US Lawyers for Securities and Investment Fraud
Deception can come in many forms. Shareholders and the investing public are protected from corporate deception that often appears as materially false or misleading statements by numerous state and federal laws. These laws allow investors to recover investment losses caused by the purchase of shares and stock at artificially inflated prices as a result of fraudulent statements or the wrongful concealment of material information by officers and directors of a corporation.
Perhaps one of the most well-known examples of securities fraud involved the Houston, Texas energy company Enron. By misrepresenting company financials and allowing its executive officers to not only conceal information from shareholders and potential investors but encourage them to invest, Enron violated numerous federal and state laws. In fact, the Enron scandal provided inspiration for the creation of the Sarbanes-Oxley Act of 2002. This act provides standards for corporations with respect to their financial reporting and accounting practices, it also includes provisions for criminal penalties for violators.
Ponzi schemes are another type of investment fraud. A notable example would be the activities of Bernie Madoff, a Wall Street investment adviser, and financier, who swindled thousands of investors out of billions of dollars. In 2009, Madoff pled guilty to 11 federal felonies for his part in defrauding investors of their savings. A Ponzi scheme typically promises high rates of returns to lure investors. Rather than invest the money into securities, funds from newer investors are used to pay back earlier investors.
Derivative lawsuits involve the impact that corporate executives can have on shareholder value. A recent example of a derivative class action is the lawsuit that was filed against BP PLC and 15 individual directors and officers. On April 20, 2010, an explosion occurred at the Deepwater Horizon oil rig in the Gulf of Mexico. As a result of the explosion, millions of barrels of crude oil gushed into the Gulf, which had a devastating impact on the environment as well as the economy. BP’s shareholders allege that the negligent actions and disregard for the safety of the operation of the Deepwater Horizon drilling rig led to great financial and reputational harm for the company.
State securities laws generally govern the relationship between brokers and their clients, and protect investors against unsuitable purchases, unnecessary active trading (“churning”), and false and misleading statements. State laws also permit shareholders to challenge the actions of officers and directors in the name of the corporation (“shareholder derivative suits”), and to contest or seek damages caused by the merger or sale of corporate assets that are self-serving or breach the fiduciary duties of directors.
Indianapolis Fraud Attorneys Cohen & Malad, LLP have brought many class actions and derivative actions to protect investors from securities fraud and corporate mismanagement. Our attorneys have prosecuted cases seeking damages for the false public statements of corporations, failures to disclose critical information affecting share prices, self-serving corporate mergers, acquisitions, and “going private” transactions, as well as Ponzi schemes and other unscrupulous and fraudulent broker activities. Contact us today if you would like to discuss a potential securities or investment fraud issue.