Category Archives: Accounting Fraud

SEC Considers Returning to Its Roots

By David Smyth on June 17th, 2013 Posted in Accounting Fraud, Financial Fraud, SEC Structure

The SEC has recently taken a well-deserved beating for its lack of attention to financial fraud at publicly traded companies. The numbers speak for themselves. In 2012, the SEC brought 79 financial fraud cases, when in years past the annual number has pushed or exceeded 200. Granted, the Commission has a lot of things on… Continue Reading

Keeping Internal Investigations Independent and Conflict-Free

By David Smyth and Kearns Davis on May 23rd, 2013 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

By David Smyth on April 3rd, 2013 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

By David Smyth on November 9th, 2012 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

By David Smyth on October 27th, 2012 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 Lays Out Standards for 102(e) Proceedings

By David Smyth on October 14th, 2012 Posted in Accounting Fraud, SEC Litigation

One of my favorite things as a legal researcher is when a court does my work for me. It doesn’t happen often, but sometimes a court takes a complicated subject and outlines the law with sufficient supporting authority to give comfort that by studying the opinion, readers have gotten a good start on understanding that… Continue Reading

SEC’s Secret Payments Brigade Marches On

By David Smyth on September 18th, 2012 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

Second Circuit Eases Aiding and Abetting Standard for SEC

By David Smyth on August 14th, 2012 Posted in Accounting Fraud, Financial Fraud, SEC Litigation

To prove an aiding and abetting claim against a defendant, the SEC has to prove three things: (1) a securities law violation by a primary party; (2) knowledge of the violation by the aider and abettor; and (3) “substantial assistance” by the aider and abettor in the achievement of the primary violation. It is a… Continue Reading

Even Domestic Bribery Falls within the SEC’s Jurisdiction

By David Smyth on July 16th, 2012 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’s Individual Cooperation Program Gets off the Ground

By David Smyth on April 15th, 2012 Posted in Accounting Fraud, Cooperation

At times, the SEC staff is confronted with investigations in which an individual seems likely to have quite a bit of information about the investigation’s core matters but little or no responsibility for any misconduct. Not so long ago, when trying to collect information from those people, the staff really had only one option: subpoena… Continue Reading

SEC Charges Thornburg Mortgage Executives with Financial Fraud

By David Smyth on March 30th, 2012 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

By David Smyth on February 24th, 2012 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