A Shocking Day for Spitzer

Reports in the New York Times linking New York Gov. Eliot Spitzer to a federal prostitution investigation have undoubtedly stunned companies around the nation that had come to see Spitzer as a corporate crime-buster.The governor, the one-time scourge of Wall Street abuses, made a brief statement ...

By Roy Harris • March 10, 2008

Short on the Charm at Charming Shoppes

Charming Shoppes Inc. is suing two hedge funds that have launched a proxy fight against the company, alleging they have filed “materially misleading and incomplete documents” with the Securities and Exchange Commission.On Friday, the retailer that owns the Lane Bryant and Fashion Bug brands filed...

By Stephen Taub • March 10, 2008

SEC: Ready to Pounce on Pension Fraud

The Securities and Exchange Commission has fired a shot across the bow of public pension funds, warning the entities that poor compliance policies could sink them. On Thursday the SEC issued a report on an insider-trading investigation at Alabama’s state pension fund that highlighted the fund’s p...

By Kate Plourd • March 7, 2008

Quest Software, Two ex-CFOs Get Wells Notices

Quest Software said two of its former chief financial officers are among four individuals who may be charged by the Securities and Exchange Commission in connection with the regulator’s probe into the backdating of stock options.The company itself also may face charges, according to a regulatory ...

By Stephen Taub • March 6, 2008

Man Bites SEC

A former executive with Aeropostale Inc. has sued the Securities and Exchange Commission, claiming it violated his confidential relationship with his attorney to obtain key information while investigating why he was fired. Christopher Finazzo, the former chief merchandising officer of the clothin...

By Stephen Taub • March 6, 2008

Investors Push Firm for Credit-Risk Data

The ongoing credit crunch and subprime-mortgage saga has heightened investors’ demand for knowing how much risk exposure their companies face. In response to investors’ questions about Principal Financial Group’s ties to bond insurers and mortgage companies, the 401(k) services and insurance prov...

By Sarah Johnson • March 5, 2008

Ex-Telecom CFO Settles with SEC

Correction: This story has been updated to reflect that the consent decree with the Securities and Exchange Commission signed by Richard Fresia, former CFO of Expanets Inc., did not contain any accounting fraud charges. In a previous version of this article, and its headline, it was incorrectly s...

By Stephen Taub • March 5, 2008

Ignore a Whistleblower — at Your Peril

A financial scandal at biotech company Dyadic International offers a telling lesson about how whistleblower memos can come back to haunt the executives who ignore them. Dyadic’s internal dirty laundry first came to light at the company last April, when then-CFO Wayne Moor went to the company’s As...

By Sarah Johnson • March 5, 2008

Are Investors Smarter than We Think?

Restatements — the dreaded “R” word describing needed reworking of financial statements, often accompanied by excruciatingly late nights for internal accounting teams — may well bring to mind another shudder-worthy “R” term: regulation. It’s little wonder why, when numerous studies have recorded ...

By Sarah Johnson • March 4, 2008

Rigas Father and Son Lose Final Appeal

It looks like Adelphia Communications founder John Rigas will most likely die in prison after all.The Supreme Court denied the appeal of the 83-year-old Rigas and his son, Timothy — their last legal step toward overturning their fraud convictions for their roles in the collapse of the one-time ca...

By Stephen Taub • March 3, 2008

A New Record for Enron? Highest Legal Fees

Here is another reminder why people go to law school. San Diego-based law firm Coughlin Stoia Geller Rudman & Robbins LLP has requested $688 million in attorneys’ fees for representing Enron Corp. shareholders and investors, according to the Associated Press. The plaintiffs stand to recover m...

By Stephen Taub • March 3, 2008

The Spill-Over Effect

Collecchio is a classic company town. Not far from Parma, in Italy’s Emilia Romagna region, its modest streets and squares sprout from a large dairy factory on its western outskirts. In 2003, on Christmas Eve, this unlikely village gained international fame when Parmalat, the factory’s multinatio...

By Jason Karaian • March 3, 2008

No Cakewalk

Still reeling from its failure to spot the subprime-mortgage crisis, Standard & Poor’s is nonetheless moving ahead on a long-discussed plan to dissect enterprise risk management (ERM) practices at non-financial companies. But will S&P be able to gain enough visibility to assess something ...

By Vincent Ryan • March 1, 2008

Pulp Faction

Despite last year’s long-anticipated green light from the Securities and Exchange Commission that allows companies to issue online E-proxy statements in lieu of traditional paper copies, many companies continue to keep the presses rolling.In a recent survey of 482 companies conducted by the Natio...

By Kate Plourd • March 1, 2008

Court to Hear New Tyco Appeals

New York State’s top court has agreed to hear new appeals by former Tyco International executives Dennis Kozlowski and Mark Swartz, Reuters reports, citing a court official.A new court date has not yet been set, according to the wire service. Kozlowski and Swartz are serving long prison terms for...

By Stephen Taub • Feb. 29, 2008

Next Year’s Model?

With their snappy name and flashy mathematical formulae, “quants” were the stars of the finance show before the credit crisis erupted. Now the complex models of risk that they developed are accused of misleading banks about the safety of subprime-laced securities. Small wonder that investment ban...

By Economist Staff • Feb. 29, 2008

No Bars for Ex-CFO of Bar-code Company

It looks like the former CFO of bar-code device maker Symbol Technologies has avoided the prospect of being covered in black stripes himself. Kenneth Jaeggi, the former finance chief of Symbol — now a part of Motorola — Wednesday pleaded guilty to fraud stemming from alleged backdating of stock o...

By Stephen Taub • Feb. 28, 2008

A Regulatory Migraine

Ng Wailun should be one happy CFO. This year, his company, Shanghai-basedpharmaceuticals and skin-care products distributor Profex, will see itscorporate income tax rateslashed from 33 percent to 25 percent. “This is good news for us,” Ngconcedes. At the same time,however, a new labor contract la...

By Cesar Bacani • Feb. 28, 2008

IBM Adds $15 Billion to Buyback Coffer

IBM announced on Tuesday that its board of directors authorized a $15 billion stock repurchase program, on top of about $400 million remaining at the end of February from a prior authorization.The company said it may repurchase shares on the open market or in private transactions depending on ma...

By Stephen Taub • Feb. 26, 2008

Can’t Anyone Here Deal with Derivatives?

Can anyone figure out how to account for derivatives? Apparently not one of the biggest investment banks in the world.In a Monday regulatory filing, Merrill Lynch disclosed that it would restate previously issued cash-flow statements going back to 2005 to correct errors stemming from an adjustme...

By Stephen Taub • Feb. 26, 2008

Splitting Headaches

“We were not designed or structured to be the most important company in the entire financial system,” said Jay Brown on February 19th as he returned to MBIA, charged with steadying the company he had run from 1999 to 2004.You may think otherwise, given the markets’ fevered concern over the “monol...

By Economist Staff • Feb. 26, 2008

Five Guilty in General Re/AIG Scheme

Five former insurance company executives, including the one-time CFO of General Re, were found guilty Monday of participating in a scheme to manipulate the financial statements of American International Group, the Associated Press reported. Four of the defendants worked for General Re, the fifth...

By Stephen Taub • Feb. 25, 2008

Report: Mounties to Charge Ex-Nortel Finance Execs

The Royal Canadian Mounted Police are about to charge two former top finance executives at Nortel Networks for their alleged involvement in a fraudulent accounting scheme, according to Canada’s Financial Post. Douglas Beatty, a former CFO, and Michael Gollogly, an ex-controller, are expected to b...

By Stephen Taub • Feb. 25, 2008

Three Years for Three Enron Bankers

Three former employees of a British bank will spend up to 37 more months on America’s shores, behind bars, for participating in the massive Enron fraud. On Friday, a federal judge sentenced David Bermingham, Giles Darby, and Gary Mulgrew to just over three years in prison, according to the Associ...

By Sarah Johnson • Feb. 22, 2008

Flowserve Pumps Out $10.5M in Iraqi Kickback Settlement

Flowserve Corp. has agreed to pay $10.5 million to settle charges that its subsidiaries participated in a kickback scheme with the Iraqi government between 2001 and 2003. The maker of pumps and valves will pay a $4 million penalty to the Department of Justice, which charged it with conspiracy to ...

By Sarah Johnson • Feb. 21, 2008