I was involved in a company in which one of the co-founders used the company debit card as his personal card to purchase food, snacks from vending machines, gas and groceries. He ended up spending almost half of the money we had made from contracts and equity we had put in and refused to pay it back.
We had a choice here, we could have taken it to the police, we could have used the law to our advantage because technically he was embezzling. Instead myself and the other co-founders called for a board meeting, we sat him down and talked to him. We considered his misappropriation of the funds ground enough to fire him from the board/company and considered the money taken to be more than enough compensation for his share of the company (to which he agreed), in return we wouldn't pursue him. This worked out for the better for all of us, since it meant we didn't have to spend time and money on a lawyer/court case and he could walk away without any penalties.
We had him sign a document stating that he no longer held any interest in the company (we had already long deactivated any and all accounts he had on the company network/services and his access to the bank account) and let it go.
Every so often I will still get calls from people looking for references (his name can still be found on Google to be associated with this company), and I will simply state that I have worked with him the past, and he was let go.
Unfortunately due to various reasons it never really did work out and the company fell apart. We made some money, I learned a boat-load and had my first failure. We were trying to bootstrap the company ourselves, so the only thing lost was the equity we all put in to start the company.
Wow, I'm actually in the middle of exactly the same situation right now (significant untracked and unauthorized personal spending by a co-founder), except I don't have a board, it's just me and the other co-founder.. We tried to work things out together to balance everything, but I finally gave up out of frustration and hired a lawyer.. Something I should have done from the start..
I'm going the opposite route though, and forcing him to buy me out of the company instead (with the alternative resolution being litigation against him), so he can keep the mess he created, and I'll get out of the liability and get a lump sum payment on the way out..
Why don't you tell people what he did? After all that's the kind of information they're looking for and it doesn't really seem like he saw the error of his ways.
I don't know if it's a real issue or not, but I've heard before that giving a detailed report on a past employee's misdeeds can open you up to litigation, especially if you can't prove your claims.
You could always respond to reference calls by saying, "I'd love to tell you all about him, but don't want to open myself up to litigation." That sends a clear message without you having to say anything.
Just say "He worked here. I do not recommend his services".
That's not a particular statement about the person, it gives no version of events. If pressed, explain that this all you can say. You simply don't recommend him.
We had a choice here, we could have taken it to the police, we could have used the law to our advantage because technically he was embezzling. Instead myself and the other co-founders called for a board meeting, we sat him down and talked to him. We considered his misappropriation of the funds ground enough to fire him from the board/company and considered the money taken to be more than enough compensation for his share of the company (to which he agreed), in return we wouldn't pursue him. This worked out for the better for all of us, since it meant we didn't have to spend time and money on a lawyer/court case and he could walk away without any penalties.
We had him sign a document stating that he no longer held any interest in the company (we had already long deactivated any and all accounts he had on the company network/services and his access to the bank account) and let it go.
Every so often I will still get calls from people looking for references (his name can still be found on Google to be associated with this company), and I will simply state that I have worked with him the past, and he was let go.
Unfortunately due to various reasons it never really did work out and the company fell apart. We made some money, I learned a boat-load and had my first failure. We were trying to bootstrap the company ourselves, so the only thing lost was the equity we all put in to start the company.