Legal Question in Business Law in Georgia

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 corporation�s stock drops 95 percent and bond covenants related to billions in debt are breached. At its peak price last year, the CFO sold stock (acquired through options) for $15 million, generating a $10 million gain.

A. Why might the corporation have to file for bankruptcy protection?

B. What provisions of the securities law will probably be the basis for a class-action lawsuit by the stockholders?

C. Why will the 1995 act probably not stop a class-action lawsuit from proceeding to the discovery phase?

D. Why will the CFO be subject to criminal (as well as civil) securities sanctions?

E. Will the SEC likely ever allow the CFO to be an officer or director of a publicly traded corporation in the future?

F. Will the SEC allow the CFO to keep te $10 million gain on the stock?

G. What kind of civil penalties could the SEC impose on the CFO?


Asked on 6/04/11, 8:56 am

3 Answers from Attorneys
Scott Riddle Law Office of Scott B. Riddle, LLC

A business lawyer will be happy to answer your (old homework) questions for an hourly fee.

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Answered on 6/04/11, 8:59 am
Glen Ashman Ashman Law Office also dba Glen Ashman Attorney

You would need to retain a business attorney to analyze all the related documents. Obviously there is no way to analyze those online.

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Answered on 6/04/11, 1:36 pm
Kevin B. Murphy Franchise Foundations, APC

As a Franchise Attorney I agree with the other attorney answers. This is not a forum to answer homework assignments. Go to your local law library and do your own research. Or, consult with a good business or franchise attorney in your area for specific advice.

Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.

Franchise Foundations, a Professional Corporation

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Answered on 6/05/11, 8:32 am


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