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Cady Bar the Door Insight & Commentary on SEC Enforcement Actions and Related Issues

Category Archives: Accounting Fraud

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SEC Sanctions Auditor, Should Make Small Issuers Think Twice

Posted in Accounting Fraud, Auditors

The SEC brought a settled administrative action against an auditor on October 24th.  Often I’ll take a case like this and write something about it to warn other auditors (or investment advisers or broker-dealers, or whomever) from similar behavior.  But you know what?  No.  It’s too dumb. Law Here’s the relevant law:  Section 10A(j) of… Continue Reading

Keeping Internal Investigations Independent and Conflict-Free

Posted in Accounting Fraud, Auditors, Financial Fraud, Investigations

Internal investigations can arise in a number of different ways and can concern a number of different subjects.  Allegations of financial misconduct, employment-related missteps, and breaches of fiduciary duty, among others, can all lead a company in that direction.  Grand jury subpoenas, search warrants, target letters, media reports, whistleblower claims, audit reports, and routine risk… Continue Reading

Accounting Fraud Not Just for Public Companies Anymore

Posted in Accounting Fraud, Investment Advisers, Non-scienter-based Violations, Private Equity

One of the salient features of the SEC’s enforcement program in recent years has been a dearth of accounting fraud cases.  While those cases used to be the SEC’s bread and butter, and hovered around 200 actions per year, they have dropped off dramatically since 2007, and hit a low of 79 last year.  Only… Continue Reading

SEC Sues Auditor for Failing to Audit

Posted in Accounting Fraud, Auditors, Financial Fraud, Microcap Fraud, Non-scienter-based Violations

This world has a lot of problems that require fixing, but I dare say that scratch-off lottery tickets is not one of them.  Still, that is the problem that Lee Cole and Linden Boyne ventured to solve through Electronic Game Card, Inc. (EGMI), a company that tried to develop credit card-sized electronic games that could… Continue Reading

Saturday Links

Posted in Accounting Fraud, Broker-Dealers, Compliance

Good morning!  Some stories for you to read today: The Legal Times reports that Harvey Pitt says the SEC has been saddled with an impossible job in writing rules to implement the JOBS Act.  At an ABA conference in D.C., he said, ”We’ll see some sort of scandal rise and of course everyone will blame the… Continue Reading

SEC’s Secret Payments Brigade Marches On

Posted in Accounting Fraud, Whistleblowers

On Monday the SEC’s Miami Regional Office brought a settled enforcement action against Gilbert Fiorentino, a former director and officer of Systemax, Inc., a Long Island-based company that sells personal computers and other consumer electronics through its websites, retail stores, and direct mail catalogs.  The SEC’s complaint alleges that over the five years from 2006… Continue Reading

Even Domestic Bribery Falls within the SEC’s Jurisdiction

Posted in Accounting Fraud, FCPA

Much ink has been spilled in recent years discussing the SEC’s and Justice Department’s focus on the Foreign Corrupt Practices Act, a law that prohibits paying bribes to foreign government officials.  While the federal criminal code has provisions prohibiting bribery of domestic public officials, see 18 U.S.C. § 201, domestic bribery has rarely been a… Continue Reading

SEC Charges Thornburg Mortgage Executives with Financial Fraud

Posted in Accounting Fraud, Auditors, Financial Fraud, SEC Litigation

Perhaps the SEC, at least for the time being, is finding its groove with respect to financial fraud matters.  For the second time in a two-month span, the Commission has brought a case for fraudulent disclosures regarding the health of a residential loan portfolio.  In January, the SEC filed suit against Florida-based BankAtlantic and its… Continue Reading

SEC Sues BankAtlantic for Mischaracterizing Its Residential Loan Portfolio

Posted in Accounting Fraud, Financial Fraud

A curious aspect of the SEC’s enforcement program in recent years has been the lack of significant accounting fraud cases.  The Enforcement Division has created a number of specialized units, including ones studying structured products and hedge funds, but dismantled its financial fraud task force in 2010, reasoning that accounting fraud was the specialty of… Continue Reading