Varsity Blues: Lessons for California Employers

All employers should be prepared and plan ahead for unexpected illicit behavior of their employees. The criminal detention of employees, whether related to their jobs or not, creates disturbances in the workplace that planning can minimize. To read how your company can be prepared for such an event, read the article CDF's Los Angeles Managing Partner Dan M. Forman authored on "Varsity Blues: Lessons for California Employers" for the Daily Journal Corp.

Excerpt:  The sophisticated educational institutions at the heart of the Varsity Blues college admissions scandal set up some protocols to guard against improper influence from commercial college preparation companies by precluding contact between such organizations and their admissions’ departments. However, the Varsity Blues scheme created a self-described “side door” to get around such restrictions. According to the United States attorney’s office, current and former coaches from Georgetown, Stanford, UCLA, the University of San Diego, USC, University of Texas, Wake Forest and Yale were identified as weak links for bribery to gain admission of high-paying clients’ children as athletic recruits.

Stanford University’s former sailing coach, John Vandemoer, became the first person sentenced in the Varsity Blues’ scandal. He was sentenced to one day of prison (which had been served), six months of home confinement, and two years of supervised release, along with a $10,000 fine. The court cited Vandemoer’s decision to provide the bribe money to the sailing program, instead of lining his pockets, as one of the reasons for leniency. The U.S. attorney sought a 13-month prison term that was to be followed by one year of supervised release."

Stanford continues to struggle over what to do with over $700,000 of funds illicitly provided to its sailing program. Stanford’s president announced the termination of Vandemoer’s employment in March and assured the public that “we will ensure that Stanford will not benefit from the monies that were contributed to the Stanford sailing program as part of this fraudulent activity. We are working to determine the most appropriate way to redirect the funds to an entity unaffiliated with Stanford, consistent with the regulations governing such gifts and in cooperation with the government.”

The university is undertaking additional caution, no doubt, as the funds were provided to its programs compared to an employee who has lined his or her own pockets. An employee who embezzles, skims, dips or fraudulently takes their employer’s money (or opportunities) violates a common law duty of loyalty to their employer. That duty means that employees must turn over any benefit they gain due to their employment to their employer. In California, that common law duty is codified as Labor Code Section 2860: “Everything which an employee acquires by virtue of his employment, except the compensation which is due to him from his employer, belongs to the employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.”

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