According to the BBC, the 2015 Volkswagen emissions scandal is not only the “most expensive act of stupidity in the history of the car industry,” but could also end up being “one of the longest legal nightmares in corporate history.”
So far, about a dozen government authorities around the world are investigating VW for their automotive sins. In the U.S. alone, that includes the Environmental Protection Agency, the Department of Justice, New York state regulators, and the California Air Resources Board.
So what can entrepreneurs and small businesses learn from the Volkswagen disaster?
Avoiding Securities and Corporate Law Nightmares
While some corporate lawyers expect VW to survive this scandal, that’s only because it’s a massive corporation with a long history. For small and medium-sized businesses, even a minor scandal or securities violation could spell disaster. As a major multinational corporation, VW has a small army of corporate lawyers at its disposal. Despite these considerable resources, the company was nearly taken down by one humble American engineer.
A West Virginia University engineer and a tiny $50,000 study helped expose the emissions scandal, but there are many other ways scandals and corporate fraud can be revealed. In 2015, whistleblowers were the top source of fraud incidents. According to the Association of Certified Fraud Examiners, the leading reasons corporate fraud was detected in 2014 were:
- Tips and Whistleblowers: 42.2%
- Management Review: 16.0%
- Internal Audit: 14.1%
- By Accident: 6.8%
- Surveillance, Monitoring, and Law Enforcement: 4.8%
So what lessons should entrepreneurs and small business owners take from the VW scandal?
The number of whistleblowers in the U.S. has been increasing ever since the 2008 financial crisis. The Securities and Exchange Commission reports that calls to its Whistleblower Office have risen sharply to almost 4,000 a year.
The bottom line: there is a strong chance wrongdoing will be exposed.
Want To Avoid Legal Trouble? Invest In Corporate and Securities Lawyers
Even for entrepreneurs who are determined to play by the rules and do everything above board, securities law can be a confusing area of the legal code. Simple human error or missed deadlines can lead to audits and summons, and many entrepreneurs choose to protect themselves by hiring experienced securities lawyers to advise them.
This proactive approach to corporate securities law is more important than ever, because the SEC has been more reactive than ever. In the last fiscal year, the SEC brought a record 755 enforcement actions and a historic $4.1 billion in disgorgement and penalties. That number includes 55 insider trading cases, but 135 related to reporting and disclosure.
To protect yourself, your business, and your employees, it’s crucial to have experienced corporate lawyers to protect you.