Risk & Compliance

Sarbox and the Fight-or-Flight Response

With the advent of Sarbanes-Oxley's certification requirements, joining a troubled company became a dangerous decision.
Stephen TaubJanuary 14, 2005

Accepting a position at a once-troubled company in turnaround mode — even a company that had been embroiled in an accounting scandal — used to be an intriguing career move for top managers.

Not anymore. With the advent of certification requirements in the Sarbanes-Oxley Act of 2002, joining such a company became a dangerous decision.

This might help to explain why Brian Anderson abruptly resigned this week as chief financial officer of OfficeMax Inc. just two months after stepping on board. The office-products retailer offered no reason for his departure; in a statement, president and chief executive officer Chris Milliken said icily: “We are disappointed that Brian is leaving after only two months of service. We regret that his commitment to our business was not strong enough to allow him to make a long-term contribution.”

Bear in mind, however, that on the same day, OfficeMax announced that it will postpone the release of its earnings for the fourth quarter and for fiscal 2004 pending the conclusion of an internal investigation into accounting for vendor income. The company noted that it had confirmed that certain employees fabricated supporting documentation for approximately $3.3 million in claims billed to one vendor by OfficeMax during 2003 and 2004. The company then expanded the investigation to review how it recorded rebates and other payments from all vendors for those years.

As a result of its investigation, the company has fired four employees, though it would not name the individuals or the vendor in question, according to Bloomberg. In addition, last week Gary Peterson, the president of OfficeMax’s retail division, resigned from his position.

Anderson is a former audit partner at Deloitte & Touche LLP who abruptly departed the CFO role at Baxter International Inc. last June, shortly before the company restated three years of results.

Under Sarbanes-Oxley, Anderson and Milliken would have been required to certify OfficeMax’s financial statements for the year, and they could have been held criminally liable for any inaccuracies. “Clearly [Anderson] was in a situation where he did not feel comfortable with what was going on,” Anthony Chukumba of Morningstar pointed out to the Associated Press, which added that attempts to reach Anderson for comment were unsuccessful.

Former OfficeMax chief financial officer Ted Crumley will return to that position on an interim basis while the company searches for Anderson’s successor. Crumley had spent 34 years with Boise-Cascade Corp., which bought OfficeMax in 2003, sold off its timber assets, and took on the OfficeMax name last year.