Corporate fraud and malfeasance takes several forms and can injure shareholders in several ways. The most common type of wrongdoing is when a public company misrepresents its financial condition and artificially inflates the price of its stock. When the truth is revealed and the company’s actual financial condition is exposed, the stock price falls and investors suffer. In these situations, corporate insiders often profit from their knowledge of the adverse information by selling their shares before the truth is revealed to the market.
Since the passage of the federal securities laws, shareholders have suffered losses from significant periods of bad corporate behavior — not limited to isolated examples but often unfolding in patterns. This occurred most recently following the dot com bubble in the early 2000s, followed by the off-balance-sheet frauds of Enron and WorldCom, the stock option back-dating scandals and the financial crisis of 2008 and its record-breaking bankruptcies.
Throughout these episodes, the attorneys at Sarraf Gentile have represented shareholders and litigated securities violations across the country. RiskMetrics Group and Securities Class Action Services has recognized the firm as being among the top 50 law firms in the country involved in securities class action litigation.
It’s important to recognize that while the majority of investor-related litigation is conducted using the class action mechanism, certain shareholder rights claims can be litigated on behalf of the injured company in what’s known as a shareholder derivative lawsuit. These types of cases are brought by shareholders against the company’s directors and officers for acts and omissions that injured the company.