SEC

Community News

Denver Accounting Firm Settles SEC Case

Denver-based Levine Hughes & Mithuen settled a Securities and Exchange Commission complaint related to its audit work, paying a $50,000 fine and neither admitting nor denying wrongdoing, the Rocky Mountain News reported.The firm was accused by the SEC of destroying documents and altering work papers as the SEC investigated Sport-Haley Inc., a client of Levine Hughes & Mithuen, which is ranked as the 19th largest accounting firm in the Denver area.As part of the settlement, the firm agreed not to practice accounting before the SEC, but it can apply to be reinstated in three years.

The Year of Internal Control: The Clock Is Ticking for Sarbanes-Oxley Compliance

by J. Stephen McNally, CPAMany companies are aggressively documenting, assessing, and testing their internal controls for financial reporting and disclosure to ensure compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Even companies that are not required to comply with this law are reviewing their internal control environments, recognizing that adequate internal controls are a prerequisite for long-term business continuity.
Community News

SEC Chair Subject of Probe by His Own Agency

The Securities and Exchange Commission is looking into accounting irregularities at a technology company whose audit committee once included SEC Chairman William Donaldson.According to anonymous sources cited by the Wall Street Journal, the accounting problems at EasyLink Services Corp.
Tax

Banc One Unit Agrees to Pay $50M to Settle SEC Fraud Charges

The Securities and Exchange Commission (SEC) announced on Tuesday a settled enforcement action against Banc One Investment Advisors Corporation (BOIA), a registered investment adviser based in Columbus, Ohio, and Mark A. Beeson, age 46, of Westerville, Ohio, former President and CEO of One Group Mutual Funds (One Group) and Senior Managing Director of BOIA.
Tax

SEC Settles Insider Trading Matter against Former FleetBoston Employee

The Commission announced that a Massachusetts federal court has entered a final judgment against Guillermo Garcia Simon, a former FleetBoston Financial Group employee residing in Buenes Aires, Argentina, in connection with his trading in the securities of FleetBoston in advance of the announcement of its acquisition by Bank of America Corporation. Under the terms of the final judgment, entered by consent, Simon was ordered to pay approximately $525,000 in disgorgement, interest, and a penalty.

Prison Terms Begin for 3 Ex-Rite Aid Executives

Three former Rite Aid Corp. executives turned themselves in Monday to begin serving prison time for their part in an accounting scandal that involved overstating earnings by $1.6 billion in the late 1990s.Former chief executive Martin L. Grass, 50, the son of the company’s founder who was forced out in October 1999, started serving eight years at the federal prison camp at the Eglin Air Force Base in Florida, the Associated Press reported. He pleaded guilty to conspiracy to defraud and conspiracy to obstruct justice. David P.

Gemstar-TV Guide Settles SEC Action for $10M

On Wednesday, The Securities and Exchange Commission filed a complaint in federal court in Los Angeles charging Gemstar-TV Guide International, Inc. with improperly reporting its highly touted interactive program guide licensing and advertising revenues in its financial statements from 1999 through 2002.Gemstar agreed to settle the case by, among other things, paying a $10 million civil penalty. That money will be distributed to harmed shareholders pursuant to Section 308 of the Sarbanes-Oxley Act of 2002.
Community News

SEC, PCAOB Offer FAQs on Auditing Standard No. 2

The Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) have released two sets of frequently asked questions to help practitioners implement the new auditing standard approved by the SEC this week.Auditing Standard No.
A&A

SEC Says Mutual Funds Must Have Independent Chairmen

After a vigorous debate, the Securities and Exchange Commission squeaked through a rule change that will require mutual-fund companies to have independent chairmen.The changes approved Wednesday, on a 3-2 vote, will also require 75 percent of fund seats be filled with independent directors, who must hold meetings separate from fund management, the Wall Street Journal reported.
Tax

Embattled HealthSouth Names New Chief Operating Officer

HealthSouth Corp. announced this week the appointment of Mike Snow, age 49, to the position of Chief Operating Officer (COO), effective June 30, 2004. Snow, who most recently served as the President of the Gulf Coast Division of HCA, will be responsible for the day-to-day operations of the company on an ongoing basis. Snow has an extensive background in the healthcare industry.

Mutual Fund Agrees to Pay $100 Million to Settle Improper Trade Practices

This week, Pilgrim Baxter & Associates, investment advisor to the PBHG Funds, confirmed that the firm has reached agreements with the U.S. Securities and Exchange Commission (SEC) and the Office of the New York State Attorney General to settle charges related to past trading activity. The settlement agreements address past trading activity in the PBHG Funds, which led to the appointment of new leadership at Pilgrim Baxter in November 2003.

Financial Planners Say SEC Brokerage Proposal Unfair

Financial planners are urging the Securities and Exchange Commission to fix a problem it created when it developed a proposal allowing brokers to act as financial advisors in some cases.That was in 1999.

SEC Approves PCAOB Auditing Standard No. 2

The Public Company Accounting Oversight Board (PCAOB) announced that its Auditing Standard No. 2, "An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements," has been approved by the Securities and Exchange Commission (SEC). The PCAOB expects to publish staff guidance regarding implementation of the standard. “This standard is one of the most important and far-reaching auditing standards the Board will ever adopt,” said PCAOB Chairman William J. McDonough.

Past Scandals Make Securities Law More Enticing for Many

With the recent swell in accounting scandals, securities law has become an increasingly enticing profession for current and upcoming lawyers. Private firms are willing to pay hefty prices for lawyers that specialize in securities-fraud law, especially those with experience at the Securities and Exchange Commission (SEC). This experience is extremely valuable to many corporations as the demand for lawyers to assist with fraud continues to shoot upward.
Practice

SEC Cracking Down on Contingency Fee, Independence

The U.S. Securities and Exchange Commission, acting to preserve auditor independence, is making sure the nation’s largest accounting firms are getting the message that accepting contingency fees for doing tax work for the companies they audit is not allowed.SEC Chief Accountant Donald Nicolaisen held a private meeting last week with the seven largest firms and the American Institute of Certified Public Accountants where he reinforced the SEC’s position on the contingency fee issue.
A&A

SEC, NASD Release Report on Broker-Dealer Sales of Variable Insurance Products

The Securities and Exchange Commission (SEC) and NASD today released a joint staff report on the findings of their examinations of broker-dealer sales of variable annuities and variable life insurance.

i2 Technologies Settles Fraud Charges Involving $1B in Misstatements

The Securities and Exchange Commission this week brought enforcement proceedings against i2 Technologies, Inc. for misstating approximately $1 billion of software license revenues, including over $125 million of revenues it should never have recognized, over a nearly five-year period that ended in 2002. As a result of the misstatement, i2's periodic filings with the Commission and press releases - which portrayed i2's revenue and pro forma income positively - were false.
Community News

Proxy Plan Puts SEC Chairman in the Hot Seat

Pressure is building for Securities and Exchange Commission Chairman William H. Donaldson, who is trying to reform corporate board election processes amid intense lobbying.Business groups strongly oppose the election plan and one has threatened to sue. The commission itself is divided, and the proposal has generated 16,000 comment letters.
Tax

Ex-CEO of Long Island Tech Company Declared Fugitive

The indicted former chief executive of Symbol Technologies Inc. was declared a fugitive Wednesday after apparently returning to his native Croatia and refusing to return to the U.S.Tomo Razmilovic’s lawyer told federal prosecutors that his client would not face arraignment, the Associated Press reported. He had been living in England since leaving the company two years ago, and prosecutors believe he left for Croatia.The former president of the Long Island-based maker of bar-code scanners and wireless networks faces securities fraud and other charges.
Tax

SEC Starts Informal Inquiry into E&Y Consultant Pay

The Securities and Exchange Commission is looking into whether Ernst & Young LLP’s independence was impaired when it paid $377,500 to a consultant that served on the boards of three companies it audited.The companies are executive-search firm Korn/Ferry International, retailer Best Buy Co. and TeleTech Holdings Inc., which runs telephone call centers, the Wall Street Journal reported. Mark C. Thompson, who calls himself a "leadership development" consultant, sat on the boards of the three companies while working for Ernst & Young.

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