Malfeasance is a form of sabotage outright in which one of the parties to a contract commits an act that results in intentional harm. The party who suffers damage through malfeasance has the right to settlement in a civil suit. The process of proving malfeasance before the court of law is usually a challenge because the exact definition of the term is not always reached on.
Understanding Malfeasance
Corporate malfeasance is a term used to describe minor and major crimes committed by key officers or employees of the firm. The crime could involve deliberate acts that hurt the company or failing to carry out their duties or comply with applicable laws. Corporate misconduct can cause serious issues within an industry or even a nation’s economy. When the rate of corporate fraud rises, countries adopt new laws and adopt more preventative measuresto reduce the number of crimes that is occurring globally.
Someone who is harmed through malfeasance has the right to settlement in a civil suit but proving the malfeasance in the court of law is usually a challenge and may be time-consuming and costly.
Malfeasance shouldn’t be confused with misfeasance which refers to the practice of performing an any duty or action however failing to fulfill the task correctly. The term “misfeasance” refers to an act which is not intended. But, malfeasance refers to an intentional and deliberate action of harm. It’s also distinct in comparison to nonfeasance which is the absence of any action that could avoid harm or injury from happening.
Examples of Corporate Malfeasance
Enron
In the month of October 2001 The Enron Corporation reported a loss for the quarter in the amount of $618 millions. Enron had concealed substantial financial losses through innovative accounting practices according to the guidance of its auditor who was and the Arthur Andersen firm. The company had been found guilty for destroying incriminating documents related to its auditing and advisory services for Enron. 1 The issue of deceptive financials and the conspiracy to hinder justice by concealing or destroying documents are grave crime.
As they realised the financial difficulties Enron was facing, the company’s executives promoted the company’s stock to employees and customers as having positive outlook for the future. When the stock price climbed to high levels the executives sold the shares. 1 Then-president Jeffrey Skilling made a total revenue of more than $62 million on his Enron shares despite being aware of the financial crisis that was about to hit to ensure that he did not lose millions of dollars as the stock price plunged. Falsifying the financial situation of a business in order to make money by selling stock can be considered Securities fraud.
Tyco
In 2002 Tyco’s chief executive officers (CEO) as well as its chief financial officer (CFO) were accused of paying for their lavish lifestyles via the company’s theft. They used corporate money to purchase extravagant homes, luxurious holidays, and costly jewelry, and defrauding the shareholders with millions of dollars.
Madoff
The year 2008 was the time that Bernie Madoff defrauded investors out of billions of dollars via the investment firm that he created as the basis of a fraud scheme called the Ponzi. The firm was operational for many years and earned money from sophisticated investors around the world. 4 Madoff’s case is considered to be one of the most infamous instances of financial mismanagement throughout the United States.
Paulson
In April of 2010 The U.S. Securities and Exchange Commission (SEC) indicted Goldman Sachs Group of fraud in securities because it failed to reveal that hedge fund manager John Paulson chose the bonds that were the backbone of the collateralized debt obligation (CDO) Goldman sold to its customers. Paulson picked the CDO due to the belief that the bonds could fail and he wanted to short them by buying Credit default Swaps to himself. The development and sales of fake CDOs contributed to making an already difficult the financial crises more severe than it could be, doubling the losses of investors because they provided additional securities to place bets. Paulson received 1 billion in exchange for the swaps he made,, whereas CDO investors lost $1 billion through the CDO.
