The government is suing your company for securities fraud, and your name is on the charge sheet. What do you do?
Know your rights
In any criminal case, it is essential to remember that the country’s laws give you rights that you should use when necessary. Among these are your right to remain silent and a legal counsel.
Remember that your company may not currently act in your best interests, and their offer to provide you counsel may not be to your advantage.
New Jersey’s tort laws
While it is generally accepted that company officers and employees are not liable for the corporation’s liabilities, New Jersey laws make an exception for intentional tort. This is known as the “tort participation theory,” where an officer or employee of the company commits or directs the fraud.
The New Jersey Consumer Fraud Act is extensive in defining corporate fraud. An officer or employee does not need to commit the fraudulent act directly. An act of omission or failing to stop the scam despite knowledge of it can already be grounds for liability.
Ignorance is not a defense
Fiduciary duty requires company officers and employees to exercise the utmost diligence in preventing financial misconduct and fraud. You cannot claim ignorance if your job or duties put you in the sphere of knowledge of the crime. The law assumes that you have practiced due diligence and, in failing to do so, are liable for negligent tort.
That said, if you are genuinely innocent of financial misconduct or fraud, your liability may be limited the more you can prove you had the least culpability in the crime. It is best to seek legal advice to help you mount a credible defense.