prosecutors

ALSO NOTED: Prosecutors: Skilling does not deserve new trial; A Sarbox for home lending?;

Tue, 20 Nov 2007 06:59:58 -0500

> Prosecutors: Skilling does not deserve new trial. Article
> Dems nominate two for SEC commissioner openings. Article
> A Sarbox for home lending? Article
> Standard marketing: New security survey. Release
> Director compensation still going up. Survey
> CEO of Deloitte Financial Advisory Services on worldwide fraud. Q&A
> Israeli companies not daunted by Sarbox. Article
> Sarbox effect: In-house counsel manages outside lawyer more closely. Article
> SEC makes life easier on small companies. Article

IT Watch:
> Companies struggle with quick ID management roll-outs. Article

And Finally... Accountants are gloomy these days. Article

Brocade verdict to embolden prosecutors?

Tue, 14 Aug 2007 06:59:59 -0400

The conventional thinking on stock options backdating cases was that prosecutors would have the best shot at companies that continued their shenanigans after Sarbanes-Oxley became law. Recall that Sarbox requires that executive (not rank and file) option grants must be reported within two business days of the grant date. But the Brocade decision really may change that. The prosecution won without airtight evidence, and Business Week Online says that the case "sets a low bar for prosecutors to clear, should they decide to bring more cases." Needless to say, fear is mounting in Silicon Valley and elsewhere. It's way beyond a civil issue now. CEO Greg Reyes faces up to 20 years in prison. It is critical that you leave no room for doubt with your grants. You need to do more than go by the book. Even appearances can be damning as Reyes supporters would say.

For more:
- here's the article

PwC ensnared in backdating controversy

Mon, 09 Jul 2007 20:01:39 -0400

The plight of Gary Gerhardt, former CFO of Engineered Support Systems, is a cautionary one for anyone in the compliance arena. Is informing your auditor, in this case PricewaterhouseCoopers, enough? Gerhardt says he told his audit firm that options granted to executives were backdated so as to be "in the money." Therefore, the firm and he should rescind Gerhardt's criminal indictment, he argues. This is an interesting question, and an old one. Who bears the brunt if the practice has been okayed by an audit firm? A reasonable executive would think he has the greenlight in most cases. In this case, the issue may not be that simple. There was other questionable activity that prosecutors have identified. Of course, just because an audit firm knows doesn't mean investors know. Still, there are areas of the audit firm-company relationship that are very tricky to say the least.

For more:
- here's the article from cfo.com

Tipping point in prosecutions? Section 1101 at issue

Mon, 27 Nov 2006 19:01:39 -0500

The stunning Enron verdicts in some ways marked the high point for the historic wave of corporate prosecutions we've witnessed recently. There are some who think that we've hit another kind of inflection point, one that marks the end of what some critics have called abusive government prosecutions. One lawyer argues that the new era empowered prosecutors to cross "the line that separates zealous prosecution from prosecutorial misconduct." He notes the pressure on companies to cut off indemnification payments to officers, the pressure on employees to waive attorney-client privilege, and the double threat of civil and criminal proceedings. Recent ruling suggest that courts are curbing some abuses. Will we be hearing calls to change Section 1103? That seems to be a way around some decisions. I doubt it. But this is very interesting.

For more:
- read the article by David Kistenbroker on the Mondaq system.

Sarbox case against Mexican firm settled

Mon, 18 Sep 2006 20:01:39 -0400

The first instance of a foreign company sued by the Securities and Exchange Commission under Sarbanes-Oxley has been settled. Ricardo Salinas Pliego agreed to pay $7.5 million and will not be able to serve as a director or executive of any publicly listed U.S. company. The SEC charged Salinas Pliego in January 2005 for the sale of improperly discounted debt by one of his companies to another company that he secretly owned. The debt was later paid at full price. There were probably other statutes under which Salinas Pliego could have been charged. I'm not suggesting that Sarbox is the new RICO, but it does seem to have a place in prosecutors' tool kits. Salinas Pliego has already delisted companies from the NYSE, noting "excessive regulation." An understatement indeed.

For more on this:
- Here's a New York Times article

Hunt for Sarbox fugitive heats up

Mon, 28 Aug 2006 20:01:39 -0400

Where in the world is Kobi Alexander, who was hit recently with a raft of options- and Sarbox-related fraud charges? The hunt for the former CEO of Comverse, a once high-flying tech firm, has generated headlines around the world. Interpol is said to be heavily involved. The Israeli press reported he has been sighted in Sri Lanka. Even with the war, the news has been hot in Israel, where Alexander kept a second home. He wired $57 million to an account in Israel as prosecutors circled. Then he fled. But so far the fugitive remains free. Alexander's attorney has not spoken with his client in "several weeks."

> Here's an update from the LA Times
> Here's The New York Times' article

Witch hunt in Silicon Valley?

Mon, 21 Aug 2006 20:01:39 -0400

Is the hunt for options abusers going too far? The breadth of the SEC's probe has surprised more than a few people and we're starting to hear whispers that perhaps the prosecutors are going overboard. Some are even using the term "Witch Hunt". That said, few are willing go public with such a sentiment. An exception to this is Daniel Warmenhoven, CEO of Network Appliance. He spoke to Business Week largely because his company has undertaken a comprehensive and successful review of its books. There are many that will praise him for this. I doubt that the prosecutors will be dissuaded in any way, however.

For more on the hunt for options abusers:
- read this Business Week article
- here's a Mercury News article that questions whether errors were intentional

More convictions in options grant date scandals

Mon, 14 Aug 2006 20:01:39 -0400

It's doubtful that prosecutors will pursue every company that backdated their options awards. So who will face the wrath of the government? For clues, look to the convictions of Comverse Technology. The prosecution contends executives took active steps to mislead its compensation committee, involving the use of a slush fund of options and fictitious names and the like. This is a lot different than fully disclosing the options awards to a committee that received approval from an auditor or law firm. One could argue that those that took extraordinary steps to deceive will make the best targets.

> Here's a New York Times article.
> The man at the center of all this has fled. Article
> Judge refuses to toss the first convictions in options scandal. Article
> More charges against Brocade execs. Article
> Here's some additional material on the FierceSarbox Web site.

Lawyer at center of options scandal

Mon, 31 Jul 2006 20:01:39 -0400

Larry Sonsini is perhaps Silicon's Valley's most powerful lawyer. In his 40-year career, he has served as legal counsel to some of the most prestigious firms and helped bring the likes of Google, Apple and Netscape public. he also represents about half of the Valley firms implicated in the growing options grant date scandal. The CEO of Brocade has noted that Sonsini advised the company on its stock options policies. Sonsini has not been accused of any wrongdoing. But you can bet prosecutors are looking at every angle.

> Read The New York Times article.

A lot of firms may dodge the options-grant date bullet

Mon, 24 Jul 2006 20:01:39 -0400

It will likely prove difficult in most cases for prosecutors to prove that companies actually back-dated options and willfully failed to disclose it, according to a report from the Corporate Library. For it to be fraud, the government needs to show some clear intent. But that doesn't mean every company will be spared. Those that can show they were following established policies, perhaps set by with the aid of auditors, are more likely to left alone. You have to wonder if companies with poor governance histories and irregular grant dates will be deemed more guilty. We'll see.

> Read the CNNMoney.com article.
> For a glimpse of what kind of behavior will earn prosecutorial recognition, read about the first two execs charged with fraud in this scandal.
> The stock options scandal continues to roil Silicon Valley. Article