On February 3, 2012, the U.S. Court of Appeals for the 1st Circuit reversed a March 2010 decision in Lawson v. FMR LLC, ruling that the Sarbanes-Oxley whistleblower provision does not cover employees of a public company’s contractor or subcontractor if the employees report violations. The plaintiffs, Jackie Lawson and Jonathan Zang, each claimed their respective firings were a form of retaliation. Both of the companies for which they were employed operate under the Fidelity Investments family, and both worked for Fidelity mutual funds companies. Looking at the language of Sarbanes-Oxley and its legislative intent, the Court found that because Congress had explicitly enacted broader whistleblower protection elsewhere, it would have done so in regards to contractors of public companies if it so had the intent. (more…)
Today we continue our weekly installment highlighting the best of the corporate and securities blogosphere for the past week. If you have other blog suggestions for us to check out, please feel free to put them in the comments!
1) FCPA Professor: DOJ Prosecution Of Individuals – Are Other Factors At Play? – Since 2008, the DOJ has criminally charged 64 individuals with FCPA offenses. 60% of the individuals charged have been in just three cases and 78% of the individuals charged by the DOJ since 2008 have been in just six cases. Mike Koehler finds these stats surprising and in this post he examines whether there are “two tiers of justice” in FCPA prosecution and what other factors might be behind these numbers.
2) FEI Financial Reporting Blog: Sarbanes-Oxley Section 404: Will We See More? – In recent testimony, the SEC’s Meredith Cross noted that the Dodd-Frank Act amended SOX by exempting non-accelerated filers. After performing a Dodd-Frank mandated study, the SEC concluded there should be no further exemptions given. In this post, Edith Orenstein examines Cross’s testimony and looks at various proposals that members of Congress have circulated to further amend SOX Section 404 as well as the opinions of interested groups such as the CFA Institute, the Center for Audit Quality, and the Council of Institutional Investors. (more…)
The following memo discussing the SEC’s recent case against Beazer Homes’ James O’Leary and the history of the history of SEC’s use of clawbacks under Section 304 was sent in by our friends at Wilson Sonsini Goodrich & Rosati.
Background: SEC v. O’Leary
On August 30, 2011, the Securities and Exchange Commission (SEC) announced a settlement with James O’Leary, the former chief financial officer of Beazer Homes USA, to recover approximately $1.4 million in cash bonuses, incentive and equity-based compensation, and profits from his sale of Beazer stock during the period of time that the SEC alleged an individual at Beazer—but not O’Leary—was committing “accounting misconduct.”  The SEC’s complaint alleged that Beazer engaged in accounting misconduct by (i) artificially establishing and maintaining certain reserve accounts and (ii) recognizing revenue and income from a sale-leaseback arrangement in a manner that was not compliant with generally accepted accounting principles (GAAP). The SEC’s complaint further alleged that this accounting misconduct was reflected in Beazer’s 2006 financial statements filed with the SEC. Beazer was required to file accounting restatements of its 2006 financial statements. (more…)