PCAOB Counters Legal Attack on Sarbox

In a recent move, the Public Company Accounting Oversight Board filed a motion to dismiss a lawsuit charging that the board and its rules are unconstitutional.On February 7, the nonprofit Free Enterprise Fund and small Nevada audit firm Beckstead and Watts sued the accounting board in U.S. Distri...

By David Katz • May 19, 2006

Milberg Weiss, Two Partners Indicted

New York-based law firm Milberg Weiss Bershad & Schulman and two partners, David Bershad and Steven Schulman, were indicted Thursday by a federal grand jury for allegedly participating in a multimillion-dollar kickback scheme.According to the U.S. Attorney’s office in Los Angeles, where the i...

By Stephen Taub • May 18, 2006

HealthSouth Avoids Indictment

HealthSouth has agreed to pay $3 million and spend three years on probation in a deal with the Department of Justice, which will not indict the company on criminal charges stemming from its $2.7 billion accounting scandal, reported Bloomberg.The $3 million will go to a U.S. Postal Inspection Serv...

By Stephen Taub • May 18, 2006

SEC Takes a Stand on 404

The Securities and Exchange Commission announced on Wednesday in no uncertain terms that small companies as well as large ones will be required to comply with the Section 404 internal-control requirements of the Sarbanes-Oxley Act.The SEC’s statement, posted in a press release on its website, cle...

By David Katz • May 17, 2006

Lay-Skilling Case Goes to Jury

Examine our Enron archiveThe fate of former Enron executives Kenneth Lay and Jeffrey Skilling is in the hands of the jury.After a four-month trial and more than four years after the energy giant sought bankruptcy protection, jurors will weigh the merits of 28 charges against Skilling and a half-d...

By Stephen Taub • May 17, 2006

Sarbox Rollback Bill Introduced

A group of U.S. senators and representatives introduced a bill on Wednesday that would exempt small companies from compliance with Sarbanes-Oxley Section 404, the controversial provision governing internal controls over financial reporting.Under the bill, a company could opt out of the requiremen...

By David Katz • May 17, 2006

Hollinger Inks Deal to Avoid Criminal Charges

Toronto-based holding company Hollinger Inc., once controlled by media mogul Conrad Black, has signed a cooperation agreement with U.S. prosecutors in their case against Black and several other former employees.In return, prosecutors will not pursue charges against the company for any crimes that...

By Stephen Taub • May 16, 2006

Enron Defense Closes Defiantly

Examine our Enron archiveDaniel Petrocelli urged the jury to find Kenneth Lay and Jeffrey Skilling not guilty on all counts, insisting during closing arguments Tuesday that the government failed to prove its case beyond a reasonable doubt, according to published reports.The lead attorney for Skil...

By Stephen Taub • May 16, 2006

SEC Commissioner Glassman to Step Down

Securities and Exchange Commissioner Cynthia Glassman announced that she plans to leave the SEC after her current five-year term ends on June 5. But Glassman, who joined the commission in January 20, did not set a specific date for her departure.SEC officials pointed out that commissioners typica...

By Stephen Taub • May 15, 2006

SEC Closes Taser Probe

The Securities and Exchange Commission ended its investigation of stun-gun maker Taser International on Monday and announced that no enforcement action was recommended.In December, the SEC completed an investigation into product safety issues, as well as certain accounting and disclosure matters....

By Stephen Taub • May 15, 2006

Prosecutor: Enron Execs “Chose to Lie”

Examine our Enron archiveThe prosecutor in the Enron trial portrayed founder Kenneth Lay and former President Jeffrey Skilling as liars who felt they were above the law, costing their victims millions of dollars.In her closing arguments, begun on Monday morning, prosecutor Kathryn Ruemmler assert...

By Stephen Taub • May 15, 2006

Morgan Stanley E-mail Penalty: $15 Million

Morgan Stanley agreed Wednesday to pay $15 million to settle civil charges by the Securities and Exchange Commission that it failed to produce tens of thousands of E-mails dating back to December 2000.The commission had sought the documents in connection with its investigations into initial publi...

By Stephen Taub • May 11, 2006

Credit Suisse Settles Enron ‘MegaClaim’

Credit Suisse Securities is the latest company to settle “MegaClaim” litigation stemming from the Enron bankruptcy.Under the settlement, the former Credit Suisse First Boston agreed to pay Enron $90 million and forgo about $337 million in claims against the Enron estate. The agreement must still ...

By Stephen Taub • May 11, 2006

Union Lawyer, Midcap CFO Clash on 404

See our special report on “The 404 Debate.”The May 10 roundtable on second-year experiences with Sarbox 404 compliance ended with a bang, as a representative of organized labor clashed with a CFO arguing the case for small companies. The issue: whether the internal-controls requirements should be...

By David Katz • May 10, 2006

Revise 404 for the Market, Panelists Say

See our special report on “The 404 Debate.”While Section 404 of the Sarbanes-Oxley Act has helped boost investor confidence in the U.S. capital markets, there could be improvements in disclosure and in the internal-controls assessment and reporting regime, panelists stated during the fourth panel...

By Helen Shaw • May 10, 2006

More 404 Guidance, Please

See our special report on “The 404 Debate.”Speakers at the first panel of the Securities and Exchange Commission/Public Company Accounting Oversight Board roundtable on Section 404 requested management-specific guidance for the internal-controls assessment process and raised the hope that such gu...

By Helen Shaw • May 10, 2006

Cry of Pain from Small Companies

See our special report on “The 404 Debate.”Noting that he was “the only officer of a small public company on any of the panels,” Dr. Stephen Sherwin, CEO of Cell Genesys, launched a soft-spoken but biting complaint about the impact of Section 404 of the Sarbanes-Oxley Act.Speaking during the seco...

By Tim Reason • May 10, 2006

Material Weakness at the Roundtable

See our special report on “The 404 Debate.”Regulators were asked to go back to the drawing board by panelists speaking out about second-year experiences related to Section 404 of the Sarbanes-Oxley Act. Many panelists — including corporate-governance gurus Barbara Hackman Franklin and Mary K. Bus...

By Marie Leone • May 10, 2006

SEC Contemplates Auditorless World

See our special report on “The 404 Debate.”What if there weren’t any auditors?The question, asked by Scott Taub, the acting chief accountant of the Securities and Exchange Commission, might have been purely hypothetical. But participants at a May 10 panel on management’s role in assessing and eva...

By David Katz • May 10, 2006

Section 404, Year Three: Ready for IT?

See our special report on “The 404 Debate.”At CBS, managers are satisfied with the media giant’s progress in developing and refining business processes to comply with Section 404 of the Sarbanes-Oxley Act. But before the information-technology systems used in the controls process attain a similar...

By Marie Leone • May 10, 2006

Panel: Don’t Audit Low-level Risks

See our special report on “The 404 Debate.”“Don’t sweat the low-risk accounts” was the message from companies to regulators during a roundtable on the second-year experiences of Section 404 implementation. Panel participants said they would like to see more qualitative factors considered during 4...

By Marie Leone • May 10, 2006

404 Makes an IPO: Mission Impossible

As a backdrop for Tom Cruise in Mission: Impossible III, satellite images of “enemy surveillance” and “global reconnaissance” are scattered about a dimly-lit, futuristic control room. The set may be a Hollywood fantasy, but the software generating the clandestine images is real, and supplied by d...

By Marie Leone • May 9, 2006

Gemstar Ex-CEO Ordered to Pay $22 Million

A federal judge has ordered Henry Yuen, former chief executive officer of Gemstar-TV Guide International, to pay $22 million to settle civil charges stemming from his role in the company’s accounting scandal, according to published reports.The sum includes penalties, interest and a return of ill-...

By Stephen Taub • May 9, 2006

Ex-CFO of HealthSouth Faces Resentencing

A federal appeals court ruling may send Malcolm McVay to prison after all, according to the Daily Business Review, a South Florida-based legal and business newspaper.McVay — one of five former chief financial officers charged in connection with the $2.7 billion accounting scandal at HealthSouth ...

By Stephen Taub • May 8, 2006

Enron Defense Rests

Examine our Enron archive“I’m sure on January 31, you thought this day would not arrive,” Judge Sim Lake told jurors Monday at the trial of Kenneth Lay and Jeffrey Skilling, reported the Houston Chronicle.The 53-day trial has been adjourned until May 15, when closing arguments are scheduled to be...

By Stephen Taub • May 8, 2006