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Is your board of directors covering up a theft hidden in a contract clause?

Xerox sued by third-largest shareholder Deason for alleged fraud related to takeover by Fuji

The complaint alleges that the Fuji-Xerox joint venture contains a "crown jewel lock-up right that allows Fuji to control Xerox's intellectual property and manufacturing rights in the $36 billion Asia-Pacific market in the event Xerox were to sell to another suitor."

The law suit may answer the question for whom do you serve when appointed to the board of directors.

Managing the financial undertakings of a company as a member of the board is not as easy as just making a few votes. A director safeguards the company's assets for all shareholders. When selecting someone to be on the board often loyalty is the only consideration but to whom? When you are selected to serve and you are put in charge of insuring the shareholders interests, whether you are family member or close friend, the situation can become complicated if it appears that some form of theft has happened to the company. Attempting to prove that fraudulent activity has occurred is difficult. There are several signs to look for when reviewing the directors performance and business judgment

How to prove mismanagement and fraud:

First and foremost you must show that the director did not act in the best interest of the trust and its beneficiaries. Here are common scenarios that demonstrate dishonest activity:

* The director had a conflict of interest and worked in the best interest of someone other than the shareholders

* The director personally or professionally benefits monetarily from misuse of the property or the agreement and did not report the entirety of the benefit to themselves,

* The director was influenced, bribed or rewarded for making decisions with regard to the company or agreement

* The director was negligent in managing the company and did not safeguard the best interests of the shareholders

* The director acted in the best interest of one or more of the shareholders but not in the best interest of all of the shareholders.

Regardless all forms of the above can equate to stealing from a company and despite the manner used, the result is the same; the opportunities disappear and the shareholders are left empty-handed.

The suit states:

"The self-interested director defendants, however, ignored the opportunity or deliberately chose not to terminate the joint venture agreements. Had the director defendants terminated the joint venture agreements, they would have been able to engage in a fair and equitable bidding process and achieve a fair value and control premium for Xerox shareholders. Indeed, the value of Xerox as a standalone company with no encumbrances on its intellectual property and the licensing, manufacturing and selling of its products in the Asia and Pacific Rim markets is significantly greater than the value being provided to the company and its shareholders as part of the proposed transaction."

These are the type of cases we at the Daily Law Group handle.

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