Category: CFOs

Memo to CFOs: Layoffs, Frozen Salaries Don’t Always Save the Most Money

Layoffs, pay freezes, pay cuts. Pretty simple cost cutting solutions for CFOs who’ve got tight budgets. Unfortunately, the slash and burn tactics for personnel may have been better applied in another area – inventory.

A recent survey performed by Greenwich Associates of midsized and small company “financial decision-makers” found that, in particular, midsized companies ($10 million to $500 million in revenue) that reduced their inventory, on average, saved 30% more ($520k inventory vs. $400 layoffs).

While that’s great news, the unfortunate part is that only 17% of the companies survey bothered with that particular cost saving strategy while 47% of those survey used “staffing reductions.”


The survey also found that while 37% of used pay freezes to reduced costs with an averaged savings of $245,000. Crunching the numbers, that’s nearly 53% less savings than the inventory reduction savings.

Of course, not all companies have inventory in the dusty-stacks-of-pallets-in-a-warehouse sense. This is especially true of the professional services/financial services area where, unfortunately, the staff are sometimes considered to be inventory.

Lesson from the Downturn: Cut Inventory, Not People [CFO]

CFO: Philips’ Efforts Have Company Moving Up the Outsourcing Ladder

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

As a follow-up to last week’s blog on Molson Coors’ experience with outsourcing, the CFO of the Latin American division of Dutch comglomerate Philips provided a different perspective Thursday morning at the Hackett Group’s best practices conference in Atlanta.

While Molson Coors’ CFO Stewart Glendinning expressed disappointment over high turnover rates at the outsourcing company the beer company signed up with, Philips’ Latin American CFO Ronald Eikelenboom said he planned on high turnover when he inked a deal with Indian outsourcer Infosys in late 2008 to expand the two companies’ relationship to Brazil, where Philips’ Latin American operations are based.


Eikelenboom told the audience (and me in a follow up video interview that will be posted shortly) that high turnover was central to Infosys’ business model, as the outsourcer keeps salary costs low by rotating from older to younger workers. But that turnover was priced into the terms of the deal, which at $250 million (for, I believe, the global contract, not just the Latin American part) is considered one of the largest of all such transactions. Too, the terms set a minimum level of performance, so it’s up to Infosys to manage the downside of high turnover.

Infosys had few qualms about Philips’ demands, said Eikelenboom, because the company was eager to expand into Brazil and the Philips deal gave it an entrée. So the CFO had enough leverage with the outsourcer to reassure himself about the potential risks.

“We’re building something together with Infosys,” he told the gathering. “We share the same aspirations.”

For that reason, Eikelenboom also expressed less concern than Glendinning did about outsourcing complex financial processes. And he said that was important for Philips as labor cost advantages in emerging markets dwindle over time as wages rise, and innovation and process improvement thus become more critical to the value that outsourcing creates.

“We’re moving up the ladder in BPO,” he said, referring to business process outsourcing.

With outsourcing, as with everything, I suppose, it’s different strokes for different folks.

You Can Forget About Landing That CFO Position at the SEC

Mary Schapiro took some time out of her fraud fighting Friday to ask Kenneth Johnson to quit acting as the Commission’s CFO and to take on the official responsibility of running the Office of Financial Management.

Mr Johnson (KenJo?) vehemently accepted the offer and threw in a shout out to the boss, “I’m honored to accept this new role at such an important time for the agency. Chairman Schapiro is deeply committed to strong financial management, and I’m proud to lead the agency’s initiatives in this area.”


Presumably, the CFO position isn’t a kicking-down-doors type job so Johnson’s first order of business should be to determine the savings on a group rate at one porn site that can appropriate service all tastes.

Washington, D.C., May 21, 2010 — Securities and Exchange Commission Chairman Mary L. Schapiro today announced that Kenneth A. Johnson has been named Chief Financial Officer for the agency.

Mr. Johnson has been serving as acting CFO for much of the past year. The agency’s CFO is responsible for leading its Office of Financial Management, which handles the budget, finance, and accounting operations for the SEC.

“I’m delighted that Ken has agreed to take on this role at the SEC,” said Chairman Schapiro. “His deep experience in the financial arena will be incredibly valuable as we grow as an agency.”

Mr. Johnson added, “I’m honored to accept this new role at such an important time for the agency. Chairman Schapiro is deeply committed to strong financial management, and I’m proud to lead the agency’s initiatives in this area.”

Mr. Johnson, 37, joined the SEC in 2003 as a Management Analyst in the Office of the Executive Director. In that role, he advised on all aspects of the budget process, developed strategy initiatives, and responded to inquiries from the Office of Management and Budget (OMB) and Congress regarding the SEC’s budget and financial operations. He became Chief Management Analyst in 2006.

Mr. Johnson has served as a valuable staff expert on legislative proposals, and he managed the development of the SEC’s long-range Strategic Plan that would guide agency policy through 2015.

Prior to joining the SEC staff, Mr. Johnson worked as a Commerce Analyst at the Congressional Budget Office. His primary responsibility in that role was to analyze and report on the budgetary effects of committee-approved legislation.

Mr. Johnson earned his Masters in Public Policy from the Kennedy School of Government at Harvard University, and earned his BA at Stanford University.

Abercrombie & Fitch’s Jonathan Ramsden: CFOs Need to Challenge Conventions

Jonathan Ramsden has been Executive Vice President and Chief Financial Officer of Abercrombie & Fitch since December 2008 and is a key part of a team trying to guide the retailer’s global expansion while managing something of a remake of its domestic operations. Going Concern caught up with him recently to find out how he sees A&F’s business and what else is on his mind.


Prior to joining Abercrombie & Fitch, Ramsden was CFO of TBWA Worldwide, a global marketing services company with operations in over 70 countries. He began his career with Arthur Andersen, spending nine years in the firm’s London and New York offices. He is a graduate of Oxford University and a UK Chartered Accountant. Jonathan lives in Columbus, Ohio, with his wife and threng>Going Concern: I’ve got to start by asking how analysts got Abercrombie’s early-year outlook so wrong. One early year report out in the Wall Street Journal anticipated an ugly same-store-sales decline, and the next day you post an 8% increase in January sales in stores open at least one year. February and March were good for you too. Why the gulf between predictions and performance?

Ramsden: Our business improved at the beginning of the year and, since we don’t give forward looking guidance, the analyst consensus was modeling a continuation of the prior trend. We have also consistently said that one or two months do not constitute a trend, and that month to month results may be volatile. Our focus is less on monthly sales figures than doing what we think is right for the long-term health of the brands and the business.

Going Concern: Do you see it as part of your job to find metrics that allow shareholders and analysts to make more accurate predictions and better comparisons, or does that really fall beyond the CFO’s purview? What can you do as CFO to help people better understand the company’s business?

Ramsden: We try to provide data that enables shareholders and analysts to understand the underlying dynamics of the business. Since the beginning of last year we have not been giving forward looking guidance on sales or earnings since we think that implies a degree of precision about future results we have not had in the environment we have been through.

Going Concern: How do you expect Abercrombie to perform this year overall?

Ramsden: We feel very good about our international business, which continues to affirm the global appeal of our brands. We have been through a challenging time domestically, but are working hard to improve the domestic trend of the business. Protecting the global appeal of our brands remains a paramount objective, and we have been willing to take some pain domestically to do that.

Going Concern: Is it fair to say that the growth will now come overseas? Expanding abroad can be fruitful, but it’s also a big investment. What if sales soften more quickly than expected?

Ramsden: We do believe that the future of our business is tied to our international strategy. At the same time, if we can achieve a sustained improvement in our domestic productivity, that will be very significant to both sales and earnings. There are certainly risks associated with an international expansion, but we have been very encouraged by the results so far.

Going Concern: There seems to be a wane in the company’s popularity here in the States. Does the company agree with that statement and what’s being done to address it?

Ramsden: We believe that our brands retain a strong appeal. 2009 was a challenging year in the US, but we think we can improve the domestic business going forward. Firstly, we continue to work on our pricing. Secondly, there are a number of initiatives in place on the marketing front that we think will help us to better connect with our core customer. We feel better about the assortment than we have in some time. Lastly, we expect that we will need to close a number of stores that don’t really fit in the portfolio, particularly for the A&F brand.

Going Concern: Has Abercrombie & Fitch actually cut costs over the last couple of years? How involved have you been in that and can you explain a little about the process behind identifying excess cost in the business?

Ramsden: We went through a reorganization of our corporate “Home Office” about a year ago, which included some significant lay-offs. The company had never been through anything like that before so it was a difficult process, but we believe the company will be more efficient as a result. The entire leadership group was involved in the process. At the store level, on an ongoing basis we have been looking to find efficiencies in variable costs such as store payroll, packaging, supplies and so on. The biggest component of the margin erosion we have incurred has been in store occupancy costs (rent, depreciation etc) which are relatively fixed in the short term, but which we think we can make progress on over time, including through store closures where appropriate.

Going Concern: What are your biggest challenges as CFO with respect to financial reporting in the coming year?

Ramsden: As we roll out internationally, we have to ensure that our local reporting is to the same standard as our US reporting. In addition, the international rollout adds to the complexity of our US reporting.

Going Concern: Have you started laying the groundwork for converting to IFRS? If so, when do believe the conversion will be complete? Can you give us a sense of the scale of this task and who is helping you with it?

Ramsden: We have done our initial assessment of what would be required to convert. The area of greatest complexity for us would be moving from the retail to the cost method of accounting for inventory.

Going Concern: A recent survey by Financial Executives International/Baruch college stated that only 44% of CFOs anticipate an increase in their hiring and that 25% expect to cut back on their rate of hiring? What kind of cost saving measures (as they relate to employees) did A&F utilize in 2009? Have economic conditions improved to the point that further cost saving measures (e.g. salary freezes, layoffs, reduced working hours) won’t be necessary? What are A&F’s plans with regard to hiring for 2010?

Ramsden: During 2009, as well as layoffs, we took a number of other measure such as deferring and reducing raise pools and reducing retirement plan contributions. Our current direction is a gradual return to normalcy. We are hiring where we need to, while seeking to keep the overall headcount close to the current level.

Going Concern: You were previously a CFO at a global marketing-services company. How difficult did you find it moving sectors? What are the main differences you see between overseeing the finances of a services operation as opposed to a retail operation? (What would you say to a senior level business finance executive who is switching business sectors?)

Ramsden: There are some significant commonalities. Both A&F and TBWA are full of creative, energized and driven people. During the ten years I was at TBWA, we were seeking to build a cohesive global brand. For A&F, the next 10 years are also going to be about international expansion. The starting points are quite different, but many of the challenges of running a global business are the same. I think there are a core set of CFO skills that are transferable and that make up a significant part of the CFO role in any organization. Industry knowledge is definitely valuable, but coming from a fresh perspective also has some value. Clearly there is also a huge amount of instituational and industry knowledge at A&F.

Going Concern: In overall terms, how do you view your role as CFO?

Ramsden: There are some things that are black and white, but most are not. As the CFO, you need to be surrounded by people and processes you trust. Good processes will take care of the black and white stuff, and having people you trust in key positions will take care of most of the rest. So you have to have complete confidence in the people you work with, and you have to ensure that systems and processes are effective. The CFO also needs to challenge conventions.

Outsourcing Has Yielded Mixed Results So Far, Says Molson Coors CFO

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

I’m down at the Hackett Group’s best practices conference in Atlanta and just finished a video interview with Stewart Glendinning, CFO of Molson Coors, on the topic of outsourcing.

While the video won’t be up for awhile, I can report that Glendinning wowed the crowd of 250 or so finance executives in attendance this morning with a frank keynote address on the subject.

He essentially warned the audience that outsourcing is hardly the no brainer that everyone – from Wall Street analysts to third-party service providers – makes it out to be.


While the CFO stood by Molson Coors’ decision to outsource most if not all of its information technology, finance and HR functions in 2008, he conceded that the arrangement has yet to live up to billing.

The decision followed the merger of Molson and Coors in 2005, which was expected to produce roughly $180 million in cost savings. And while outsourcing has helped produce some of that, Glendinning – who was appointed CFO of the combined companies two years ago – acknowledged the arrangement with its vendor hasn’t been all smooth sailing. (He identified the outsourcer by name, but I’m leaving that out just to avoid starting an argument between the two.)

As a result of higher than expected turnover, largely in the vendor’s Indian and Costa Rican operations, for example, some of the labor savings that the outsourcer promised have failed to materialize. Glendinning said annual turnover in those two locations has run as high as 100 percent.

As a result, the CFO said the company was “a little shy” of the savings initially projected for the deal, due to project scope and implementation costs. He said that he would have to revisit some of these issue once the contract comes up for renegotiation in 2013. “You have to keep taking cost out,” he said.

In addition, Glendinning said that during the ramp up phase the arrangement produced higher-than-expected error rates in certain financial processes, and those produced an unwelcome payables backlog that threatened the company’s supply chain. And while he said some of the fault was that of Molson Coors, Glendinning noted that the outsourcer failed to bring it to the company’s attention, largely because of what Glendinning described as “reticence” on the part of its Indian employees to challenge their client.

While Glendinning said Molson Coors’ move to outsource was “the right decision nonetheless,” he cautioned the audience that there are a host of issues that finance executives must consider before going forward with such deals.

In particular, he noted that unlike IT or HR, more complicated, “sensitive” financial processes such as pricing and customer management probably should not be turned over to a third party.

“It’s not black and white,” he said about the decision to outsource. “There is a lot of gray in between.”

Pros and Cons of the CFO Serving on the Board of Directors

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

While shareholders and Sarbanes-Oxley demand more independent directors on boards, a new study shows companies with boards that have at least one key insider, the CFO, are better at financial reporting than those without that executive on their boards. But that doesn’t necessarily mean that all companies should appoint their CFOs to their boards, not at least without taking other considerations seriously into account. In fact, most companies probablelsewhere for the expertise that CFOs supply.


The study found that companies with CFOs on their boards have more effective internal controls over financial reporting, higher accrual quality and a lower likelihood of restatements.

The study measured the quality of financial reporting by examining the incidence of material weaknesses reported under Section 404 of Sarbanes-Oxley. The provisions require companies to document and test internal control over financial reporting, and the company’s independent auditor to independently test those controls and opine on internal control effectiveness.

“One overarching benefit we saw was that there was an improvement in financial reporting when a CFO was on the board,” Rani Hoitash, a professor in the department of accountancy at Bentley University and co-author along with professors Jean Bedard of Bentley and Udi Hoitash, of Northeastern University, “Chief Financial Officers on Their Company’s Board of Directors: An Examination of Financial Reporting Quality and Entrenchment,” told CFOZone.

From 2004 to 2007, 12 percent of those with a CFO on the board reported problems with their internal controls, compared with 15 percent of those without their CFOs on the board, according to the study. Companies with their CFOs on their boards were also 15 percent less likely to restate their results.

These results imply that having a CFO on the board is more likely to align management’s interests with those of shareholders. One reason, the study says, is that CFOs are more likely to share information with other board members about the status of the financial reporting function, and secure sufficient resources to invest in the establishment, documentation and testing of internal controls.

Yet only 8 percent of the more than 7,000 companies studied had their own CFOs on the board.

Of course, SarBox says a CFO can’t serve on his or her company’s audit committee because of the obvious conflict of interest. But as Hoitash points out, “they can have input.”

And SarBox also requires a board to have financial expertise. A CFO obviously fits that bill.

But having a CFO on the board is not without its drawbacks. CFOs serving on boards are more highly compensated than those in other companies, earning an average of $218,715, or 34 percent more in total compensation than their nondirector peers did. There was also a 35 percent lower turnover rate, 8.2 percent compared to 12.7 percent, among CFOs who sat on their own companies’ boards, an advantage that sometimes existed despite a decline in earnings. Hoitash said the findings were evidence that CFOs who serve on boards are more firmly entrenched than those who are not.

That can be a good or bad, depending on a company’s performance. While in many cases where companies are performing poorly, they will fire the CFO without addressing the underlying causes, Hoitash noted that the opposite is true in cases where the CFO is on the board, and that’s obviously not a good thing either. “If the CFO is on the board and the company is performing poorly we found that they sometimes don’t leave, because they have power and influence,” he said.

The question is, will they use the power to do good or bad?” asked Hoitash. If they see themselves as part of the board and work to achieve goals, that is clearly a good thing. However, that power could also be used in their interest to the detriment of shareholders.

That makes some observers wary of appointing CFOs to boards. Instead, say these observers, they should merely attend all board meetings so as to share their expertise without becoming entrenched. “Look back in history, what transgressions brought us to Sarbanes-Oxley and other regulatory reforms?” asked Marc Palker, a certified management accountant and director of CFO Consulting Partners. “Once the CFO was granted stock options in the same manner as the CEO, there was a possible partnership for crime,” Palker added.

Others go even further by recommending that CFOs not attend meetings devoted to discussions of the company’s finance functions. In that case, “it might be appropriate to hold them without the CFO present,” said Sue Mills, a consultant with Tatum, an executive services firm that provides interim CFOs.

Bottom line: CFOs don’t belong on boards unless they cannot otherwise get financial expertise. In that case, Hoitash said, “you might want” to consider the idea.

Survey: CFOs Don’t Think You Should Start Your Career at a Big 4 Firm

Accountemps released the results of a survey today that shows many Chief Financial Officers think that the best place for accounting graduates to start their careers is in a “small to midsize company.” The surprising thing about this particular survey is that the numbers aren’t even close.

When CFOs were asked, “In which one of the following employment environments would you recommend today’s accounting graduates begin their careers?” Their responses were:

Small to midsize company 56%
Small to midsize public accounting firm 16%
Large corporation 14%
Large public accounting firm 8%
Other/don’t know 6%


“Small to midsize public accounting firm” dropped 14% from 2005.

Oh right. And “large public accounting firm” came in dead last. So, for the CFOs surveyed, they’re not really hot on public accounting like they were five years ago and they’re really not crazy about the Big 4 and next tier firms.

Accountemps Chairman Max Messmer says, “At smaller companies, employees often must wear many hats because workloads are spread between fewer workers. Having a wider range of duties enables new hires to quickly build skills, gain exposure to diverse areas of the business and assume strategic roles earlier in their careers.”

From a personal standpoint, we’ve seen both the small and the freakishly large so we’ll try to provide some perspective here.

Maximilian’s thoughts are accurate as it relates to smaller companies. They do have more of a sink or you’re out on your ass approach that will help you grow up quick in that company. Additionally, small businesses have the tendency to be a little more flexible when it comes to your work/life balance. There aren’t any fancy initiatives or bombardments of emails; it’s more of the behavior of those around you. In small companies, you see people taking vacation for days and weeks at at time. That should encourage you to do the same.

At large companies, you hear about people that are losing their accrued vacation, mostly because they are lunatics, but also because it’s likely a widespread occurrence at the company. People in large firms have the asinine notion that somehow the wheels would fall off if they were to disappear for two days, forget about a week. This sounds ridiculous but it’s true.

However, large firms and companies do have resources and opportunities that smaller shops simply cannot provide. Want to move to San Francisco? Your large firm has an office there. Think you might want to spend two years in Australia? Your large company can make that happen. Small shops? Not so much.

What the press release doesn’t say is why the CFOs think you should start at a small/midsize company. Max’s opinion is fine but did he conduct all 1,400 of those phone interviews himself? Of course not. The survey was “a random sample of [CFOs at] U.S. companies with 20 or more employees.” Chances are, most of those CFOs have never worked at a big company so their perspective is likely skewed.

The other thing is – trying not to overstate this – you’ve got to make up your own damn mind about what you want to do with yourself. Do you want Big 4 experience? Then go for it. Do you want a flexible schedule that doesn’t involve a multi-level bureaucracy? Then a small company is probably more your speed.

No survey can answer those questions for you.

THINK SMALL: CFOs Recommend Accounting Grads Start Their Careers at Smaller Companies [Accountemps PR]

The BNY Mellon CFO Isn’t Mad at Andrew Cuomo…

…just disappointed about Andy getting all sue-y over BNY Mellon’s Ivy Asset Management’s involvement with Berns Madoff, which will result in more money going to – SHOCK – lawyers.

Bank of New York Mellon Corp.’s (BK) Chief Financial Officer Todd Gibbons told investors Wednesday that the company is “a bit disappointed” about the New York Attorney General’s decision to file a law suit against the bank related to Bernard Madoff’s Ponzi-scheme.

But as a result of the suit, and the current environment more broadly, legal cost are expected to run higher, the CFO said at UBS AG’s (UBS) Global Financial Services Conference in New York.

Grant Thornton Survey Shows That CFOs Might Be Ignoring the SEC’s XBRL Deadline

It has been well established in these pages and elsewhere that the SEC has had its share of problems. Take your pick: 1) missing the biggest financial fraud in the history of the world 2) hiring an army of porn-addicted accountants and lawyers to protect our markets 3) waffling on IFRS 4) did we mention missing huge frauds?

To be fair, the Commission has been working hard to redeem itself by cracking down on dubious activity (from Goldman to Overstock), hiring more fraud experts and giving those tranny porn-obsessed employees a second chance.


Regardless of the turnaround-in-progress, CFOs in this country seem to have ceased taking the SEC seriously. Sure the 10-Ks and Qs still get filed but those were in place long before the wheels fell off.

In a recent survey, Grant Thornton found that, despite a SEC deadline for public companies to utilize eXtensible Business Reporting Language (XBRL), a fair amount of CFOs don’t seem all that worried about reporting their financial statements using the technology:

64 percent of public companies do not currently report financial results using eXtensible Business Reporting Language (XBRL); and of those, half have no plans to in the future even though the SEC mandated that public companies have to report their financials using Interactive Data by 2011.

“It’s concerning that almost a third of public companies still have no plan on using XBRL to report their financials despite the requirement that all public companies comply with XBRL filing requirements by mid-year 2011,” said Sean Denham, a partner in Grant Thornton’s Professional Standards Group and a member of the AICPA’s XBRL Task Force. “I foresee a lot of companies playing catch up as the 2011 SEC deadline approaches.”

Whether this lack of action can be attributed to defiance, fear of technology, or pure laziness is not explained but we wouldn’t rule out the possibility that the SEC has an outright mutiny on its hands.

A third of public companies have no plans to use XBRL – despite SEC mandate requiring XBRL use by 2011 [GT Press Release]
Also see: XBR-Lax [CFO Blog]

REMEC Court Decision Could Expose Companies to More Accounting Fraud Litigation

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

As if it wasn’t a big enough risk already, CFOs may have to brace themselves for more private litigation over accounting fraud if a court decision on April 21 involving failed telecom equipment maker REMEC serves as precedent. The good news is that plaintiffs will have to show evidence of the executives’ intent in such cases.


Most cases involving accounting are either dismissed because they involve judgment or are settled before they go to trial, Robert Brownlie, a partner in the law firm of DLA Piper who represented the defendants in the REMEC case, told CFOZone last Thursday. The Del Mar, Calif., company filed for bankruptcy in 2005.

One of the largest such cases involved former Lucent executives, whom shareholders charged had defrauded them through improper accounting for goodwill. In that case, shareholders agreed in 2003 to accept a $600 million settlement.

In contrast to the Lucent case, the one filed by shareholders against REMEC’s former CEO, Ronald Ragland, and former CFO, Winston Hickman, was dismissed, though it also rested on charges that they misled investors because they didn’t write off goodwill that was impaired.

But the dismissal was more difficult to achieve than it would otherwise have been, said Brownlie, because the plaintiffs submitted evidence of internal reports and testimony showing that the company was behind schedule on certain objectives and not meeting its internal forecasts. The court said that those reports created a factual issue that should be determined by a jury; the defendants had to show there was no evidence of intent to deceive on the part of management.

“Normally, with matters of opinion or judgment, you either can’t bring a suit or it’s very difficult to do so,” Brownlie said. But he warned that the decision could mean more cases against corporate executives over accounting fraud.

The court dismissed the charges even though the plaintiffs’ accounting experts testified that they would have reached different conclusions than the former executives did.

Brownlie added that his case was helped by evidence of good faith conduct by the defendants, including evidence of transparency between the company and its auditors, disclosures of disappointing results and write-offs of other accounting items during the period of the alleged fraud and the absence of stock sales.

Describing the outcome for CFOs as “both good and bad news,” Brownlie said the decision showed that the critical issue in such cases will be “a connection between claims and evidence.” And he cautioned that in other accounting cases, it’s likely to be harder to defend executives on the basis of intent, which is why he said “there’s a paradox” in the REMEC decision.

SEC Wins Backdating Case Against Former Maxim CFO

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

The SEC, under attack last week for its Goldman lawsuit and porn allegations, late Friday finally had a victory to celebrate.

Carl Jasper, the former chief financial officer of Maxim Integrated Products was found liable for securities fraud in a stock-option backdating lawsuit filed by the SEC’s San Francisco office, according to Bloomberg.

Carl Jasper, the former chief financial officer of Maxim Integrated Products was found liable for securitioption backdating lawsuit filed by the SEC’s San Francisco office, according to Bloomberg.

It was a rare civil jury trial involving backdating allegations.

Even rarer, it was the second backdating case decided in a court in one week.

Earlier in the week the former CEO of KB Home was convicted of four felony counts in a criminal stock option backdating case.

In the Jasper case, the former finance executive of the maker of chips for laptop computers was found liable on eight out of 11 counts, and cleared him on three, according to The Recorder. Bloomberg said he was found liable for fraud, lying to auditors, and aiding Maxim’s failure to maintain accurate books and records.

“We are pleased that a jury sitting in the heart of Silicon Valley recognized that stock-option backdating is, in fact, a fraudulent practice that matters to investors, and that Mr. Jasper, as the CFO of a public company, was ultimately responsible for misleading investors about the accuracy of Maxim’s financial reports,” Mark Fickes, trial counsel for the SEC, told the wire service in an e-mail statement after the eight-day trial.

Jasper’s lawyer, Steven Bauer, told Bloomberg in an e-mail he will ask the judge to overrule the jury verdict at a May 24 hearing. “Carl Jasper is a good man who never intended to do anything wrong,” he reportedly said. “This is the first step in a long road, and we are confident that in the end he will prevail.”

In late 2007, the SEC filed civil charges against Maxim, Jasper and former chief executive officer John F. Gifford, alleging that they reported false financial information to investors by improperly backdating stock option grants to Maxim employees and directors.

The Commission alleged that Jasper helped the company fraudulently conceal tens of millions of dollars in compensation expenses through the use of backdated, “in-the-money” option grants.

In a separate action, Gifford agreed to pay more than $800,000 in disgorgement, interest, and penalties to settle charges relating to his role in the options backdating.

Maxim, without admitting or denying the Commission’s allegations, consented to a permanent injunction against violations of the antifraud and other provisions of the federal securities laws.

The Commission’s complaints also alleged that Jasper was aware of the improper backdating practices, drafted backdated grant approval documents for Maxim’s CEO to sign, and disregarded instructions from CEO Gifford to record an expense in connection with certain backdated options. According to the Commission, Gifford should have known that the company was not reporting expenses for those in-the-money stock options and instead was falsely reporting that they were granted at fair market value.

According to The Recorder, in his opening statement at the trial, Bauer said Gifford, who is now deceased, was to blame for the backdating and not Jasper.”You can’t talk about options at Maxim without talking about Mr. Gifford,” Bauer reportedly told the court. “You can’t talk about picking dates without talking about Mr. Gifford.”

The SEC is seeking injunctive relief, disgorgement of wrongful profits, a civil penalty, and an order barring Jasper from acting as an officer or director of a public company.

Early last week, Bruce Karatz, the former CEO of KB Home was convicted of four felony counts in a stock option backdating case. He was found guilty of two counts of mail fraud, one count of lying to company accountants and one count of making false statements in reports to the Securities and Exchange Commission, according to published reports.

He was acquitted on 16 other counts, including mail and wire fraud, securities fraud and filing false proxy statements, according to Bloomberg.

He faces up to 60 years in prison when he is sentenced.

Has Florida CFO Alex Sink Watched Scarface Too Many Times?

It’s been a while since we shared some cost saving ingenuity from Florida’s CFO–cum-Gubernatorial candidate, Alex Sink. However, this time we learn how she managed to spend some of those savings.

According to the Politics blog of the South Florida Sun-Sentinel, CFO Sink’s Department of Financial Services has “purchased 182 assault rifles – costing $255,000, according to Sink’s office – in the last two years.” When you Google “assault rifle” one of the first links takes you to this.


A spokesman for the wannabe Guv made it plain for those GOP haters (who are all of a sudden against guns?) trying to block Sink from purchasing more BFGs:

The rifles are necessary to protect fraud investigators who deal with “dangerous people,” said spokesman Kevin Cate – arsonists, sophisticated car insurance fraudsters, money launderers. If Republican legislators are taking a shot at Sink with the assault-weapon purchasing ban, “that’s a shot at officer security,” Cate said.

Sink said: “I rely on my law enforcement people to evaluate what the risks are and what they need. I’m going to do everything possible to protect them.”

Look. We’ve got no doubt that some white-collar criminals are dangerous but this seems a tad ridiculous.

On the other hand, since it is South Florida and basically anything can happen (including 10 – 26% returns on arbitraging groceries) perhaps this type of firepower is necessary.