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February 6, 2023

What Would You Say if Someone Told You That a Trustee of the Financial Accounting Foundation Was on the Audit Committee of Morgan Keegan During a Huge Accounting Scandal?

Maybe, "Oh, that's fascinating." Perhaps, "Can't say that I'm surprised." Or, probably more likely, "Will this affect my raise?"

Jonathan Weil has the story of Mary Stone, who is a trustee of the Financial Accounting Foundation, but prior to her appointment was an audit committee of Morgan Keegan & Co. when a bunch of their mutual funds blew up in an accounting scandal. Stone and seven other former Morgan Keegan directors were charged this week by the SEC for being not-so-good being directors. And then:

After the SEC’s enforcement division filed its claims on Dec. 10, the foundation issued a news release saying Stone had requested and been granted a leave of absence from its board of trustees. It didn’t say why. The SEC previously had accused the funds of fraudulently overstating their asset values.
That the foundation appointed Stone to its board in the first place was a serious lapse. It was a matter of public record when Stone was selected that she had been the funds’ audit-committee chairman during the time when the SEC said the fraud occurred. The SEC filed its complaint accusing Morgan Keegan and two employees of accounting fraud in April 2010. Stone was named a trustee of the accounting foundation in November 2010, while the SEC’s investigation was ongoing.
Okay, but "Chair of audit committee of company currently under investigation for accounting malfeasance" is not something she would have had on her résumé or LinkedIn profile or anything. Gosh.


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