Juan Monteverde on the Unexpected Costs of Corporate Fraud

Fraud

Corporate fraud is usually measured with dollar signs attached, but Juan Monteverde explains the true costs can run much deeper. 

NEW YORK CITY, NEW YORK — Corporate fraud is a serious crime with both financial and criminal repercussions for individuals at fault. While news coverage may frequently focus on convictions of executives who are not above the law, attorneys like Juan Monteverde know the real costs of fraud extend beyond the splash of an initial headline, past corporate losses, and even past settlement amounts.

These consequences impact the lives of major investors and those who are investing more casually or via a 401(k) or health savings account. The ripple effect of a major loss can impact the retirement age and so much more for these individuals and also impact the corporation’s workforce.

Juan Monteverde on intangible costs

Impact on long-term trust for shareholders

For many shareholders, an initial announcement of corporate fraud represents a breach of trust. Even if only one person was a bad actor in a given situation, overall confidence in a corporation is shaken. Whether theft occurred blatantly and was identified quickly or was hidden for years and not discovered due to a lack of oversight, shareholders rely on a company to protect their investments.

It’s also true that when a theft is only a small portion of corporate revenue, no one is above the law, and the fraud and subsequent legal actions send ripples through the stock market and lead to losses. As a prosecution or legal action continues, each subsequent filing or court appearance can cause another wave. Over time, these little ripples can seriously erode the value of a stock. Some shareholders may opt to sell at a loss.

Reputations are ruined

For some companies, public trust is never restored, and stocks may never recover. Some businesses may rebrand after an incident and attempt to rebuild, but this scenario also requires losing any name recognition of the former company and other intangible assets.

Juan Monteverde reports that this impacts employees at a firm who may not have been involved in the fraud as they search for new careers and limits their ability to grow at the company. While past actions for corporate fraud demonstrate no one is above the law, there are always many innocent victims of the fraud who never receive full restoration.

Daily life is changed

Meanwhile, shareholders who opt to ride out a scandal may find it takes years to recover value or that they never do.

When this happens to a smaller investor or someone investing toward retirement, there may not be years to recover, and retirement plans are altered due to corporate fraud. Quality of life can be lessened and even health may be negatively impacted due to stress or, more tangibly, due to the depletion of stock value when assets in a health savings account are invested in the company.