QUESTION
Is it illegal to mark up costs of things (such as travel) to the company you work for?
Asked on Jan 10th, 2012 on Business Law - Maryland
More details to this question:
I work for a small (5 full time employees) company that distributes equipment from our parent company in Europe. Our Managing Director has been traveling via private aircraft for the past few years and has recently started marking up his travel costs (under an LLC he created) to our company. Example: he rents an airplane for $45 an hour, pays for the fuel (which costs anywhere from $20-$30 an hour), pays out of his own pocket, and writes the company an invoice for double what he paid for the cost of the trip ($150/hr.). He himself owns 20% of the US company and the other 80% is owned by European investors. Is this illegal? I feel like I should inform our investors but may be in a bad position for outing my boss. If what he is doing is illegal, I would have a solid ground for bringing this up.
Thank you,
Neil Healey
2 ANSWERS
Labor and Employment Attorney serving Atlanta, GA
2 Awards
What he is doing is committing fraud if the company paying the bill is not aware of the markup. (I take it he is flying himself.) However, since yours is a private company, the federal Sarbanes Oxley act does not apply to you. I am not aware of any state law that offers protection for private whistleblowers. That is something you should check out with a Maryland employment lawyer. (I'm admitted to practice in Maryland, Ga. and DC, but I practice in Atlanta). You at least should make sure that you do nothing to assist him in his fraudulent dealings.
Sometimes, an anonymous note to your Boss's boss is enough. (i.e., Don't sign your name like you did with this note.)
Michael Caldwell
404-979-3150
Answered on Jan 30th, 2012 at 2:18 PM
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1 Award
No law prohibits an employee from being reimbursed for more than his out-of-pocket costs in connection with business expenses, if that is what all parties understand and intend. As a general matter, the difference between actual cost and the reimbursement is taxable income to the employee and needs to be reported to the IRS. An employer which believes that it is reimbursing actual costs may have a claim against an employee who is padding expenses without the employer's knowledge, but the employer and employee are free to agree on such an arrangement if they want.
Answered on Jan 10th, 2012 at 4:14 PM