Corporate Fraud – How Corporations And Big Companies Lie About Their Financial Condition

frCorporate fraud refers to large organizations that deceive their investors, analysts and auditors about the real financial condition of a corporation. Corporate fraud results not only in financial losses of the investors, but also creates great potential damage to the U.S. economy.

Such fraud may be accomplished through:

  • manipulation of share prices
  • control of financial datafraud
  • artificially inflated financial performance
  • false indicators
  • different valuation measurements

Continue reading

Institutional Capital is Finding its Way Into Litigation Finance

 

A recent Wall Street Journal article entitled: Investors Put Up Millions of Dollars to Fund Lawsuits written by Jennifer Smith may spark further interest amongst investors into funding lawsuits.  The term most commonly used for this investment type is Litigation Finance but Litigation Funding, Legal Financing, Settlement Funding, Third Party Funding and Professional Funding are also used.

Legal Financing is the mechanism or process through which litigants (and even law firms) can finance their litigation or other legal costs through a third party funding company. These third party funding companies provide cash advances to litigants in exchange for a percentage share of the judgment or settlement. Since the advances are provided in the form of non-recourse loans, usury laws do not apply.

If the case proceeds to trial and the litigant loses, the third party funding company receives nothing and loses the funds they have invested in the case.  In other words, the investor assumes the full risk for their investment in the lawsuit and the litigant is not required to repay any of the invested capital if he case is lost.  Obviously the investor will only risk their capital if they believe the litigant to have very strong merits to their case.

In those situations where the plaintiff prevails in their litigation, the funder’s share of the settlement may be calculated from several factors:

  1. the sum of money involved;
  2. the length of time until recovery;
  3. the expected value of the plaintiff’s claim;and
  4. whether the claim settles, proceeds to trial, or is appealed.

Continue reading

Bank of America Profits are Affected by Legal Costs

Bank of America has reported profits have been hit by legal costs.

For the last three months to the end of September net income came in down at $340m. It used to be $6.2bn in the same period last year. The bank took a $1.6bn charge for litigation expenses.

The bank has already paid $2.4bn to settle a lawsuit that had been brought by shareholders who said they had been misled about the acquisition of Merrill Lynch by Bank of America.  The acquisition occurred during the financial crisis.

Shareholders argued that Bank of America made misleading statements concerning the financial health of the two banks. However, Bank of America claims it did nothing wrong.

Bank of America warned that it would be hit by a pre-tax loss of $1.9bn and an additional $800m in charges due to changes in the UK corporate tax rate.

The information was taken from the BBC News website. If you like to get more info, please, go to: http://www.bbc.co.uk/news/business-19979438