The OM is married to a very controlling spouse. She apparently monitors his every move
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She must not be monitoring every move or he wouldn't have been able to have an affair with your wife, right? How do you know she is 'controlling'? Is this what your WW has told you? You understand that waywards are notorious liars, correct?
My wife has always had issues with self esteem and this would ruin her personal self image.
So you're going to hide the very actions that SHE chose to commit in order to help her poor little fragile self-esteem? Don't you think she tanked
herself by behaving immorally? If she had behaved in an upright fashion her self esteem would be just fine. You are enabling her, sir. This will come back to bite you firmly on the butt.
Given her history with depression, I would seriously question her ability to survive...
Has she been hospitalized for long periods of time in mental or psychiatric institutions for this depression? What meds is she on?
I realize that not doing so would make it easier for the affair to go "underground".
Here's one thing I am sorry to confirm to you right now: the affair hasn't ended. It has already gone underground. They are still working together. It's the oldest trick in the book for waywards who work together: "Pinky swear! It's over! We can work together but we won't let it go any farther than that! We'll only talk business!" Don't buy that for one second.
But, are there times in which it is just better to "not tell"?
Only if you don't mind the affair continuing. In any event, the OM's poor wife needs to know what her hound-dog husband is up to, regardless of whether or not you don't mind the two affairees continuing their affair while they work together.