So often we see bogus "shareholder" lawsuits against a
So often we see bogus "shareholder" lawsuits against a company. We have seen this with CYDY -- law firms putting out press releases that they are seeking a lead plaintiff for a suit against a company, alleging all kinds of misdeeds. Then, if they are able to find a plaintiff (not uncommonly, someone who owns just a small number of shares), they company being sued often pays them a few hundred thousand bucks to withdraw the suit. A form of "greenmail."
Now, let's think about this. What if a group of people mounts a proxy battle, making misstatements and deceptive claims, to convince shareholders to let them get control of a company. Don't you think that when the new management makes its very first misstep or self-dealing -- for instance buying a company they pledged NOT to buy, or paying that company excessive fees -- that there would be some REAL shareholders with a REAL lawsuit against the company? I would think that the shareholders might be able to "pierce the corporate veil" -- the protection that directors have, hiding behind the company's incorporated status -- to sue the directors AS INDIVIDUALS as well as suing the corporation, because the shareholders could allege that the acts of deception that put them into power occurred BEFORE they were directors. Therefore, they should be fair game for a suit alleging conspiracy to defraud investors by acts from before their corporate position, as well as for their acts as directors.
Yoo hoo, 13-D, do you really think that the angry shareholders here are going to roll over and not file a legitimate shareholders' suit if you manage to fool enough suckers into giving you power, and you then do things that are against our best interests?
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