First CEO, CFO Fines Levied Under Sarbanes-Oxley

The first fines have been levied under the Sarbanes-Oxley Act on Chief Executive Officers who sign off on financial statements knowing they are not accurate. Poultry firm Rica Foods Inc., and its top two officers settled federal charges this week.

Chief Executive Calixto Chaves and Chief Financial Officer Gina Sequeira settled the charges, with Chaves agreeing to pay a $25,000 fine. Sequeira cooperated with the SEC and will not be required to pay a fine. The two executives and the company itself agreed to be subjected to stiffer future penalties if they violate SEC laws again. The two, who are Costa Rican residents, did not admit to or deny the charges.

According to Reuters, the charges were that the officials certified the accuracy of the company’s annual financial statements, knowing they did not include the required independent audit report. According to the SEC, Rica submitted a 10K annual statement in January that the company said included a report from Deloitte & Touche. The 10K said the company had complied with generally accepted accounting principles (GAAP), but at the time the 10K was filed, Deloitte had not submitted a signed audit report and the SEC claimed that Rica’s statements were erroneous.

This type of executive misbehavior was at the heart of the reforms mandated by Sarbanes-Oxley, including the two signed certifications of financial statements by top officers.

Dow Jones News reported that Rica Foods, which is based in Miami, grows chickens in Costa Rica by way of its Pipasa and As de Oros units. The firm supplies chicken to McDonald's, Burger King and KFC, according to its website.

Rica’s troubles may be just beginning. The company said that it was notified on July 7 that the American Stock Exchange believes it is no longer in compliance with the exchange's listing standards. The ASE is taking steps to have it delisted from the exchange. The company plans to appeal.


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