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By timestaff
December 23, 2009

Question: When our sister died ten years ago, my brother became the trustee of her five-year-old daughter’s trust. Drew invested Mandy’s money in a business he was starting, and Mandy received stock in return. The business folded this year, and now the stock is worthless. Shouldn’t Drew repay our niece the money he lost? He says what happened is nobody’s fault.

Answer: That’s just the way the investment cookie crumbles, is it? Drew’s probably also thinking that if his company had been the next Google, he’d be a hero for making Mandy rich.

Well, he’s right that a good outcome can obscure bad judgment. But he’s wrong to imagine that what happened to Mandy’s inheritance is nobody’s fault. It’s his fault. Moreover, your brother wasn’t just foolish or unlucky, he was unethical. First, instead of handling your niece’s money responsibly, he poured all of it into a single, untried business. If Drew either didn’t know enough or didn’t care enough to invest more wisely than that, he had an obligation to turn the job over to someone who did.

Worse, not only was Drew irresponsible, he engaged in self-dealing. That wasn’t just any business he put Mandy’s money in, it was his business. What could be a clearer conflict of interest?

If we had your brother’s photo to hang on our Money & Ethics Wall of Shame, we’d be putting it at least as close to Bernie Madoff’s as to Scrooge McDuck’s. The guy is unequivocally obligated to make Mandy whole. Pronto.

Questions? Email Money Magazine’s ethicists – authors of “Isn’t It Their Turn to Pick Up the Check?” (Free Press) – at FlemingandSchwarz@right-thing.net.

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The purpose of this disclosure is to explain how we make money without charging you for our content.

Our mission is to help people at any stage of life make smart financial decisions through research, reporting, reviews, recommendations, and tools.

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Our content is free because our partners pay us a referral fee if you click on links or call any of the phone numbers on our site. If you choose to interact with the content on our site, we will likely receive compensation. If you don't, we will not be compensated. Ultimately the choice is yours.

Opinions are our own and our editors and staff writers are instructed to maintain editorial integrity, but compensation along with in-depth research will determine where, how, and in what order they appear on the page.

To find out more about our editorial process and how we make money, click here.

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