privacy of member ● Third Party Report • Scope of the Debt ● Credit Report Personal Debt – Immediate response – Leadership takes lead, treasurer supports – Steps: • • • • • Stop spending Take credit cards away Opt out of credit card offers Get promise of cooperation Determine scope of debt – Credit Report – Bank and Credit Card Statements • Consider points of vulnerability – Employment, Community, Access to money – Strategy depends of facts of the case • Type and level of debt, underlying cause, cooperativeness of member. Credit Card – Opt Out • Call 1-888-5-OPTOUT to have personal information removed from direct marketing lists. • Alternatively, contact the individual credit bureaus to opt out: – Options; Equifax Inc; PO Box 740123; Atlanta, GA 30374-0123 – TransUnion LLC; Name Removal Option; PO Box 97328; Jackson, MS 39288 – Experian Opt Out at 1-800-353-0809 • Write Direct Marketing Association; Mail Preference Service; PO Box 9008; Farmingdale, NY 11735 Personal Debt • Addressing the debt: – Not debt of the community – Taking responsibility for the debt – Assets at risk • Taxable Personal Income • Personal Assets: Patrimony – Credit Counseling – Debt Consolidation – Bankruptcy Credit Card Abuse – Debt • Effect of paying off debt ● On Member ● Credit record ● On Order – apparent agency ● Effect of bankruptcy ● On Member ● On Order Consumer Debt 2000 Consumer Debt $6.5 trillion Corporate Debt $4.3 trillion Federal Debt $5.8 trillion The Lending “Spread” By Type of Loan in 2000 Auto 20% Credit Card 61% Corporate 19% Source: U.S. Federal Reserve System, Federal Reserve Bulletins; reported in“Consumer Credit-Installment of Credit Finance Rates,” and “Money Market Interest Rates,” Statistical Abstract of the United States (Washington, D.C.: U.S. Government Printing Office, 2000). Credit Card Abuse – Bankruptcy • Chapter 7 ● No steady income and few assets ● Debts are canceled ● Assets are converted to cash and used to repay part of debts ● Chapter 13 - Repayment ● Steady income, ● Placed under a court approved repayment plan Three to five years, ● Assets are not sold to pay creditors Chapter 11 – Business Bankruptcy 2005 Law Changes – tougher stance on abuse ● ● Member Income and Assets • Income at risk ● Personal Income – 1040s are examined ● Gifts aggregating > $200 / year ● Assets at risk ● Personal Assets – Patrimony ● Institute Income and Assets are not a part of the proceedings ● Special rules for those “in business” including selfemployed, or officer/director within 6 preceding years ● Transfers in last two years ● No bankruptcy in last 8 years Must get credit counseling first Dischargeable Debts • Credit card debt • Loans from friends and relatives • Department store and gasoline company bills, rent • Legal, medical and accounting bills • Utility bills • Deficiency balances (the difference between the amount you owe and the value of the property) • Court judgments, such as property or mechanic's liens Nondischargeable Debts • Certain federal, state and local taxes • Debts from fraud, larceny, theft • Fines and penalties for violating the law, such as traffic tickets • Alimony and child support • Some student loans • Luxury goods or services purchased within 60 days of filing for bankruptcy, with a value of $1,000 or more • Debts not listed on bankruptcy papers Exempt Property • Qualified retirement benefits - ERISA • Personal property such as clothing, household goods to $400 per item, $800 total. • Public benefits such as social security and public assistance • Home equity up to $15,000 • Disability and unemployment benefits • Life insurance policy, loan value up to $8,000 • Tools of the person's trade such as books and computers, to $1,500 • Assets held in trust, alimony, child support Non-exempt Property • • • • • Personal income Cash and bank account balances Private pension plans Stocks, bonds, investments Equity in a house, above $15,000, second house or car • Luxury items such as fur coats, jewelry, coins, stamps, family heirlooms • Musical instruments, books, etc. unless a professional Bankruptcy • http://www.uscourts.gov/bankruptcycourts.html – Bankruptcy Basics – Bankruptcy Forms Bankruptcy Forms • • • • Voluntary Petition Bankruptcy – Summary of Schedules Bankruptcy – Schedule B Bankruptcy – Schedule I Religious Order Liability • Not liable for unjust debt of members ...unless.... • Paid off debt in the past – Gives rise to apparent agency, or apparent guarantor theory. – Contributes to credit rating and ability of member to abuse credit. • Community credit card – Unsupervised use of credit • Can assist member in obtaining bankruptcy protection • Supervisory responsibility – Members in financially responsible roles Credit Card Policies • • • • One card Pay off card each month Personal card Corporate card with specific limit ● Pros and cons • Track expenses / receipts • Where to go for help • Opt out Personal and Sexual Misconduct – Sexual Abuse – sexual contact with a minor or vulnerable adult – Sexual Battery – non-consentual sexual contact with an adult – Battery – unwanted touching of another person, or anything connected to that person. – Assault – the unlawful attempt to violently injure another person Criminal liability • • • • • Sexual Abuse – reporting requirement No interference with criminal investigation Possibility of civil liability Requires attorneys Insurance Substance Abuse • Substance Abuse – Secondary Liability • Public disturbance • Vehicular Crimes – Operating to endanger – Operating under the influence • Personal Injury • Workplace or Lifestyle problems • Financial or Sexual Misconduct – Criminal: controlled substance • Emotional or Psychological Problems Members Liability: Responses • Responses – Put out the fire • Stop continuing damage – Address the damage caused • Civil and / or criminal liability – other injury – Address the underlying causes • Psychological, emotional, substance abuse – Address systemic issues • Policies • Supervision • Ability of members / leaders to address concerns before liability arises Questions? . Amy Hereford, CSJ, JD - (314) 678-0389 - a.hereford@yahoo.com www.ahereford.org Practical Legal Responses to Member Liability Amy Hereford, CSJ, JD 6400 Minnesota Ave.; St. Louis, MO 63111 (314) 678-0389; a.hereford@yahoo.com; www.ahereford.org Overview • Chain of liability, chain of causality • Responding to liability: ● For the member ● For the Order Preventing liability ● Limiting liability ● Shifting liability ● Sources of Liability • Civil Liability – law suits ● Citizen seeking money damages ● Citizen seeking an injunction • Criminal Liability – criminal prosecution ● State seeking imprisonment ● State seeking fines or monetary penalties Civil Liability is … • Civil liability arises a wrong act is done – Assault and Battery, Trespass, Fraud – Stealing • Civil liability arises when some duty is neglected – Duty to maintain property – Duty to drive prudently – Duty to maintain professional standards • Neglect of duty can be – Intentional – intended – Reckless – unreasonable, irresponsible – Negligent – failure of ordinary care, “you should have know better, but it could have happened to anyone.” – Criminal negligence: “...so stupid it's criminal” Neglect of duty is … Light is red and I drive through 1. I purposely drive through 2. I’m digging in my bag for my cell phone, and I don’t notice the light 3. I’m driving 50 mph in a 25 mph zone and I don’t see the light 4. A noxious chemical is in the air which causes me to loose consciousness just as I reach the intersection Basic Chain of Causality (Member) • Defendant had duty of care Reasonable Person Standard ● Industry Standard ● Legislation (negligence per se) ● • Defendant breached the duty of care • Defendant should have known risk of harm • Defendant's conduct caused harm to Plaintiff Chain of Causality Liability Caused harm Chain of Causality Light is red and I drive through and …. …I hit a car in the intersection. …Another car swerves to avoid me and sustains damage. …I hit a tree and a local resident hears the crash and has a heart attack. Corporate Duty of Care • Duty to Supervise – Recommend for ministry – Know of potential liability – Community policies • Duty to Screen – New members – Current members Vicarious Liability • Liability for the conduct of another – Defendant had duty of care – Defendant breached the duty of care – Defendant should have known risk of harm – Defendant's conduct caused harm to Plaintiff • Corporation had a duty to supervise the Defendant • May be duty in law or duty in fact – Corporation breached the duty of care – Corporation should have known risk of harm by Defendant’s conduct – Corporation’s conduct caused harm to Plaintiff – But for Corporation’s negligence, Plaintiff would not have been harmed Chain of Vicarious Causality Secondary Liability Secondary cause Primary Liability Primary Cause Scope of Duty to Supervise / Agency • Corporation responsible to supervise employee within the scope employment • Member isn’t member of corporation, but of congregation or order. • Is member’s conduct within the scope of the order or corporation’s duty to supervise? – Substance Abuse – Sexual Abuse – Financial Misconduct • Reassignment of member after misconduct • Use of corporate assets: car, money Case Study • Sr. /Bro. Pat is a member of your order and Terry has a credit card problem. Pat also has some problems with substance abuse. ● It has come to you attention that Terry has some significant debt. ● Are you responsible for the debt? What steps might you take in Pat's regard. What limits could be placed on Pat... ● to limit Pat's liability? ● to limit the order's liability? ● ● Lifecycle of a Lawsuit Initial Stages • Pleadings • Complaint • Answer • Counterclai m • Motions • Discovery • Settlement / Mediation Trial • Pre-trial conference • Jury Selection • Opening Statement • Evidence • Closing Statement • Verdict Post-Trial • Post-judgment motions • Appeal • Enforcement / Sentencing Lifecycle of a Lawsuit Wrong Done Defense Response & Counterclaim Discovery Trial Judgment Claim No Defense Appeal Enforcement Sentencing Civil Remedies • Equitable Remedies • Injunction – do or not to do something • Restitution – restore victim • Reformation – re-write a contract • Legal Remedies • Money Managing Liability • Preventing liability • Limiting liability • Shifting liability Managing Liability • Prevent / Avoid – don’t do risky things • Manage Liability – Identify Risks – Analyze Risks – Manage Risks • Assume risks prudently balancing – Gospel call to ministry – Good stewardship Preventing Liability • Supervision – Responsible Supervision – Community Policies • Writing policies • Enforcing policies • Agency – Real or Apparent – Logistics Responsible Supervision • Ministerial Credentials ● Ongoing Professional Education ● Supervision / support of peers and colleagues ● Compliance with Professional Standards and Industry Standards. Managing Liability through • Appropriate supervision ● Shift Liability through Corporate Structure ● Share Liability through Insurance ● Distance the Liability from the Corporation Shift Liability through Corporate Structure • Separately Incorporate Risky Activities ● ● ● Help separate liability Remaining supervisory responsibility Church organization – OCD listing Religious organization Charitable organization Exempt purpose ● ● ● ● Maintenance of corporate form Sharing Liability through Insurance • Identify liability sources ● Some can be avoided ● Some can be limited or modified through planning ● Others can be shifted to insurance carriers ● Insure unavoidable risk ● General Liability, property, auto, etc. Questions? . Amy Hereford, CSJ, JD - (314) 678-0389 - a.hereford@yahoo.com www.ahereford.org