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Misappropriation of Corporate Funds

Corporate officers and directors are not permitted to intentionally and illegally use corporate funds for personal gain or any other unauthorized purpose. Such misappropriation can even result in criminal prosecution. Furthermore, companies are responsible for maintaining internal controls to detect and prevent such misappropriation

Any false or misleading statements regarding misappropriation or a company’s internal controls may give rise to a claim of securities fraud. For example, failure to disclose weaknesses in the company’s internal controls, or false reassurances of the the quality of a company’s internal controls can form the basis of a fraud claim.

In addition, a company must report misappropriated funds as part of the offending officer’s compensation. As such, statements about the amount and type of compensation are false and misleading if they fail to account for the funds which were misappropriated, and such false statements may give rise to a claim for securities fraud

Moreover, when a company’s executives misappropriated corporate funds, management’s positive statements regarding the company’s or its management’s honesty or integrity may be false. Such statements may too give rise to a securities fraud claim.

Another possible action to take against insiders that misappropriated funds is the derivative lawsuit. The company’s board members have a duty to prevent corporate officers and other directors from needlessly harming the corporation. A derivative suit allows a shareholder who meets certain requirements to force the corporation to act against officers or directors who are harming the corporation.

To file a derivative suit, you must meet specific legal requirements. For example, you must have been a shareholder when the acts causing harm to the corporation occurred, or you must have obtained your stock by operation of law from someone who was. In addition, you must be able to fairly and adequately represent the corporation in enforcing its rights.

The business litigation attorneys at GPM have the experience needed to effectively prosecute shareholder actions against companies whose officers and directors engaged in misappropriation. Contact the securities fraud attorneys at GPM if you suspect misappropriation has occurred to consult an experienced attorney who can fully explain your options.

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“And without question, the Court is of the opinion that the value of benefit that’s been conferred to the class is extremely sizable and that this Court is certainly aware that the skill and efficiency of plaintiff’s counsel is what attributed to this settlement, and they are learned securities counsel. The Court is mindful of that, and as a result they were able to sort of weed their way through the complex issues in this case, and also to bring this about — bring about a settlement rather in short order as these matters go. So the Court certainly attributes that to counsel’s skill and efficiency, as well as the ability to work with the adversaries in this matter.”

–Hon. Susan D. Wigention, U.S. District Judge, District of New Jersey

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–Hon. Dickran M. Tevrizian (Ret.), U.S. District Court Judge, Central District of California

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