Shareholder fraud accusations surface when a corporation’s employees are believed to have misrepresented or withheld information with the intent to deceive a company’s shareholders (either to retain them or attract new ones). Shareholder fraud allegations generally arise out of the prosecuting agent’s belief that the organization incorrectly reported its costs, expenses, and quarterly profits, or that one of the following occurred in excess in the company: corporate waste, mismanagement, or corruption that diminished shareholder equity.
Once these illegal actions cause a drop in the value of the corporation's stock, the shareholders may sue the company for money lost. The corporation can also be faced with an SEC investigation and possible federal charges.
However, in the event of a shareholder derivative action (a lawsuit initiated by any shareholder to protect and benefit the interest of the corporation as a whole, and thereby all shareholders), the company occupies a dual position due to its role as both the real party plaintiff as well as the nominal party defendant. While an adversarial relationship still exists between the shareholder-plaintiff and the management (even when the alleged wrongdoer is a third party), neither can recover from the other because both parties are presumed to be equally at fault.
Under the second Bush administration, prison time has been lengthened for shareholder fraud convictions, and SEC Investigation of suspicious activities has been intensified. Yet the prosecution for these cases generally relies on "paper witnesses", which can be less than clear and convincing evidence when presented to a jury. The Blanch Law Firm has extensive experience in defending clients against shareholder fraud accusations at trial, as well as resolving such matters before a courtroom door is even opened.
Alleged fraud is often nothing but a complex business strategy that was, unfortunately, not successful. If you are in this position Contact one of the Blanch Law Firm's Securities Fraud Attorneys today by calling 212-736-3900. The initial consultation is free, confidential, and the best move you can make for yourself.