National Clothesline

Let’s talk baseball for a minute. Taking performance enhancing drugs is cheating, but a certain amount of cheating is expected.

For example, if a pitcher can get away with using a scuffed ball to get more rotation on his curve ball, that’s OK. And even though a pitcher is not supposed to try to hit a batter with the ball, there are circumstances where throwing at a batter is expected and/or condoned.

In areas where cheating is not condoned, should ballplayers inform on ballplayers they know are cheating? They rarely do.

There is a certain satisfaction, however, watching a driver get a speeding ticket several minutes after blowing by you at 30 mph over the limit. But how many times have you driven faster than the speed limit, based on the urban legend that police do not give tickets until you are at least 10 mph over?

My only speeding ticket was for doing 48 in a 40, so I know better. Should we be calling 911 and reporting speeders?

In law school, we are taught that there is a fine line between tax evasion and tax avoidance. Both save you money, but only tax avoidance is legal. Tax evasion is a crime.

Amazingly, we are also taught in law school that while we cannot advise clients to break the law, we can advise clients of the likelihood of civil or criminal liability if they do so. It’s like me saying: “I can’t advise you to do 70 mph on the Interstate, but the likelihood of being given a ticket is very remote.”

In business, there are always companies that blur the distinction between efficient management and illegal activities that save money.

When one of those companies is your competitor, it gives that company an unfair advantage that may tempt you to (1) do the same thing or (2) turn him in.

We all know “the right thing to do,” but no one wants to have to choose between being a criminal and a “rat.” The polite term is “whistleblowing,” but everyone knows that “squealing, ratting, and being a stool pigeon” are the more common terms for reporting cheating.

Here’s a situation that confronted me in my early days writing for National Clothesline. I received a phone call from adrycleaner who was being threatened by an employee he just fired if he did not pay him $5,000. The threat was that if he did not pay, the employee would squeal to the IRS that the drycleaner had paid him under the table for two years.

I told the drycleaner that there were ways to get into compliance with the IRS and not give into the former employee’s extortion, but the drycleaner told me that all his employees were being paid something under the table. Yikes.

He paid the money, I’m sure. I told him that if he was unwilling to get into compliance with his remaining employees, he should at least stop giving under-the-table money to new hires.

That was many years ago, and I never heard from that drycleaner again.

I know what you are thinking, depending on your current payment practices. If you are skirting the law, you are hoping that no one ever rats you to the IRS. If you are not skirting the law, you hope that someone does rat out your non-compliant competitor. But should you?

First, you generally have no obligation to take action against a competitor you know is violating the law.

Second, finding the right government official to complain to or investigate is not easy, so it could take a lot of time to do so.

Third, there is no guarantee that you can remain anonymous, which is everyone’s wish when he “gets involved” in being a whistleblower. Unfortunately, this is a legal column, not one on ethics or civic responsibility.

Then again, business is business. You may not care that the coffee shop you like is paying waitresses under the table, but you do care if your customers go to a competitor to save 10 cents a shirt because the competitor saves money evading taxes.

My advice under those circumstances is to seek legal counsel who can decide if the conduct is, in fact, illegal, and possibly report the violation without disclosing your identity.

I strongly recommend seeing a lawyer to make sure you are not wrong in blowing the whistle. As you know, an investigation is very disruptive, and you yourself would not want to have to defend against claims that are baseless. In other words, act responsibly if you decide to do something that could cause a competitor to be investigated. Minimize the possibility that you will be sued for making a baseless claim.

I was once audited by the IRS, and I hated it. They owed me money, which I would have gladly given up to avoid having to put together all my records for an agent to review. So, I am very meticulous about taxes, hoping that the accountants I use for my business and the computer software I use for my personal return are protecting me. I know other people get away with tax evasion, but I’m not prepared to take the risk.

If you are someone who has knowingly violated tax laws, environmental laws, and other laws regulating your business, get good legal advice on how to avoid prosecution or liability, and how to come into compliance.

If you are someone who does not take undue chances, you do not have to suffer in silence while your competitors do. Seek advice, and if that advice is that they are breaking the law, you are well within your rights to take some action.

If you do, I’ll never call you a “rat.” I’ll call you a good citizen.