If someone asks you to “alter” or “fudge” a financial metric reported to the market, take pause. Or hit the big red button.
“Witness: Magnate Knew of Altered Metric,” The Wall Street Journal, June 28, 2017 B9. The chairman of a large company allegedly knew that one of the financial metrics the company reported to the market for the previous quarter was improperly inflated. Or fudged, as they say in the trade. By $12 million.
The former chief accounting officer took a plea to fraud (and admitted to lying on other matters) and is cooperating with the government; the former CFO is charged with criminal fraud and is at trial. The company is “cooperating.” The chairman hasn’t been charged. Yet.
Why isn’t the company charged? At least one of its agents appears to have committed a fraud. Why isn’t the chairman charged, if he knew? Is this consistent with the Yates memo? Is there a civil (derivative) suit against the chairman?
Filed under Accuracy, Board, Collect, Communicate, Compliance, Compliance, Compliance, Controls, Corporation, Directors, Duty, Duty of Care, Employees, Governance, Inform market, Internal controls, Management, Oversight, Oversight
I was otherwise engaged last week and missed posting. Here are some catch-ups.
- Comey – reportedly, former FBI Director wrote memos to the file on his conversations with the President. Two points: just because you write something, doesn’t mean it’s true – that’s why you have hearsay rules and cross-examination. Doesn’t mean it’s not true, either. Also, interesting question in the area of obstruction of justice: if what was written was not 100% accurate, are there implications for the former Director under 18 USC §1519? “Trump Asked Comey to Drop Probe,” The Wall Street Journal, May 17, 2017 A1.
- “Tests Show More American Workers Using Drugs,” The Wall Street Journal, May 17, 2017 B1. Does your company have a drug policy that your employees are violating?
- “Putin Says Trump Divulged No Secrets,” The Wall Street Journal, May 18, 2017 A6.
- “Cover-Up Alleged In Probe Of Attack,” The Wall Street Journal, May 18, 2017 A7. Criminal complaint by Berlin filed against police investigators, alleging documents were altered.
- VW (the adventure continues) – The VW CEO and a few others (including Board members) are being investigated over whether they intentionally withheld information about the diesel emission testing scandal from investors. “Inquiry Targets Volkswagen CEO,” The Wall Street Journal, May 18, 2017 B1.
- “Uber Threatens to Ax Executive,” The Wall Street Journal, May 20, 2017 B3. Company threatens to fire executive (hired from Alphabet) if he doesn’t turn over documents. No Fifth Amendment protections against getting fired?
Filed under Accuracy, Board, Communications, Compliance, Compliance, Content, Controls, Corporation, Directors, Discovery, Duty, Employees, Governance, Government, Inform market, Inform shareholders, Internal controls, Investor relations, Oversight, Privacy, Protect assets, Protect information assets
Can you get too much information? Yes.
“KPMG Fires Partners Over Leak,” The Wall Street Journal, April 12, 2017 B1. KPMG fired 5 partners, including the head of the audit practice and the national managing partner for audit quality and professional practice(and the vice chairman of audit, after information from the PCAOB (a regulatory oversight agency) was leaked by a now-former PCAOB employee. (BTW, they also audited Wells Fargo when the account cramming was going on, among others).
Unusual to learn of the firing of partners, and the details. One might surmise KPMG indeed has zero tolerance, at least when there’s no apparent defense.
Another in the long line of crises around information mismanagement.
Filed under Board, Compliance, Compliance, Controls, Corporation, Culture, Duty, Employees, Governance, Government, Inform market, Inform shareholders, Internal controls, Investor relations, Oversight, Oversight, Supervision
If a corporation fails to raise “‘known trends or uncertainties'” in securities filings, has it committed fraud against third parties?
“High Court To Weigh Corporate Omissions,” The Wall Street Journal, March 28, 2017 A2. Supreme Court to hear a case involving suit by investors against company for omissions in public filings, otherwise the purview of the SEC.
So, does this mean that unspoken information is “information” subject to government regulation or third-party litigation?
Filed under Accuracy, Board, Communications, Corporation, Definition, Duty, Governance, Inform market, Inform shareholders, Information, Oversight
Say your mortgage company is highly regarded in part because of your low customer default rate. Say as well that your low customer default rate is because you pay off some of the mortgages that otherwise would be in default. Is that kosher?
“Lender Masked Borrower Debt Woes,” The Wall Street Journal, March 9, 2017 B1. Renovate America Inc., which is involved in solar panel financing, paid off customer debts (secured by their homes) to avoid having to report defaults (or, perhaps, to avoid the customers’ making complaints to the state governments behind the loans). How will investors in your company react to the news? If it’s only a hundred customers out of 90,000? $175,000 versus $1 million?
Is it material? Not the amount of the repayments but the mere fact that the company was making any such payments? Surprised by the fact that the allegations come from three former members of the company’s compliance department? What else aren’t you being told?
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“Former SunEdison Executives File Suit,” The Wall Street Journal, February 25, 23017 B3. Company allegedly told a different story to investors than it was discussing internally, and managers were instructed to make more optimistic projections. Two executives took their concerns to the Board, and were then replaced.
Employees have a duty to report concerns upwards. The company has a duty to its shareholders and to the market to disclose material information. Directors have a duty to the corporation and its shareholders to provide oversight and to handle reports of wrongdoing appropriately.
Watch this space. A chance for a Maryland court to look at Caremark, a Delaware case dealing with a director’s duty to provide oversight, and how derivative actions get decided.
Filed under Board, Compliance, Corporation, Directors, Duty, Employees, Governance, Inform market, Inform shareholders, Investor relations, Oversight, Supervision, To report
As The Wall Street Journal says, “In these days of alternative facts, some companies are pushing alternative accounting.” “Watch Out for ‘Tailored’ Results,” The Wall Street Journal, February 24, 2017 B12.
When a company departs from the usual way of reporting something (watch for “non-GAAP”), it may not be to provide you deeper insight. But you knew that.
Filed under Accuracy, Analytics, Board, Communications, Compliance, Compliance, Corporation, Data quality, Directors, Duty, Governance, Inform market, Inform shareholders, Investor relations, Oversight, Oversight