Couple which committed fraud has to pay the church over €800,000!

Luxury meals, fancy chocolates, skiing trips, school books for the children and large sums spent at consumer A natural person who does act in the course of a profession or business.
» Meer over consumer
electronics stores. These are only a few of the many private expenses that a treasurer of a church financed for years from the church cash funds. In proceedings against the treasurer and his wife, the Mennonite Church of The Hague claimed over €800,000 back from this couple. Debt collection lawyer Thomas van Vugt explains the ruling in this remarkable case.

Treasurer withdrew money from the cash funds for personal use

This legal action started as follows. In the period 2001-2009 the defendant worked as treasurer for the Mennonite Church. During this period he withdrew large amounts from the church account for personal use. From 2010 onwards, the defendant’s wife acted as treasurer. During this time there were also irregularities The irregularities also concerned two other legal entities (connected to the church) for which the defendant also acted as treasurer. After an investigation it was found that the fraud amounted to over €800,000.

Is the wife liable as director/officer?

In the proceedings the Mennonite Church based its claim on the argument that the treasurer and his wife are jointly and severally liable for unlawful acts. The court is quick to rule about the treasurer: he acknowledged some of the withdrawals, so it is clear that he acted unlawfully. There is only discussion about the extent of the unlawful withdrawals.

In case of the wife, matters are somewhat more complicated. The Mennonite Church holds the wife liable based on directors’ and officers’ liability, pursuant to article 2:9 of the (former) Civil Code, for the period that she acted as treasurer. Based on this article each director/officer is responsible towards the legal entity to properly perform his duties.

Director/officer liable for serious and personal blame

For any liability pursuant to article 2:9 of the Civil Code there is the requirement that the director/officer can be seriously blamed for this. The court points out that if there is a board of management with more than one member, any division of duties between the board members does not negate the fact that the general policy of a legal entity, specifically including the financial policy, is an issue of the whole board: each director/officer is responsible for this.

Court: wife failed in her management duties!

The court finds that the wife failed to adequately carry out her management duties and as treasurer failed to adequately acknowledge the risk of irregularities and withdrawals. She failed to adequately supervise PIN withdrawals, money transfers and current account transactions. She can seriously be blamed for this personally. Also, she simply did not do enough to prevent risks and limit the consequences of those risks.

The wife must have known about the fraud

The court finds that the wife must have known that her husband was conducting inexplicable transactions where money was channelled between the various legal entities and ended up in his pocket. A telling example is the PIN payment to the account of the Mennonite Church of over €1.300 to a hotel in the ski resort Engelberg. The defendant was on holiday there with his wife at that time. Also, as treasurer the wife should at least have asked questions when her husband’s private credit card was paid off from the church account. The court finds the wife jointly and severally liable for compensation of the loss caused by her husband.