Legal Question in Securities Law in California

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A fortune 500 CFO admits to having deliberately treated $4 billion in operating expenses as assets, thereby allowing the corporation to show profits instead of losses, The auditor never detected this. The corps stock dropped 95% and bond covenants related to billions in debt are breached. At its peak price last year, the CFO sold stock acquired through stock options for $15 million, generating a $10 million gain.

What provision(s) of the securities law will probably be the basis for a class-action lawsuit by stockholders?

Asked on 10/01/11, 1:40 pm

2 Answers from Attorneys

Daniel Bakondi The Law Office of Daniel Bakondi

I am the right attorney to address this issue. There would be nearly a dozen separate causes of action, both securities specific, and others. I currently have several cases this large pending. My law firm focuses on securities fraud, and specifically investment losses due to material omissions and misrepresentations, and pursues such matters in both litigation and arbitration. Please send me an email with your contact info and let me know when you will be available for a discussion. You may check out my website for more info.


Daniel Bakondi, Esq.

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Answered on 10/01/11, 9:02 pm

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

We don't answer law-school type hypothetical questions. Further, I have no idea how operating expenses could be treated as assets, any more than sales could be treated as inventory. They are unrelated accounting concepts, not susceptible to the type of fraudulent mistreatment you propose.

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Answered on 10/01/11, 9:02 pm

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