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Nearly 11 years after accounting irregularities came to light, a former CFO is heading to jail. Also: A new chief accountant at the SEC; CFOs on the move.
CFO Staff, CFO Magazine
September 1, 2003
When will we know if Enron Corp.'s Andrew Fastow is going to walk free or head up the river? No time soon, if the case of Paul Polishan is any indication.
If you don't remember Polishan, don't worry. It's been more than 10 years since the former Leslie Fay Cos.'s CFO orchestrated a financial fraud that left the Pennsylvania clothing company bankrupt. A long line of appeals has kept him out of jail since his conviction in July 2000, but despite one last, long-shot appeal that is still pending, he agreed last month to surrender to authorities on September 4 and begin serving his 9-year sentence.
Although white-collar cases typically take longer than other criminal trials, says Assistant U.S. Attorney Bruce Brandler, this case has taken "an extraordinarily long" time to resolve. "In our opinion," he says, "the reason is that Mr. Polishan's strategy throughout these proceedings has been to delay them as long as possible."
Ironically, that strategy was so successful that some of Polishan's appeals took place after the Enron and WorldCom scandals broke — a climate that even his own attorney admitted wasn't very friendly toward CFOs convicted of financial fraud. "Ultimately, he may have shot himself in the foot," observes Brandler.
Enron is likely to be a longer, and more complicated, case, but there are parallels. Both Polishan and Fastow reportedly cowed their employees with domineering personalities, and both had that backfire when their closest aides — former Leslie Fay corporate controller Donald F. Kenia and former Enron executive Michael Kopper — began cooperating with prosecutors. And although the estimated $460 million in losses suffered by Leslie Fay shareholders pales in comparison to Enron's estimated $80 billion hit, the company's bankruptcy resulted in painful factory closings and layoffs. "As far as northeastern Pennsylvania, it has had a devastating impact," says Brandler. No doubt Brandler's colleagues in Houston, where Fastow was arraigned, will be equally anxious to see Fastow behind bars. —Tim Reason
All Accounted For
The accounting community has a new sheriff: Donald Nicolaisen, appointed chief accountant at the Securities and Exchange Commission in August, is expected to assume the role later this month.
Nicolaisen joins the SEC from PricewaterhouseCoopers LLP, where he was a senior partner. His is the first major appointment at the SEC by new chairman William Donaldson. "I am confident that Don's experience, expertise, and enthusiasm will greatly benefit the commission and the investing public," noted Donaldson in a statement.
Nicolaisen, of course, will have to figure out exactly how his office will work with — and supervise — the embryonic Public Company Accounting Oversight Board. It is not yet clear what responsibilities the PCAOB will have. "They have a lot to work out," says Alan Bromberg, a professor at the Dedman School of Law at Southern Methodist University.
Nicolaisen will also have to help police the slew of new rules designed to prevent accounting fraud. "This is an extremely challenging time for the accounting profession and the nation's financial-reporting system," he said in a statement.
Most accounting experts applauded the move. "Donald is an excellent choice," says Dennis Beresford, an accounting professor at the University of Georgia and a former Financial Accounting Standards Board chairman. "The SEC needed someone with his background who knows the issues."
Still, some bristled at the selection of a Big Four insider, especially since PwC has come under fire for its role as auditor of Tyco International Ltd. The SEC is still reviewing what role, if any, the auditor played in the accounting scandal. "Clearly, he's not going to be able to be involved in that process," says Beresford. —Joseph McCafferty
CFOs on the Move
William Aylesworth will retire as CFO of Texas Instruments Inc. at the end of the year. He will be succeeded by Kevin March, controller at the Houston semiconductor company.... George Moore is the man for Maytag Corp. He was appointed CFO of the Newton, Iowa, appliance company. Moore replaces Steven Wood, who left to pursue other interests.... Universal Health Services Inc. hired Steve Filton as CFO. He fills the spot vacated by Kirk Gorman, who resigned after a dispute with auditor KPMG. Filton was formerly controller at UHS.