Few business disputes are more frustrating than when fiduciaries prioritize their own interests over those of the company or client they serve. A fiduciary is an individual or entity entrusted with the responsibility to act in the best interests of an employer or client, typically in financial or business matters. They could be a corporate officer, salesperson, investment counselor, trustee, accountant or other professional. Such self-dealing represents a conflict of interest and can result in termination, financial penalties or litigation. The benefits they gain from self-dealing can be either direct or indirect.
6 common examples of self-dealing
Self-dealing by a fiduciary can take many forms, including:
- Using company assets for personal or professional gain
- Misappropriating funds from a foundation or non-profit for personal use
- Exploiting a company’s proprietary information for personal financial gain through stock transactions
- Providing financial advice that benefits the advisor rather than the client
- Knowingly withholding relevant information from clients
- Engaging in excessive stock trades to increase commissions
Proving it in court
It is crucial to maintain a policy of trust but verify all business relationships involving finances. This helps ensure there are no instances of self-dealing that could financially harm the client or hinder them from achieving their financial or business objectives. To address such issues through litigation, California court’s burden of proof in case the existence of a fiduciary duty and that the self-dealing harmed the plaintiff’s interests must demonstrate :
- That the fiduciary duty existed
- The fiduciary engaged in self-dealing
- This conduct resulted in harm to the beneficiary or client
In defending themselves, the fiduciary must prove that the transaction was fair and reasonable to the beneficiary to rebut the presumption of wrongdoing. California law emphasizes transparency and loyalty in fiduciary relationships.
Trials require skilled litigators
Regardless of these guidelines and the specifics of the case, an experienced business law attorney familiar with fiduciary duty issues, such as self-dealing, is essential in holding the defendant accountable in a court of law. Moreover, these attorneys must also act as skilled litigators, which is less common among business law lawyers, to support their case.