Monday, August 29, 2011

Stock Fraud and Its Effects

Of all the various types of fraud, perhaps none causes repercussions as dramatic as stock fraud.
Shares of Sino-Forest, as quoted over-the-counter on the Pink Sheets, closed Friday at $1.38, down 70%, on volume of more than 15 million. The stock closed at $18.64 on June 1, the day before Muddy Waters issued its rating. - http://www.thestreet.com/story/11232685/1/sino-forest-ceo-resigns-shares-suspended.html
The above quote refers to the effects of a research firm alleging that Toronto-based company had engaged in stock fraud. The CEO had voluntarily resigned, the stock price tumbled, and then trading of the stock was suspended simply because of fraud allegations. Nobody has been convicted of stock fraud and nothing has been proven conclusively, but the effects are obvious as they are significant.


Stock fraud poses a number of problems for a business and its employees, all at once. First, there are the obvious PR concerns of minimizing and controlling the impact of such an allegation. This also includes communicating with current customers, employees, suppliers, shareholders, and other stakeholders. In addition, the business needs to ready itself for the inevitable audit and investigation that are to result from the accusation.

Perhaps the most important aspect is ensuring the business has adequate legal representation. As an experienced Philadelphia stock fraud lawyer, Peter J. Scuderi has advised a number of businesses and individuals targeted in the ensuing investigations of stock fraud scandals. Although a trial may be months away, it is a smart decision to retain counsel well in advance. Protecting yourself and defending charges is more effective when you start right away.

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