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Is Gateway's former CFO in the clear? Also: How Best Buy's CFO gets 600 employees to look forward to earnings presentations.
Laura DeMars, CFO Magazine
July 1, 2007
After four years of battling charges that he manipulated earnings, former Gateway CFO John Todd may be off the hook — for now.
The Securities and Exchange Commission accused Todd, along with former CEO Jeffrey Weitzen and ex-controller Robert Manza, of boosting the computer maker's earnings in 2000 through a variety of "tricks," including offering financing to individuals with poor credit. A federal jury found the former finance chief, who left Gateway in 2001, guilty in March. But during post-trial proceedings, Judge Roger Benitez overturned the jury's verdict, stating that the SEC failed to provide sufficient evidence that Todd intended to defraud investors.
Todd's lawyer, Bob Rose, a partner with Sheppard, Mullin, Richter & Hampton LLP, says the case, which created more than a million pages of legal documents, should never have been brought. During the jury trial, for instance, the agency's lawyers accused Todd of signing particular documents, only to produce documents that did not, in fact, contain his signature.
Benitez, who also dismissed charges against Weitzen last year, rejected the SEC's request for a permanent injunction against Todd along with a disgorgement of salary and a ban from serving as a public-company officer or director.
He did, however, require Todd to pay $16,500 in penalties for an accounting error in a minor transaction during the third quarter of 2000.
Rose says his client is somewhat relieved, but will still suffer under a "dark cloud." In fact, Todd was asked to leave his position as chief operating officer of Cervantes Capital LLC at the time that he was found guilty.
That dark cloud may not clear any time soon: the SEC is considering appealing the Benitez decision.
Glazed Over, in a Good Way
Best Buy CFO Darren Jackson may not sugarcoat financial results, but he knows how to dish out the quarterly numbers. For the past two years, Jackson has been serving employees everything from crullers to Bavarian creams along with his earnings reports. His "Donuts with Darren" sessions have become so popular that 600 employees regularly take part.
The idea for the 90-minute presentations was a no-brainer, says Jackson. "Since we spend so much time putting presentations together for investors and outsiders," he says, "why not spend the same amount of time on the people who make it all happen?"
Held the day after the company's quarterly conference call, Jackson's presentations cover not only the financials but also the basics of finance. "For people who aren't schooled in financial statements, the numbers can be very intimidating," says the 42-year-old Jackson.
For the most part, Jackson has been able to share good news. Since the inception of the presentations, Best Buy's revenues have risen from $27.4 billion in 2005 to $35.9 billion in 2007. But Jackson has also had to deal with employees' questions about outsourcing and downsizing. The doughnuts may be sweet, but sometimes the news is not. — L.D.