manager borrowed money, refused to repay it, then fired me

This is long but really outrageous. A reader writes:

I was fired from my job 3 months ago. The reason I was given was "due to personality conflicts with your supervisor," which was shocking, considering that we were actually were pretty close in the office. I had been there longer then her and anyone else, and I never had any conflicts with anyone throughout the duration of my employment. To the contrary, I had wonderful relationships with every single person.

A couple of weeks before my termination, I did go to HR for some assistance because my supervisor began asking to borrow money from me in late 2009, and she continued to constantly ask through out 2010. She was pressuring me so much that it got to the point that I was so uncomfortable at work that I felt obligated to loan her the money. 

The last time she borrowed money ($750), she agreed to pay it back by our next pay period because I told her that could only afford to loan it to her if I got it back by that specific date; she agreed. Well, that date came and she didn't pay me back. A week went by and she didn't mention anything. When I sent her a message asking her about the loan, she simply ignored it. At this point, not only was I in financial trouble because my bills were unpaid, but she began to be really hostile towards me. When I asked again that she at least pay me back half of the money, she said that she needed to check her account and she could probably give me $100. Well, after that reply there was NOTHING. No payback, no message or email, nothing. 

So, since she was refusing to pay me back, I went to our HR person (hesitantly, because they were actually friends outside of work, but I had no choice). I told HR what was going on, and by the immediate reaction I knew there was something else going on, but she did not disclose anything, obviously. She did, however, want to help me and said that she was going to have to talk to the owner of the company about this, which I said would be fine. Two weeks go by and nothing, I then go to HR and ask what was going on, and she said that the owner told her not to get involved and at this point it is getting even more weird in the office. So, HR redirects me to the owner of our company. 

A day or so later the owner calls me into his office and says that my supervisor was told to repay me immediately. Then he asks me about my work environment, so I tell him how she has been making me feel, etc. He then continues to say that he wants to resolved as I have been the longest employee there and she was wrong, etc. Then he shared that she had already been warned not to ask anyone in her "work -related" environment for money or loans. One week later, I finally get my money paid back and that Friday I also get fired. 

After I was fired, I was contacted by the mail carrier who delivered our daily mail, who I'd known since I began working there. He said he was shocked to find out that I was no longer there, and when I told him the reason for my termination, he revealed that my supervisor had asked him to borrow $4,000 and that he reported it to our company.

I never had even one incident with anyone in my company, there are no disciplinary actions in my personnel file at all whatsoever, and throughout this time I remained cordial and respectful to my supervisor as I simply needed my money because I was suffering financially. So how do I explain this to a prospective employer? I guess I am still in shock and I can't even come up with the words to articulate it.

Wow. First let's talk about this firing itself, because I have to think that you might have a wrongful discharge claim. I'm not a lawyer and I don't have all the facts about what happened, but if, for instance, your employee handbook says that you'll get a formal warning before being fired, and you weren't warned, that would be legally relevant. There are also some jurisdictions where you have a claim for wrongful discharge if you were fired in a way that violated the implied covenant of good faith and fair dealing. Any employment lawyers in the audience want to weigh in on the legal side of this?

Now, I'm not necessarily recommending that you explore an actual lawsuit (although you might have that option), because lawsuits are expensive, exhausting, and can take years. But I am recommending that you contact your old company (go to HR and the owner, not your old boss) and try to negotiate a very, very good severance package, based on how improperly they handled this -- including a sizable severance payment and an agreement about what the company will say about your tenure there and the reason for your departure. And you might want to have a lawyer help you with these negotiations, because the involvement of a lawyer sends an implicit "or else there's going to be a legal problem" message.

As a side note, it's interesting to speculate on what the hell this company was thinking. They're retaining a manager who apparently has a reputation for asking employees (and the postal carrier!) for loans and who ignored warnings to stop, and they've fired one of the employees she pressured for money without presenting a concrete performance-related reason. I'd love to know to what extent your manager's boss and/or HR were involved in the decision to fire you. My hunch is that (a) they aren't especially aware of employment law that might come into play here, and (b) they think firing a manager is a huge deal and they don't want to rock that boat, so they're willing to let her run wild all over everyone else (always a bad approach).

Anyway, let's answer your actual question, about what to tell prospective employers in interviews: Ideally, you'll have worked out an arrangement with your previous employer that requires them to say that you were a great employee and were driven out by a problem manager. In the interview itself, you can then say, "I made the mistake of loaning my manager a large amount of money, and it soured the relationship. It ultimately made things so uncomfortable that I ended up leaving as a result."

And to everyone else:  Loans in the workplace -- giving or receiving -- are not a good idea. Say no.