Word: sec
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Though by far the most visible, the WorldCom duo wasn't the only prey: telecom firm Qwest, already under investigation by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), is close to restating the past three years of earnings by more than $1 billion; apparel maker Warnaco is now in the SEC's cross hairs; and prosecutors were driving a hard bargain in plea negotiations with ImClone's ex-CEO Samuel Waksal, insisting that he accept at least seven years in prison on insider-trading charges and declining to spare his family members from prosecution...
...latest addition to the Justice Department's list is AOL Time Warner, TIME's parent company. Justice confirmed last week that it would follow up on the SEC's investigation into how the company's AOL division accounted for some $270 million in revenue over the past two years. The amount involved is almost trivial in a $38 billion-a-year company, but the implications are not. The agencies are investigating whether AOL executives contrived to misstate advertising revenues to puff up the performance of AOL just as it was closing its merger with Time Warner. AOL Time Warner...
...actions last week underlined an unusually high level of cooperation between Justice and the SEC, which has limited subpoena powers and a more complex bureaucracy to navigate. Attorney General John Ashcroft emphatically announced that Justice was raising the stakes, declaring that "corrupt corporate executives are no better than common thieves when they betray their employees and steal from their investors." He noted that the WorldCom executives could face as much as 65 years in prison, which legal experts dismissed as prosecutorial hyperbole. Yet as former federal prosecutor and Los Angeles white-collar defense lawyer Mark Beck notes, "The criminal sanction...
...conviction is even tougher if independent auditors or outside lawyers have signed off on the accounting methods in question. Although in theory compliance with GAAP (generally accepted accounting principles) "cannot be used as a cover," says retired Judge Stanley Sporkin, prosecutors have generally ceded the territory to the SEC for civil action, if any at all. As the President himself said in defending his tenure as a director at Harken Energy, "In the corporate world, sometimes things aren't exactly black and white when it comes to accounting procedures." Expect to hear those words echoed by defense lawyers many times...
...were very focused on questions of tax shelters, very focused on questions on regulatory havens…very focused on the questions of dirty money,” Summers said. “In terms of questions of the integrity of the market, we worked closely with the SEC [and] that brought to light the auditor independence set of issues...