Comments on: This Is What SARBOX Is For . . . Beazer

By: sparrowsfall

sparrowsfall — Thu, 19 Nov 2009 14:23:35 +0000

I remain constantly mystified: whey aren’t shareholders–the board–the ones demanding these bonus clawbacks?

By: Transor Z

Transor Z — Wed, 18 Nov 2009 19:53:49 +0000

You want to finish the criminal before the civil because facts established at trial on the criminal side can stand up on the civil side but not vice versa. But as we know now, the SEC has a habit of only pursuing civil actions, unless you’re Mark Cuban.

The SEC sucks. They really do. Go take a look at the SDNY judge’s denial of the proposed SEC-BoA settlement agreement from a couple of months ago for more stuff to give you a migraine.

By: TDL

TDL — Wed, 18 Nov 2009 19:04:53 +0000

A quick follow up. Below is a link to the SEC charge against the former CAO of BZH. The manipulation alleged should, at some point, been identified by the CFO and/or the CEO.

Regards,
TDL

http://sec.gov/litigation/litreleases/2009/lr21114.htm

By: TDL

TDL — Wed, 18 Nov 2009 18:56:12 +0000

Let me understand this correctly. A company (in this case BZH) restates earnings for the past 7 years and the CEO is unaware and is not implicated in a crime? 7 years of manipulating earnings implies that it was a corporate strategy; if it was a corporate strategy that means the C-Level execs. agreed to it, at least implicitly. If note, than the C-Level execs. were incompetent (i.e. misleading investors in believing that they knew what they were doing.) It seems as though SOX is an excuse not prosecute the CEO (& other execs.) as opposed to being an effective tool to protect the small guy investor.

BR, I’m surprised that you are using this case as support for SOX. As a regular basher of this silly piece of legislation it is another mark against it because this time it is being used to protect a potential perpetrator of fraud (and by what seems to be the SEC desire not pursue criminal action this may be the case.) SOX is garbage, the half millennium old common law concept of fraud is not garbage however. As opposed to more regulation (when indeed we should have less), maybe the enforcement of existing laws would be more effective and less costly.

Also, 53% of BZH stock (as of the most recent reporting) was held by institutions (and only a minority of that group seems to be index funds.) What are the chances that percentage was higher in the bubble days? Once again, the great fraudsters known as institutional money managers & mutual funds go unmolested.

By the way, how can massive restatements not be “a lack of due care”?

Regards,
TDL

By: torrie-amos

torrie-amos — Wed, 18 Nov 2009 15:48:18 +0000

SOX, lol, shareholders pay for huge insurance policies for ceo’s, cfo’s, etc. so they are not liable

By: tawm

tawm — Wed, 18 Nov 2009 15:27:54 +0000

This application of SARBOX, if it in fact comes to fruition, is a good thing. Clawback earnings-based compensation to shareholders! But SARBOX adds many other layers of bureacratic and regulatory requirements which are not productive. It is an overly-blunt instrument, which on the whole is ye t another lawyer full-employment act.

By: redtox

redtox — Wed, 18 Nov 2009 14:57:43 +0000

Good point Barry, but there’s a further justification as well. Remember that SOX was passed after Enron and Worldcom executives got before Congress and claimed they had no idea what was going on with the accounting – that it just wasn’t their job. SOX was supposed to make it their job, by making them personally liable in case of fraud. In effect, part of a CEO’s job is now supposed to be to ensure fraud doesn’t occur on their watch – whether through sufficient internal controls or direct personal oversight or whatever. The argument “I didn’t have anything to do with it” doesn’t fly.

By: MRegan

MRegan — Wed, 18 Nov 2009 14:54:19 +0000

RW-

Thanks for the clarification.

http://www.sox-online.com/act_section_802.html

(a) IN GENERAL- Chapter 73 of title 18, United States Code, is amended by adding at the end the following:`Sec. 1519. Destruction, alteration, or falsification of records in Federal investigations and bankruptcy. `Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.`Sec. 1520. Destruction of corporate audit records

By: Transor Z

Transor Z — Wed, 18 Nov 2009 14:42:03 +0000

What happened to all of the traders who used to kibbitz during the day on TBP? Have they all moved on?

By: TaurenHunter

TaurenHunter — Wed, 18 Nov 2009 14:33:29 +0000

Mr. Ritholtz, you’re pulling at straws.

It is a law that hurts people who are working honestly: how many other companies did not restate their earnings and yet are penalized with all these compliance costs and useless red tape?

How do you like stop-and-go traffic? Stop-and-go traffic on a manual shift car while going uphill… That is how it is like trying to comply with Sarbox and yet be productive in your business.

Ultimately, all the Sarbox costs are being paid by the shareholders in added costs deducted from the company’s earnings and by the customers in higher prices.

Where is the article that you published yesterday about the horrible job the Fed has done in keeping the purchasing power of the USD, Mr. “Regular Fed Basher”?
Why do you still put that much faith in yet another government agency?

Sarbox = CPA full employment act, an useless bureaucracy like the Fed.