Employees from hell: Turncoat who tries to take over

Terrifying tales of wicked workers and tips on how to avoid them.

By Phaedra Hise, FSB contributor

(FSB Magazine) -- When Ima Boss started her small service business in the Pacific Northwest a few years ago, she brought Benedict Arnold onboard to focus on sales and marketing. (Names and identifying details have been changed throughout this article.) Arnold went on to become Boss's second-in-command in building the company. "He was very charming," Boss says, "fun to work with, someone who did a lot of innovative stuff."

About a year into the startup, Boss started noticing that Arnold was working a little too independently. He was expensing meals and books that didn't seem to be work-related. He took frequent two- to three-hour lunches and was unapologetically late for important meetings.

"Whenever I'd get close to [disciplining him], he would do something really amazing," Boss remembers. "He would bring in new clients or stay up all night and put together a great proposal. I always said he was the best and worst employee I had. I didn't realize how prophetic that was."

Boss had begun documenting Arnold's issues in writing and finally sent him a note asking to meet and discuss the problems. Then she went on a two-day trip, and when she returned Arnold dropped his bomb.

He asked to meet with her, she remembers. "He told me that I needed to step down," she says, "and he or someone else needed to take over the company." Otherwise, Arnold said, her employees and investors would abandon the company.

Unbeknown to her, Arnold had spent the past year convincing many among the firm's 17 employees that Boss had to go. "He had a well-thought-out process," she discovered later by reading depositions. "He worked on each person in a different way to undermine their trust in me."

Primarily, Arnold insinuated that Boss was crazy and that he was the only one who could keep her unpredictable temper under control. He told key managers that there were legal issues regarding the way the company had been set up and warned that they could be sued. "It was a brilliant plan," Boss admits. "We were all really busy, and nobody compared stories." Boss refused to leave, but Arnold didn't give up. He met with a financier who had made the company a million-dollar loan and hinted that the books were cooked.

When she and her attorney fired Arnold a few weeks later, he simply chuckled and quipped, "Sounds like a plan." On his computer, she found a detailed journal logging "evidence" he had gathered about how Boss was allegedly mismanaging the company and logs of his clandestine meetings and conversations.

"My attorneys said I had about a 99 percent chance of winning in court," Boss says. "But I decided that I really needed to heal the company, and I couldn't be in both places at once." She didn't sue.

Instead, for the next few months Boss focused on regaining the trust of her employees and investors. "The people involved were so upset - they felt so manipulated and deceived," Boss recalls. "People went into therapy." The million-dollar lender called in his loan, but the only employee who quit was Arnold's friend, the operations manager. "I had people writing me letters of apology," Boss says.

"I had to work night and day just to keep the company on a stable road and knit everyone back together," she says. "I did that, and I'm proud of it. A lot of companies would have just crumbled and blown up." Two years later the company is profitable and growing.

Today Arnold is out raising capital for a startup venture. He has written to Boss, sending congratulations on her company's success. Boss knows that Arnold still lists her on his résumé, because she has received calls for references; she simply responds that she would not rehire him. "He has no guilt whatsoever," she has concluded.

Boss knows how easy it is for fast-growth-company CEOs to let employee issues ride, but she doesn't make that mistake anymore. Now, as soon as she gets a hint that there may be a problem, she confronts her workers directly. "Just because someone brings in a lot of business or they're funny or charming, don't let that convince you that the problems are okay."

Are you seeing an increase in problem employees? What types of bad behavior have you seen at your company? How have you managed difficult workers? Let us know what your experiences have been by writing to fsb_mail@timeinc.com.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.