Fraud by the Numbers

This year marks not only the five-year anniversary of the Sarbanes-Oxley Act but the same milestone for the President’s Corporate Fraud Task Force. Announced in July 2002, the task force is chaired by Deputy Attorney General Paul J. McNulty and includes senior Department of Justice officials and ...

By Kate Plourd • Sept. 1, 2007

FOIA Bombs Backlog the SEC

The Securities and Exchange Commission constantly promotes transparency, but one critic says the regulator has failed to practice what it preaches.To be sure, that critic — John Gavin, president of research firm SEC Insight — has an axe to grind. Gavin earns a living by mining SEC correspondence....

By Alan Rappeport • Aug. 31, 2007

Internal Probe Stalls Children’s Place Filings

The Children’s Place Retail Stores has missed another regulatory-filing deadline as it probes violations of its company policies by two executives. The company had originally said it would release a number of delinquent financial reports on Friday.The missed filings include its annual report for ...

By Stephen Taub • Aug. 31, 2007

Judge: SEC Can Keep Financial Probes Secret

A federal judge has decided not to sanction the Securities and Exchange Commission for denying Freedom of Information Act requests by an investment research firm for details of commission investigations of a number of probes. Even though U.S. District Judge Paul Magnuson said the SEC’s behavior i...

By Sarah Johnson • Aug. 30, 2007

Backdating: Are the Lawyers to Blame?

Since the backdating scandal began unfolding nearly two years ago, regulators and outsiders have been wondering why so many public companies — many of them in the technology industry — began issuing undisclosed, misdated stock options grants around the same time. Was it spread through word of mou...

By Sarah Johnson • Aug. 28, 2007

Rambus Settles Most Backdating Claims

Rambus Inc. said it has settled claims against all but one former officer stemming from a review of past stock option grants. In a press release, the Los Altos, Calif.-based chip maker added that the settlements are conditioned on the dismissal of the claims asserted against them in derivative ac...

By Stephen Taub • Aug. 28, 2007

Ex-Enterasys Execs Sing, Face Sentencing

Prosecutors are asking a judge to go lightly on Wednesday when he sentences three former executives of Enterasys Networks who testified against the former CFO and the former senior vice president of finance, as well as two other employees, in a criminal securities fraud case.According to the New ...

By Stephen Taub • Aug. 28, 2007

No Double Jeopardy for Ex-Symbol Execs

A federal appeals court ruled that a former Symbol Technologies finance executive and another former executive cannot be retried on charges stemming from the company’s accounting scandal.A three-judge panel of the 2nd Circuit Court of Appeals said retrying former senior vice president of finance ...

By Tim Reason • Aug. 27, 2007

Cutting the Fat: Z Trim May Restate

Officials at Z Trim Holdings are contemplating whether they should restate company financials following a probe into its stock-option practices. The news comes at the end of a week filled with bad news for the Illinois company, which makes a gel used to reduce fat in foods.Earlier this week, Z Tr...

By Sarah Johnson • Aug. 24, 2007

Boards Behaving Badly: A Delaware Primer

In a Delaware Court of Chancery case that he wrote “tests the boundaries of the business judgment rule,” Chancellor William B. Chandler III dealt infoUSA Inc. a setback, and drew guidelines for director conflicts of interest, and for board disclosures of internal investigations.His opinion, hande...

By Roy Harris • Aug. 23, 2007

Refco Suit Hits Grant Thornton, PwC, E&Y

In a 158-page lawsuit seeking more than $2 billion in damages, trustees representing the failed commodities brokerage Refco Inc. have charged the company’s accounting, financial, and legal advisers with knowingly aiding a group of Refco insiders to plunder millions of dollars in company assets. ...

By Kate Plourd • Aug. 22, 2007

SEC: Sentinel Used Credit Crisis to Hide Losses

The Securities and Exchange Commission has charged Sentinel Management Group with misleading investors and using the credit crisis to hide losses and imprudent operations, according to the Associated Press. In a civil suit filed in U.S. District Court in Chicago, the SEC charged Sentinel with “fr...

By Marie Leone • Aug. 21, 2007

The Game Is Up

The old-fashioned financial system was like Old Maid, a parlour game once beloved of small children. The banks were like players, dealt hands from a pack of cards, which they swapped among each other. At the end, one player was left holding a lonely queen—a bad debt, if you will—and lost. Over th...

By Economist Staff • Aug. 21, 2007

SEC Case against Amex ex-CEO Thrown Out

A Securities and Exchange Commission administrative law judge has decided that the SEC can’t censure former American Stock Exchange chairman and chief executive Salvatore Sodano for a past failure to enforce exchange rules. In his ruling, Judge Robert Mahony dismissed the case brought against So...

By Kate Plourd • Aug. 21, 2007

Tyson Stung in Spring-loading Case

Tyson Foods Inc. got another chance for Delaware’s Court of Chancery to throw out claims that the company improperly spring-loaded stock-option grants, dating options ahead of favorable company news so the value would likely rise. But the judge slapped the Tyson board down with harsh suggestions ...

By Roy Harris • Aug. 20, 2007

The CFO Stands Alone

The chief financial officer of Taiwan-based microchip maker Himax Technologies was named as the sole defendant in a class action securities lawsuit alleging that he violated securities laws, breached his fiduciary duties, and made false or misleading statements in connection with the company’s pu...

By Kate Plourd • Aug. 20, 2007

“Failure to Question” Snags Impath Exec

A three-panel judge has affirmed a former corporate president’s conviction for conspiracy, securities fraud, and filing false statements with the Securities and Exchange Commission.More than a year ago, Richard Adelson, who presided over cancer-data company Impath before it went bankrupt, was sen...

By Sarah Johnson • Aug. 17, 2007

Former McKesson VP Settles SEC Charges

A former McKesson Corp. executive has settled charges that he helped to inflate revenue and net income at a software vendor that later merged with the pharmaceutical giant. Michael Smeraski has agreed to pay $50,000 and put an end to the six-year-old civil fraud charges filed against him by the S...

By Sarah Johnson • Aug. 17, 2007

No Rx Required: CVS Probe Closed

CVS Caremark Corp. has disclosed that both the Securities and Exchange Commission and the U.S. Attorney’s office have ended an inquiry into the drugstore operator’s stock-options-granting practices and relocation of Caremark Rx Inc. headquarters to Nashville from Birmingham.In May 2006, an invest...

By Kate Plourd • Aug. 17, 2007

Spinout: Grand Theft Maker on Notice

The Securities and Exchange Commission has told video-game publisher Take-Two Interactive that it may file charges against the company and its executives related to an investigation into the company’s historical stock-option-granting practices.The game maker, best known for its “Grand Theft Auto”...

By Kate Plourd • Aug. 17, 2007

Jumping on the Buyback Bandwagon

As the stock market continues to sweat out the dog days of August, more companies are joining the ranks of those buying back shares. On Wednesday, at least three repurchase plans were announced. For example, storage-solutions company Network Appliance announced its intention to buy back up to $1 ...

By Sarah Johnson • Aug. 16, 2007

DoJ: Ease Up on Vendors’ Fraud Liability

The Department of Justice has filed a friend-of-the-court brief with the U.S. Supreme Court opposing lawsuits that hold third parties equally liable for a business partner’s securities fraud.Filed on Wednesday, the U.S. Solicitor General’s amicus brief flies in the face of Securities and Exchange...

By Sarah Johnson • Aug. 16, 2007

Another Broadcom Exec Receives Wells Notice

The Securities and Exchange Commission has sent David Dull, general counsel of Broadcom Corp., notification that it may bring charges against him related to its ongoing investigation into the company’s stock-option granting practices. Earlier this week, Broadcom revealed Dull had received the Wel...

By Sarah Johnson • Aug. 15, 2007

A Room of Their Own

First came virtual annual meetings, then “paperless” proxies,and now the Internet may play a role in shaping another aspect of company-shareholdercommunications: ongoing dialogue between shareholders and management,made feasible by dedicated chat rooms.In May the Securities and Exchange Commissio...

By Kate Plourd • Aug. 15, 2007

Critical Masses

The movement to scale back recent financial reforms has turned into a veritable book-of-the-month club as one organization after another issues reports that call for major changes to everything from Sarbanes-Oxley to shareholders’ rights. On the heels of last fall’s report by the Committee on Cap...

By Alix Stuart • Aug. 15, 2007