Nice try losers.
In what has to be an especially shameful blow to the SEC’s confidence, a Dallas judge has tossed the civil-insider trading lawsuit against Mark Cuban.
As much as we would like to see Cuban squirm, the Judge basically told the SEC they got nada. The SEC, re-thinking its career choice, did not immediately return calls for comment.
Judge Dismisses SEC Insider-Trading Case Against Mark Cuban [WSJ]
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SEC: Diebold Financial Execs Would Step Over Their Own Mothers to Meet Earnings Forecasts
The Diebold CFO, controller and Director of Corporate Accounting had a fairly standard routine back from 2002 to 2007 – 1) get daily “flash reports” 2) look at BS estimates that analysts came up with 3) cook up some ideas for meeting those estimates 4) make up the numbers.
Pretty standard stuff, especially if you buy the idea that “legally cooking the books is a critical skill for attracting investors.”
The SEC presented the accounting hocus-pocus earlier today:
The SEC alleges that Diebold’s financial management received “flash reports” — sometimes on a daily basis — comparing the company’s actual earnings to analyst earnings forecasts. Diebold’s financial management prepared “opportunity lists” of ways to close the gap between the company’s actual financial results and analyst forecasts. Many of the opportunities on these lists were fraudulent accounting transactions designed to improperly recognize revenue or otherwise inflate Diebold’s financial performance.
…
Among the fraudulent accounting practices used to inflate earnings and meet forecasts were:• Improper use of “bill and hold” accounting.
• Recognition of revenue on a lease agreement subject to a side buy-back agreement.
• Manipulating reserves and accruals.
• Improperly delaying and capitalizing expenses.
• Writing up the value of used inventory.
Gotta give yourself some options, amiright? Can’t just simply rely on channel stuffing!
But in all seriousness, if you’re a top financial executive at a company and part of your daily routine is finding ways to increase profitability through accounting manipulation, at some point you’d have to think to yourself, “This is one shitty business we’re running.”
Goldman Sachs May Inspire a Redefinition of “Fiduciary Duty”
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
One bit of commentary I’ve noticed in the blogosphere following yesterday’s Goldman show is that the bank could toggle back and forth between being an investment advisor and a broker dealer when it came to any fiduciary duty it owed to investors in its crappy mortgage deals.
That may or may not be a loophole that needs closing, as Senator Collins’ line of inquiry suggested. Surely, banks like Goldman shouldn’t be able to use it as such.
But it’s important to remember that this is not an issue in the SEC’s case against the bank.
Take another look at the complaint. It charges Goldman with violations of three specific provisions of the securities laws, Section 17 (a) of the Securities Act of 1933 and Section 10 (b) and Rule 10-b (5) of the Securities Exchange Act of 1934. All of them relate to deceit, plain and simple.
Here’s the exact wording from the complaint: Goldman, the SEC charges, “employed devices, schemes or artifices to defraud, made untrue statements of material facts or omissions of material facts necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or engaged in transactions, practices or courses of business which operated or would operate as a fraud or deceit upon persons.”
Nope, nothing about fiduciary duty there.
Goldman’s defense here, essentially, is that the bank didn’t have to disclose those facts the SEC refers to, because the investors in the deal in question were sophisticated or already knew or should have known that another party that was betting against them had helped select the portfolio, and that any other information it failed to disclose wasn’t material.
Nothing about fiduciary duty there, either.
So while the back and forth over that issue may be important to any legislation aimed at reforming such practices, it’s not strictly relevant to the legal case.
Of course, we’re talking about a jury trial here, so the atmospherics surrounding the case, including what the bank should have done that it wasn’t legally required to do, aren’t totally irrelevant.
Anyway, I was somewhat puzzled over the significance of the fiduciary issue when I stumbled across it earlier this morning. And I figured others might be as well.
EY’s Top In-House Lawyer Just Quit
EY US Vice Chair & General Counsel Ann Cook is saying goodbye to the firm […]