The Challenge
A business owner and his partners had signed a memorandum of understanding (MOU) setting out how money from their business arrangement would be shared. For a time, everyone operated under it. Then the relationship broke down, and the payments stopped.
When our client sought what he was owed, his former partners took the position that the MOU had never been a valid, binding agreement. If they were right, he had no claim.
His counsel needed two things from a forensic accountant. First, evidence of how the partners had actually behaved under the MOU, not just what they now said about it. Second, a defensible calculation of everything owed under its terms.
Our Approach
We let the partners' own financial records tell the story. Using the business's general ledger, bank statements, and payment records, we traced every transaction connected to the arrangement from the date the MOU was signed.
We then compared what the records showed against what the MOU required, line by line and period by period. Where the agreement called for a payment, allocation, or split, we tested whether the books reflected it, and in what amount.
We also pinpointed the moment the pattern changed: when the payments the MOU required stopped, and what was happening in the business at that time.
Finally, we applied the MOU's terms to the full period at issue and calculated the amounts owed to our client, with supporting schedules that tied every figure back to a source document.
The Findings
- The partners' conduct matched the agreement. For an extended period, the financial records showed payments and allocations consistent with the MOU's terms. The partners weren't just aware of the agreement; they were following it.
- The departure was deliberate. Performance under the MOU didn't fade or become confused. It stopped at a clear point, once continuing to pay no longer served the partners' interests.
- The amounts owed were substantial and documented. Applying the MOU to the full period produced a calculation of the unpaid amounts owed to our client, supported by schedules that opposing counsel could check against the records.
The Outcome
The partners' own books undercut their defense. Counsel used the evidence of how they had performed under the MOU to support the argument that the agreement was binding, and used our calculation to establish what was owed. Our client was awarded a multi-million-dollar judgment.
Key Takeaway
What people do with money often says more than what they later claim about an agreement. When a partner insists a deal "never really existed," the general ledger and bank records can show whether they acted as if it did. Economic damages analysis can document that history and turn the agreement's terms into a precise, defensible figure.
If your client's partners have stopped honoring an informal or disputed agreement, the proof may already be in their own records, and a forensic accountant for business disputes can find it.