Some Basics About Sarbanes-Oxley

Standard

Say it fast five times: Sarbanes-Oxley, Sarbanes-Oxley, Sarbanes-Oxley, Sarbanes-Oxley, Sarbanes-Oxley… If you’re like me, you’re sick of hearing these words.

Lots of people, however, don’t have the first idea what the Sarbanes-Oxley Act of 2002 is really about. I think the public-at-large thinks it’s legislation that stops fraud. That couldn’t be further from the truth.

It is true that Sarbanes-Oxley (also fondly referred to as SOX or SarbOx) was meant to protect investors in public companies. It set forth some standards and certain procedures that public companies are required to abide by.

But the legislation itself requires far less than many people believe it does. At the end of the day, the regulations require companies to document their processes and disclose whether or not their internal controls are working. It doesn’t actually force them to materially improve the internal controls. (See my article What Has Sarbanes-Oxley Done For You Lately? for more of my opinions on this.)

So what does Sarbanes-Oxley require? Continue reading

The REAL “Flip This House” is coming back!

Standard

You heard it right! Not those scam artists from San Antonio and Atlanta. This is “The Real Deal.” Quite literally. Richard Davis, his sidekick Ginger, and the rest of the Trademark Properties team are going back on the air (this time with a contract) and I can’t wait! I’ve learned from WallStreetFighter that Richard and Ginger and crew will be on TLC starting March 10th.

From Time Warner Cable:

The Real Deal
Airs Saturdays, March 10th, 9p-10p ET (60 min.)

The Real Deal is the non-stop new series from TLC that takes us inside the world of Trademark Properties for an eye opening and unapologetic look at the true reality of making money in real estate by pulling off the impossible. Each week Team Trademark, led by Richard Davis locate, renovate and if they can pull it off on time and under budget, profit from some of the most challenging projects they can find.

Best of luck to Richard and everyone. I am so glad you’re back!

UPDATE: MediaWeek is reporting that the show will actually begin airing in April.

Microsoft Vista and Office 2007 banned…

Standard

According to InformationWeek, The U.S. Department of Transportation has banned upgrades to Microsoft Windows Vista, Internet Explorer 7 and Office 2007. This ban will be for an indefinite period of time. According to InformationWeek:

The agency has an “indefinite moratorium” on upgrades because “there appears to be no compelling technical or business case for upgrading,” CIO Daniel Mintz says in a Jan. 19 staff memo obtained by InformationWeek. In addition, there are “specific reasons not to upgrade,” he says, referring to compatibility with apps, upgrade costs, and an upcoming move to a new headquarters. The ban applies to 15,000 DOT users who now use Windows XP Professional. The memo indicates that a similar ban is in effect at the Federal Aviation Administration, which has 45,000 desktop users.

A friend of mine who is running Vista on a new laptop computer (because there was no other option when purchasing the machine) has had nothing but trouble. The number of bugs in Microsoft Vista are apparently staggering, and compatibility issues with software packages are out of control. What a nightmare!

Dennis Troha indicted on federal charges

Standard

Dennis Troha has been federally indicted on one count of fraud and one count of making a false statement to the FBI. It is alleged that Troha used a business entity called Johnson Houston Partners to give family members over $100,000 to make campaign contributions. These contributions were made in order to receive an Indian gaming compact.

The FBI interviewed Troha on January 12, 2007, and he stated that there was no link between the distributions of money from the Johnson Houston Partnership and campaign contributions made by family members.

Troha recently withdrew from an $808 million tribal casino project after investing millions of dollars and several years of his life. He faces up to 25 years in prison and a fine of $500,000.

Auditors have a duty to correct a false audit report

Standard

This information was posted Monday on Blawgletter:

The Second Circuit today held an auditor potentially liable for federal [tag]securities fraud[/tag] if it doesn’t correct a false or misleading report on its [tag]audit[/tag]. The court said:

The precise issue on appeal is whether an auditor may incur primary liability under § 10(b) and Rule 10b-5 when the auditor provides a certified opinion that is false or misleading when issued, subsequently learns or was reckless in not learning that the earlier statement was false or misleading, knows or should know that potential investors are relying on the opinion, yet fails to take reasonable steps to correct or withdraw its opinion and/or the underlying financial statements. We hold that under such circumstances, an auditor becomes primarily liable for securities fraud, assuming all the other elements of a securities fraud claim are present. Since the complaint pleads precisely this theory of liability, we vacate the District Court’s dismissal and remand for further proceedings consistent with this opinion.

Overton v. Todman & Co., CPAs, P.C., No. 06-2496-cv (2d Cir. Feb. 26, 2007).

I think it is safe to say that this decision will definitely have an impact on the future of independent audits.

Restraining Order Issued Against Michael McGee (Jackson)

Standard

Milwaukee alderman Michael McGee (Jackson) has been issued a restraining order for harassing Leon Todd, a man involved in the effort to recall McGee/Jackson and to expose him for the thug and scofflaw that he is. McGee/Jackson is notorious for his criminal behavior, and these threats come as no surprise.

The restraining order is currently temporary, and there will be a hearing on March 13 to determine if it should be made permanent. In December, McGee/Jackson made a statement on his father’s radio show that Todd should be “hung” for his “betrayal of the community.”

Todd has also allegedly receiving harassing phone calls, some with death threats. The restraining order prohibits McGee/Jackson from contacting Todd in any way, or from having any third parties contact him on McGee/Jackson’s behalf. Not that something like this would ever stop McGee/Jackson.

Online steroid ring busted

Standard

Two facilities in Florida were raided in a steroid bust, and four people were arrested as a part of it. The raids happened at two Signature Pharmacy stores, and the company officials arrested were charged with criminal diversion of prescription medications and prescriptions, criminal sale of a controlled substance and insurance fraud.

The four officials who are considered the “producers” of the drugs included Stan and Naomi Loomis (owners of Signature Pharmacy in downtown Orlando), Stan’s brother Mike Loomis, and Kirk Calvert (Signature’s marketing director). Also arrested were three “distributors” from a Texas company called Cellular Nucleonic Advantage. More charges are expected.

The steroid investigation was based out of New York. The investigators found that testosterone and “performance enhancing” drugs were being fraudulently prescribed over the internet to professional althletes, college athletes, high school coaches, and a couple of bodybuilders.

While no customer names were given by the investigators, a secret source revealed that Angels outfielder Garry Matthews Jr. was one of them. The investigators have spoken with Richard Rydze, a team doctor for the Pittsburgh Steelers who allegedly used a personal credit card to purchase $150,000 in testosterone and human growth hormone in 2006.

McAfee’s former general counsel indicted

Standard

Kent Roberts, the former general counsel at McAfee Inc. (fka Network Associates) was charged with seven criminal counts of fraud, nine months after being fired for improper handling of stock options. The charges include manipulating the value of his own stock options to increase his profits and then falsifying records to cover up this misconduct. Roberts faces up to 20 years in prison and as much as a $5 million fine.

Roberts was allegedly part of an ethics committee formed by McAfee in 2002, related to some of the prior accounting problems at the company.

At one point, Roberts was granted 20,000 stock options which carried an exercise price of $29.62. In late 2000, Roberts allegedly altered the exercise price to $19.75. In a 2002 internal investigation, Roberts allegedly recommended that the controller who helped in this alteration be removed from the finance department. It is further alleged that in the same year, Roberts helped to backdate 420,000 stock options owned by George Samenuk, the former chairman and CEO.

It is estimated that McAfee will have to incur a non-cash charge of about $100 million to $150 million to correct this problem.

Starting a Business — And Not a Legal Battle

Standard

How to quit your job, compete with your old boss, and not get sued

Entrepreneur.com
By Geoff Williams

Some bridges are merely burned. Others are scorched.

Elaine Browne and her business partners, Federico Lupo and Dario Arias, knew the latter applied to them shortly after opening their New York City hair salon, Trillium. “We found out we were being sued during our second week when the affidavit came,” says Browne. “We were shocked.”

The reason for the lawsuit? Browne, Lupo and Arias, sensitive types who will only cop to being in their 30s and 40s, worked together for years at a hair salon known as the John Sahag Workshop before collectively quitting and creating a new company–effectively competing with their former salon.

It’s a common gripe among many business owners. You hire employees, teach them everything you know and groom them for a long future at your business. Then one day, they’re out the door, starting their own business with an indirect mission: to compete with you. Continue reading