When moving up within a company, you often gain new opportunities that can really pay off if you are smart.

What would you do if the owner of a company asked you to take some of his personal money and invest it, but then when he wanted to cash out, he refused to give you the percentage of profits that he had agreed to?

That is what happened to the tech worker in this story, but in the end, it worked in his favor!

Let’s see what happened.

UPDATE: Short me $70,000 in Violation of our Written Agreement? It’ll Cost you $1.8 million.

BACKGROUND:

A year out of school in the early-1990’s, I procured a job as a business analyst for a large, family-owned tech company.

This business was located in the booming heart of technology at the time and was very profitable.

As tech took off over the next decade, the company thrived and remained family-owned.

What was a rich family and company became exceedingly wealthy with a valuation/net worth in the high 9/low 10-figures.

This employee thinks the company could’ve done even better.

The family that owned it was quite neurotic, very moody and had a reputation as very ruthless (greedy) when it came to financing, deal-making, employees, etc.

I truly believe this is what held them back from ultimately becoming a household name as a company.

As I progressed in the company, I gained more and more face time with the owners.

Sounds like a great opportunity.

I worked on some projects directly with ownership that really paid off and gained me even greater access to their inner circle.

Now, like a lot of people at the time and particularly those who worked in tech, I was heavily invested in tech stocks.

I discussed some of my investments and gains with ownership as casual conversation, though investing had nothing to do with my role in the company.

That changed in 1999.

That is until one day in late-1999 when the owner came to me and asked me if I would invest some of his personal money.

He wanted me to take big risks to see if they would pay off using 1 million dollars of his personal money.

I was a bit hesitant, but still being in my late-20’s and wanting to prove myself, I said I would.

I asked for a written agreement where they acknowledged this wasn’t my role in the company, was a personal matter between the owner and me, and to document my compensation for this side arrangement (20% of all profits).

He had a feeling about which tech companies were weak.

Around this same time and by working in the industry I started to notice the weakness associated with a lot of tech companies.

They just weren’t living up to their hype and stock price and some seemed like they were starting to run out of money.

I had no inside information, just a strong sense of which companies were struggling based on my work in the business.

He used his assumption to his advantage.

Based on this sense I started using both my money and the owners money to short tech companies just after the New Year in 2000.

For anyone unfamiliar with shorting, it means if the value of a stock decreases, the value of the investment increases.

I had a few long positions, but my overall position was very short.

Using leverage is very risky indeed.

Since the owner wanted big risk and big reward, I used his money and obtained leverage or margin from the financial institution where I maintained both his and my trading accounts.

The accounts were separate, but both under my name (again, I documented this and gained consent).

Well, both my account and his suffered some moderate losses in the first two months of 2000 before the bubble began to burst and both accounts, but his in particular, began to skyrocket.

Things weren’t looking good.

OWNERSHIP’S PETTINESS

In June, the company began to suffer a downturn.

We were still profitable, but since we provided tech services and products we were not immune to weakness in the broader market.

I had not informed the owner of my short strategy.

He came to me one day and asked how his money was doing, saying he suspected it was way down like the general market.

The owner was pleasantly surprised.

To his surprise, I informed him that while we still had some money tied up in options (puts) and shorts, but based on the positions I had closed, there was $1.35 million in cash sitting in the account that belonged to him.

Again, I still had a bunch of open positions which, if memory serves, were worth about a million on that date, but the positions I had closed had yielded $1.35 million in cash just sitting in his account (which was in my name).

The owner, either through ignorance or lack of attention, said “Great, $1.35 million. Fantastic work in this down market. Will you please wire it to me?”

That seems very reasonable.

I responded that I would, but would be taking my 20% of the $350,000 profit, or $70,000, before wiring him the $280,000.

I also reminded him I still had open positions that had yet to pay off or close, but I didn’t state the amount.

He, once again, appeared not to understand or comprehend the open positions statement, but instead totally focused on and became incensed about my rightful claim for $70,000.

He went on and on about how times were tough, I should be grateful for a job, particularly at my young age, and the entire $350,000 was necessary for him and the company.

He knew the owner wasn’t being fair.

I knew this wasn’t true based on my position within the company.

Worse, this was my first time personally experiencing the greedy and corrupt nature that served as the basis for ownership’s reputation.

THE REVENGE

Now comes the revenge.

He still had some of the owner’s money.

Since, after two separate conversations, the owner didn’t seem to grasp that the open positions would yield at least some income, and thus additional profit, I decided not to mention it again.

I sent him back the entire $1.35 million and continued to manage the open positions to the best of my ability.

And here’s the kicker, the owner never brought it up again.

How could he be so stupid?

He seemed to think the $1.35 million payment was the entire value of the account and never understood or remembered that open positions still existed.

He never asked for records, tax documents or any time of audit or financials.

Given the fact that he was dishonest with me, I didn’t feel the need to disabuse him of that notion.

He ended up with a huge payday!

Ultimately, after a bit more net gain, I covered all of the shorts and exercised all of the options (puts in this case) for an additional $1.8 million.

I worked for the company for 3 more years and owner never asked about it during my tenure, after I gave notice, or since.

I know it’s a bit crass and even shady, but given his dishonesty with me over the $70,000, I felt justified in keeping the additional $1.8 million.

I paid taxes on the gain (long term cap gain), and went on my way with a fantastic nest egg.

Nobody has asked about it since and I have only told the story to a few people (and even then only after the statute of limitations passed).

This guy really benefited from the opportunity.

The final ironic cherry on top of this sundae is that during my remaining 3 years I gained greater influence with ownership in position within the company because they considered me loyal for giving the $1.35 million back and not making too much of a stink about the $70,000 profit.

Little did they know I got the better of them.

The company eventually folded due to family disputes, but my understanding is that ownership walked away in very good financial position.

They likely could have been a much better and greater company had they not practiced the same dishonesty that they showed me with their vendors, clients and employees.

Wow, that is some life changing money, congratulations!

Read on to see what the people in the comments on Reddit have to say about this.

Waiting for that limit is important.

I guess it would be embezzlement.

This person makes a good point.

This person sees nothing wrong with what he did.

I’m jealous as well.

If true, this is a major win for this guy.

If you liked that story, check out this post about an oblivious CEO who tells a web developer to “act his wage”… and it results in 30% of the workforce being laid off.