In July of last year, the Attorney General of Texas filed a lawsuit against multi-level marketing company Mannatech (NASDAQ:MTEX), alleging the company used illegal sales and marketing practices.
Then in August, the company’s CEO, Sam Caster, stepped down. Although he resigned as CEO, he stayed on as chairman of the board.
In October, Grant Thornton, the company’s auditing firm, was fired. Mannatech issued a press release which stated that Grant Thornton was dismissed because they wanted the company to relieve Sam Caster of all duties, and the board said no. Mannatech said there were no disagreements about accounting principles or audit matters. Continue reading
The fines levied by the Securities and Exchange commission have fallen to their lowest level since 2002. Bloomberg reports that “fewer billion-dollar accounting-fraud cases” and “new policies for fining companies” are to blame.
For the year ended September 30, the SEC issued $1.6 billion in fines, compared to $3 billion in each of the two previous years.
One expert says this is because the cases being investigated by the SEC are smaller and that the SEC has adopted a new stance on penalizing companies, since the penalties ultimately hurt the investors.
Two of the larger fines in 2006 were issued against American International Group (AIG) and Fannie Mae, at $800 million and $400 million, respectively. 2007’s fines include $50 million against Freddie Mac, $45 million against ConAgra Foods, $81 million against HealthSouth founder Richard Scrushy, and $208 million against Deutsche Bank.
It is also reported that the SEC brought 656 cases in 2007, which was a 14% increase over 2006.
According to the Financial Times, the Securities and Exchange Commission has been working to create four groups that will focus on fraud. The groups include one for hedge funds and insider trading, one for stock options backdating, and one for municipal bond issuance. The most recent group was set up in January, and focuses on subprime mortgage issues.
Walter Ricciardi, deputy director of enforcement for the SEC says that these working groups will be formed when issues arise, and he wants would-be criminals to know about their focus on fraud.
The groups are being set up to focus on specific types of cases, so that the SEC employees can maximize resources and share expertise.