Our family is in a corner

[Emperor Duncan]

I’ve been impressed with the guidance on this site, so I'm sharing my story.

My wife signed a letter of intent for her job as a family medicine doctor a decade ago, which specifically stated the benefit of a retirement plan as part of her employment package. After ten years without receiving any retirement benefits, she was promised part ownership of her medical practice. We were ecstatic. We both signed agreements under the assurance that this was risk-free and would benefit us from the eventual sale of the practice. She was verbally promised frequent dividends to pay down her ownership loan.

However, we later discovered that the medical practice was only profitable because it failed to repay federal COVID loans, and the company had actually been incurring debt. We have received no dividends. Now, my wife is part owner of a massive debt, nearly more than the equity of our home. If she leaves her job, we lose everything—our home, our two young children’s college funds. Staying has resulted in the realities of mismanagement: significant pay cuts, additional responsibilities, and denied earned paid time off to offset company debt. Her salary, along with another owner's, has been cut by 20%, while two new doctors, just out of residency, have been hired at double her salary.

She is increasingly burdened with more tasks because she cannot resign under the threat of having to pay off the debt, while work conditions worsen. Between the empty promise of retirement benefits and the reduced salary, her ownership loan accrues interest without any of the promised dividends or reliable salary to pay it down. Our family is getting deeper and deeper in debt with absolutely nothing to show for it. It seems we have been conned into supporting something her boss owns, and possibly their lifestyle, from which we derive no tangible benefit. I cannot fathom that we owe $200K+ on something we cannot touch, experience, or benefit from.

I was frugal in my early years, planning for our children’s college fund and early retirement as an engineer, but all of this fiscally responsible planning is being wiped out due to her current employer's mismanagement. What can we do? We fear bankruptcy and worse. Any guidance is greatly appreciated.

Thank you!

-Desperate in Denver

[ratherbereading]

Someone else can chime in but this is beyond the scope of this board (at least mine) - sounds like you need a good attorney to address this.  Bankruptcy isn't the end of the world; you can recover from that. Best of luck. 

[Bill Presson]

Agree with the above. You also should have had an attorney and CPA involved either the initial agreement and the acquisition agreement. Seems like those were big misses. 

[RatherBeGolfing]

I agree with @ratherbereading and @Bill Presson.  This is way beyond what can be addressed on a message board, OP needs to engage an attorney ASAP.

[Emperor Duncan]

Thank you all. Yes, a tax attorney reviewed the initial agreement without any suggestions. Bill mentioned a CPA; finances were profitable at the time, but the practice had not repaid COVID loans, leading to the debt realization after the fact.

I assume this is an employment law attorney for the work conditions. Does the promise of benefits in the initial letter of intent to hire, but not providing those benefits, fall within an employment lawyer's expertise? Would they also specialize in contracts related to ownership, or is there a specific type of attorney better suited for this scenario?

[Paul I]

I, too, agree that you need to hire an attorney to work with you.

Here are some things you can do now to facilitate the process.

• Gather every scrap of written documentation you have that is related to any agreement between your wife and the medical practice.  Preferably, the parties to each document and the date of each document are available.  Documentation includes letters, agreements, contracts, email, text messages...
• If there were oral promises, at least describe to the best of your knowledge who made the promises, when they were made, and who else may have known about them.
• Gather copies of your tax returns showing any income received from the business.  This includes all supporting documentation and schedules going back as far as available.
• Included copies of any information that may have been provided to your wife about the finances and financial condition of the practice.
• Prepare a timeline of events from her starting to work with the medical practice up to now.  In particular, was the offer of ownership made around the time the COVID loan was in default?
• With respect to the promised retirement plan, provide any information that show she was accruing a benefit.  In particular, have documentation if the offer of partial ownership was in place of the previously retirement benefits.
• Be prepared to respond to the question of why she did not ask about her retirement benefits earlier. 
• Gather similar documentation about the promised dividends.  Note that corporations pay dividends to shareholders.  Your wife should have documentation of the number of shares that she owns, and of how she acquired (or was given) those shares.

With this information in hand, schedule an interview with a reputable attorney from a reputable law firm to discuss your wife's case.  If you are not comfortable with how the discussion goes, approach another attorney or law firm.  You may wish to ask whether the attorney sees this as a likely case of employment law, or a case of fraud on the part of the other owners, or both. 

You commented that "if she leaves her job, we lose everything."  The attorney can provide some guidance to what extent, if at all, this may be true.  Depending on the terms of the agreements, walking away may be the better option.  You also need to be prepared in case the medical practice can force your wife out of the business.

Full disclosure - I am not an attorney and this is not legal advice.  I am sharing with you the kinds of steps I have seen others take when confronted with seemingly impossible situations.

You have a difficult and stressful road ahead.  You will need help to navigate the way forward.  Stay focused on the facts, get help, and may you find peace.

[Emperor Duncan]

Thank you, Paul. I appreciate you taking the time to lay out the initial steps for us. Having everything in place will make it easier to find the attorney who can help us navigate our options- and as you stated, better understand if this is employment law or something that may have been unlawful. This is uncharted territory for us, so we greatly appreciate your straightforward guidance!

Thank you again for the first steps, have a great week.