Clients – CEOs, officers, directors, and senior executives retain Sbaiti & Company to handle Director and Officer Liability matters for cases of:
- Securities Fraud
- False Claims Act
- SEC Actions
- FDA Investigations
- DOJ Prosecutions
- Qui Tam Actions
- IRS Claims
Sbaiti & Company has been able to successfully navigate the complex waters surrounding D&O Insurance policies and their coverage limitations and exclusions, balanced with resolving the underlying matter giving rise to the potential director or officer liability.
Two Threatening Trends
Private Lawsuits Naming Officers, Directors and Senior Executives are on the Rise.
We have noted that more and more often, CEOs, Directors, Officers, and Senior Executives are being named in lawsuits for personal liability. Our own analysis of the trend revealed that among 1000 lawsuits filed under the federal or state securities laws, almost 70% of them named one or more senior executives. And of 1000 matters analyzed alleging breaches of contract, 45% of them named one or more senior executives, officers or directors.
While typically, an officer, director or senior executive cannot be liable for their company’s contracts, they can sometimes be liable for their own intentional or reckless tortious behavior (depending on the state–for example, in New York, you can be liable for your own fraud, even if committed on behalf of the company). Sorting it all out is often messy and time-consuming — two things that the other side is counting on. That is why you have to be prepared.
Government Investigations, Civil Enforcement Actions and Criminal Prosecutions of Directors, Officers and Senior Executives Are Also On the Rise.
Since the financial crisis of 2008, U.S. government agencies have been under attack for allowing the various violations to go undetected and for allowing the perpetrators to go unpunished. This has resulted in a response from federal agencies to take aggressive and often preemptive actions and zealous prosecutorial stances. Fiscal Year 2016 was a banner year for government investigations, civil enforcement actions according to statistics released by the SEC, CFTC, DOJ and IRS. The Securities Exchange Commission and the Internal Revenue Service are now the two most active agencies in terms of issuing pre-suit subpoenas, often called civil investigative demands (CIDs), and in initiating civil enforcement actions (the equivalent of an agency lawsuit) against Directors, Officers and and Senior Executives. Overall, criminal prosecutions also saw an uptick. If the agency directed actions weren’t enough, since 2008, there have been over 4000 false-claims act, Qui-tam actions filed against American businesses by individuals, which often brings the government in as well.
Sometimes the Best Defense is a Good Offense
Complex lawsuits, civil enforcement actions and criminal prosecutions require the analysis–and understanding–of sophisticated interplays between often obscure and ambiguous facts, arcane legal standards, and complex regulations. Going up against any of the federal agencies means you have to have someone on your side who will do more than simply go through the paces, you will need someone who will fight relentlessly to win for you and go further than merely denying the allegations. Federal agencies often recruit the Department of Justice to provide logistical assistance and manpower to these investigations and enforcement actions, while the DOJ is the only agency able to bring criminal prosecutions for violations of federal law. The DOJ is the single largest law firm in the world with six times as many lawyers as the largest private law firm in the world. Similarly, you have to be ready to fight whenever you have been named in a lawsuit, especially if you are the officer, director or executive of a publicly traded company.