When Personal and Business Relationships End Badly

Earlier this year, we had a client who came to see us with a sad, but not unique problem for ex-pats here in the Philippines. This case did not happen in Dumaguete, but similarly disturbing situations have happened, and
will continue to happen, here.

I’ll call our client Robert, and his business partner John. They’d had a successful business relationship going back many years. Their respective wives, both Pinays, also got along well. The couples socialized extensively together. Because of draconian laws here that restrict the rights of ownership for foreigners, their respective wives between them owned sixty percent of the corporation while their husbands had ownership of twenty percent each.

Everything went well for several years. Robert was godfather to his friend’s only son. They were viewed in both the ex-pat and Filipino communities as good people. And they were. After years of making modest
profits, because of Robert’s friendship with a fellow Rotarian, they were awarded an important contract. Then, over time, the success of that project opened other doors nationally. Their business became very successful.

Ironically, that’s when the problems began. Robert’s wife began to complain it was her husband who was mainly responsible for the recent success so they should earn higher dividends, while John’s complained Robert drank too much and spent company money on non-business related items for himself. It’s never a pleasant experience when two wives have opposing viewpoints and become agitated. Here in the Philippines, it’s inclined to be particularly dramatic, with material ideally suited for daytime soap opera, TV shows.

What’s particularly sad here is the goodwill and friendships created over many years while building up the business relationship was quickly destroyed in an avalanche of anger and vitriol. First, the wives stopped talking. One can only imagine the conversations, probably monologues, whereby the respective wives complained to their husbands about perceived wrongs done by the other party. I’m not intending to be frivolous here. It must have been painful for all involved.

Then the inevitable happened. Robert and his wife were served with papers for a civil lawsuit demanding they hand over their ownership interests to the other couple in exchange for a nominal payment. Charges of company financial mismanagement and also misappropriation of funds by Robert were also included in the lawsuit. That aspect deeply offended Robert who is a man of integrity, and never would have behaved in such a disingenuous manner.

The business first suffered, then went into decline. There were however considerable assets including a large, paid off warehouse unit, and valuable accounts receivable. There would also be a viable opportunity to rebuild the business relationship after the legal issues had been finalized. I’d like to have been able to report matters that were resolved somewhat amicably. Sadly, they rarely are in these heated confrontations where close personal
relationships are involved.

But I am pleased to tell you Robert did very well financially from the process. After a comprehensive review of the situation, we developed a strategy we believed would best serve his needs. It is easy to simply refer
an attorney to a client, but several factors about the case first needed to be considered before deciding on the most appropriate attorney from our panel to recommend to Robert and his wife. We narrowed it down to three.

One was an excellent arbitrator, another had a good relationship with the judge handling the case, while the third was renowned for his skills in the courtroom, especially when challenging the opposing party. He is also
admired for the quality of his skillful, closing arguments. We recommended him to Robert based on our belief the mention of his name could intimidate opposing counsel and encourage him to settle the case. John’s attorney had lost the previous four lawsuits when confronted by the attorney we were recommending. Another reason was that we wanted to keep the legal expenses to a minimum and, although Robert’s legal position was strong, we didn’t want the case to go to trial because of the possibility of a negative result. We have learned the hard way that solid legal arguments do not necessarily translate into legal victory in the Philippines.

Fortunately, our strategy worked. A settlement was arranged between both parties and, while everybody wanted more than they received, it was an equitable solution. Robert and his wife agreed to sell their shares in the
business in exchange for a sizable sum. Part of that was paid immediately with the balance to be paid over five years. Robert also received a formal apology from John and his wife that was published in a prominent national newspaper. It also confirmed the inaccuracy of claims made about Robert’s alleged financial wrongdoings. I didn’t agree with drawing attention to the untruths in a national newspaper but was overruled on that matter.

What this case confirmed yet again for us was the need for substantive due diligence and caution before any business begins. As a former attorney, I know its impossible to protect our clients fully against any person who has malice in their hearts. But it is foolhardy not to take precautions and do all one can reasonably do prior to entering the uncharted waters of any new business relationship. Had there been a clause in the contract that
addressed conflict issues, its possible they could have resolved these issues prior to everything falling apart. Unfortunately, there was a complete absence of even the most basic partnership agreement let alone
anything substantive.

We believe it’s also important to have a team of qualified professionals and service companies in place. This allows our clients to be proactive rather than reactive when faced with legal or any other business or
personal issues. Their skills are running their businesses or having the capital required to build their dream home. Distractions from that are harmful. Our responsibility is to take care of our clients’ issues when
they arise while providing the support that allows them to focus on being productive.

VCG Working towards the best possible outcome when business, and by extension personal, relationships turn sour

At VCG, we believe the key to being of valuable service to Robert was not only having quality attorneys to recommend to him but also for us to have a comprehensive understanding of all elements that might impact his situation. That approach increased the possibility of success and the probability of doing well, rather than naively hoping for the best possible outcome. The same principles apply to our relationships with any client who is doing a significant activity that will impact his or her life. It could be buying a home, hiring a construction company to build a home, dealing with immigration issues, or looking for a solar system.

At VCG, we believe the best method is to use a comprehensive approach. We also provide an ongoing conduit between our clients and whichever professional or service company they are working with. This proven business model results in less stressful and more effective conclusions which seem to satisfy not only our clients but all parties involved in the process.

For Discussions on Financial Matters, please feel free to contact us to discuss your options confidentially

Michael O’Riordan

Shortly after arriving into Dumaguete, Michael  intuitively knew it was the right place for him. Everything seemed to be right. It was and is. In addition to enjoying the way of life, he also met a special Pinay, and is living contentedly with her near the city.

He now operates Veritas Consulting Group, a company dedicated to helping other expats and Returning Filipinos with their transition to life in Dumaguete City and surrounding areas

Contact – info@vcg.com.ph