Cronkhite obtains $405,120.20 arbitration award and attorney’s fees against former director who defrauded staffing company.

Issue: Employment Fraud

Court: Private Arbitration (Oakland County)

Industry: Staffing

Judge: Private Arbitrator

Case Description

A Michigan arbitrator recently awarded $405,120.20 to my client—a national staffing company—after arbitration proceedings.

In 2018, the staffing company hired a director-level employee to manage a new staffing division. The employee had represented to the staffing company that he had a well-established network of existing clients, as well as a large roster of individuals to staff future staffing contracts. Based on these representations, the staffing company offered the individual a lucrative employment contract as director of the new staffing division.

Afterward, the director claimed to have signed up a number of customers for staffing contracts whose value exceeded $60,000,000.00. The staffing company built up the director’s division to service these apparent staffing contracts, and also paid the director sizeable bonuses as a reward for procuring the staffing contracts.

But none of the alleged customers paid. The staffing company, growing concerned with these developments, retained me to investigate the authenticity of the staffing contracts. My prompt investigations confirmed that none of the contracts were real, and were instead fraudulently executed by the director.

Arbitration was then initiated against the (now former) director, including claims for breach of the employment agreement, fraud, fraudulent concealment, fraud in the inducement, and unjust enrichment. The staffing company also requested that the arbitrator rescind, i.e., cancel, the employment agreement because it was a product of fraud.

After lengthy arbitration proceedings, the arbitrator awarded the staffing company $405,120.20 in money damages against the former director in favor of the staffing company.

The arbitrator found that the staffing company prevailed on all counts, concluding that the former director had not only breached his employment agreement but also committed fraud, fraudulent concealment, fraudulent inducement, and false reporting to the staffing company. The arbitrator also agreed that the employment agreement should be rescinded based on the director’s fraudulent misrepresentations to induce the staffing company to sign it.

The award included an award of attorney’s fees to the staffing company.

The arbitrator’s award demonstrates the importance of quickly acting to investigate and prosecute suspected employment fraud—as well as the fruit borne by diligent action.