Still in the Backdating Scandal Crosshairs

The stock-options backdating scandal just won’t go away.

Apple Inc. shareholders last week filed a class action lawsuit charging former CFO Fred Anderson and other executives with intentionally filing false documents in an attempt to conceal stock option grants to executives. The suit came shortly after the Department of Justice (DOJ) reportedly dropped its federal probe of Apple itself and its CEO, Steve Jobs. Neither the DOJ nor Apple would comment.

Also, the Securities and Exchange Commission (SEC) accused Microtune ex-CFO Nancy Richardson and other colleagues of civil fraud, days after the SEC settled an options backdating case with cable-chip maker Microtune itself. Richardson’s attorney Susan Resley, said in a statement, that she will fight the charges, which seek financial penalties and other relief under the "clawback" provision of the Sarbanes-Oxley Act to recover money executives wrongfully earned while misleading investors. “From the day Ms. Richardson walked into the job until the day she left, she lost money on the options the SEC alleges she backdated," Resley said, adding that Richardson stopped the improper practice as soon as it came to her attention.

While that may sound harsh, former SafeNet Inc. Carole Argo suffered a worse fate. She was sentenced to six months in prison earlier this year and fined $1 million for her role in the improper timing of millions of dollars of employee stock option grants.

Some CFOs have avoided imprisonment by cooperating with federal authorities investigating their colleagues. Former Comverse Technology Inc. CFO David Kreinberg, for example, paid almost $3 million in penalties, while helping SEC officials gather evidence against Comverse and its executives. As a result, general counsel William Sorin was sent to jail for one year and one day. And without admitting guilt, Apple’s Anderson last year consented to pay $3.5 million in fines and penalties, while throwing the blame to Jobs and agreeing to cooperate in the just-ended DOJ investigation.

In one of the latest indictments to be unsealed, ex-Broadcom Corp. CFO William Ruehle, free on $2.6 billion bond, may have less room to negotiate. Indeed, Ruehle pleaded not guilty to charges of filing false statements with the SEC, committing wire fraud and falsely certifying financial reports and faces up to 370 years in prison if convicted on all counts. Broadcom is the poster child for the backdating scandal. It had to restate 2007 earnings after trying to conceal more than $2 billion in compensation costs.

Article found in Benefits, Compliance, Accounting/Financial Reporting

Risk Management: Too Many Questions, Not Enough Answers

Risk management now looms as the top concern—eclipsing accounting judgments and estimates—in the minds of nearly 300 public company audit committee members surveyed by KPMG’s Audit Committee Institute (ACI) and the National Association of Corporate Directors.

Furthermore, only 28% of respondents say they are “very satisfied” with their understanding of management’s process for identifying and assessing significant business risks, and only 21% with management’s risk reports. ACI Director Ed Smith says the credit crisis is fueling this concern. “Everybody thought financial institutions were way ahead on risk. If we look at the credit crunch, there were a lot of surprises there. I think many directors were surprised,” Smith says.

Respondents ranked Information Technology (IT) risk and governance as their third biggest concern and the area where they have the least confidence. One-quarter said they were unclear about their committee’s responsibilities for oversight of IT risk and 26% said they were not satisfied with management’s reports on IT risks. “IT is one of those areas that has steadily been creeping up on the audit committee’s agenda,” says Smith, noting that the New York Stock Exchange’s listing requirements require audit committees to discuss risk assessment and risk management policies.

For the most part, audit committees feel that risk management activities are crowding their agendas—half the respondents believe they have too much responsibility for risk oversight and 74% want improved communication and coordination of risk oversight activities among the audit committee, board and other committees. Smith adds that some committee members are confused by the technological issues involved and the jargon used to discuss IT risk issues. “There are generational issues” among members and IT staff, he explains.

Smith’s takeaway is that audit committees are getting smarter about risk. “They’re starting to ask more questions and realize that just having a risk management process and a risk management report isn’t enough,” he says. “They have to know more. They have to dig deeper.”

Article found in Risk Management, Accounting/Financial Reporting

Careers

Curtis E. Espeland becomes the new senior vice president and CFO on Sept. 1 at Eastman Chemical Co., the $6.8 billion producer of chemicals, fibers and plastics based in Kingsport, Tenn. Espeland, 44, succeeds Richard A. Lorraine, 62, who is retiring after five years with the company. Espeland, a 12-year company veteran, has served as chief accounting officer since 2002. Scott V. King, 39, will take on that position while continuing as vice president and controller.

Thomas M. Manley is the new CFO at Avaya Inc., the $5.1 billion telecommunications company based in Basking Ridge, N.J. Manley, 49, takes over from Edwin J. Gillis, 59, a Teradyne Inc. director who was appointed interim CFO in October after Caroline Dorsa, 48, resigned to become senior vice president and CFO at Gilead Sciences Inc. Previously, Manley served as senior vice president of administration and CFO at Cognos ULC, an IBM Corp. subsidiary.

Ullrich E. Porzig is retiring as senior vice president, CFO and treasurer at Collective Brands Inc., the $3 billion maker and retailer of footwear and accessories based in Topeka, Kan. Porzig, 62, has served in his current positions since February 2006. Porzig will remain through the filing date of the company's Form 10-Q for the second fiscal quarter. A search for Porzig's successor is under way.

Jeffrey A. Schwaneke takes on the role of controller at Centene Corp., the $2.9 billion healthcare provider based in St. Louis, Mo. Schwaneke, 33, joins Centene from Novelis Inc., where he served as assistant controller from May 2006 to October 2007, and as vice president, controller and chief accounting officer from October 2007 to June 2008. Schwaneke also worked at SPX Corp. from 2002 to 2006, where most recently he served as segment controller.

C. Timothy Trenary resigned as vice president and CFO of DURA Automotive Systems Inc., the $2.1 billion car parts manufacturer based in Rochester Hills, Mich., to accept a position at another company. Trenary, 52, joined the company in September 2007 after two years at Collins & Aikman Corp., where most recently he was executive vice president and CFO. Nick G. Preda, 56, a director and audit committee chairman, is serving as interim CFO.

Stephen Cumming takes on the role of vice president of finance and CFO at Atmel Corp., the $1.6 billion maker of semiconductors based in San Jose, Calif. Cumming, 38, replaces Robert Avery, 59, whose retirement after 19 years with the company was announced last October. Cumming joins Atmel from Fairchild Semiconductor International Inc., where he served in several financial positions from 1997 until his promotion to vice president of finance in 2005.

David DiStasio is the new chief accounting officer at iStar Financial Inc., the $1.4 billion real estate investment trust (REIT) based in New York. DiStasio, 43, succeeds Nicholas Radesca, also 43, who resigned in March. DiStasio joined iStar Financial after 12 years at CIT Group Inc., where he was CFO and controller of the consumer finance division from 2002 to 2008. Previously, DiStasio was a senior manager at KPMG LLP.

Rozanne Kokko moves up to senior vice president and CFO at Handleman Co., the $1.3 billion music distributor based in Troy, Mich. Kokko replaces Khaled Haram, who resigned after five months to join Pegasus Capital Advisors L.P. Kokko joined the company in 1997, and held several business and financial positions before becoming vice president of finance in 2001. Previously, Kokko spent 24 years in various audit, finance and operational roles at Kmart Corp.

Edward Christie III moves up to senior vice president and CFO at Frontier Airlines Holdings Inc., the $1.2 billion parent of Denver-based Frontier Airlines. Christie, 37, succeeds Paul H. Tate, 56, who resigned in March to become COO of Air Methods Corp. Christie joined the company in December 2002 and held several positions before becoming senior vice president of finance in February.

William D. Markert is the new CFO at Securus Technologies Inc., the $400 million provider of telecommunications services to correctional facilities based in Dallas. Markert, 43, succeeds Keith Kelson, 41, an eight-year company veteran who served four years as CFO. Markert joined the company after eight years at Eschelon Telecom Inc., where he was vice president of network financial management from 2001 through 2006, when he was promoted to executive vice president.

Article found in Careers

From Sourcing Through Contracts, Follow the Money

New sourcing and contract management tools from Basware Inc., the U.S. unit of Finland’s Basware Corp., enable companies to monitor and manage all of their sourcing projects in one place and streamline the management of each contract throughout its entire lifecycle. The applications also enhance the procurement process and straight-through processing (STP) capabilities of Basware’s purchase-to-pay product suite.

Basware RFx lets companies collaborate around sourcing projects, organization-wide, internally as well as with suppliers. Users can create and submit sourcing documents, such as requests for information or proposals, and evaluate them according to common criteria set in the system. The second tool, Basware Contract Lifecycle Management, streamlines the management of each contract. It lets financial professionals develop and maintain client/partner business agreements in one centralized place, enabling easy access to contract information. It includes automated handling of contract-based invoices, contract-based self-billing and automatic handling of purchase orders based on contract definitions.

Article found in Financial Information Technology, Corporate Finance, Treasury Management

Testing Internal Controls to Detect Fraud

Companies can detect fraud and reduce risks by testing the design and effectiveness of internal controls with a new internal audit module of the BWise governance, risk and compliance (GRC) platform. BWise Internal Audit also streamlines the compliance process by linking internal audit and business management. Companies can re-use previous audits and audit best practices through a secure Web environment. Other capabilities include audit planning, audit workflow management and audit reporting as well as resource allocation, and findings and issue management.

Article found in Tools & Technology, Risk Management, Compliance, Treasury Management

Managing Environmental Hazards

Companies can get help developing and managing their environmental, health and safety (EHS) risk management policy with a new governance, risk and compliance tool. With OpenPages EHS, companies can identify and document hazards in a single data repository and create enterprise-wide standards on how to deal with those hazards, says Julie Marobella, senior solutions consultant at OpenPages.

The tool automates EHS management work flows and alerts users when hazard and risk thresholds are breached. “A business user, safety practitioner or EHS manager can modify the software to meet their methodology on an ongoing basis,” adds Marobella. All elements in the data repository are available for reporting so users can customize their reports.

OpenPages EHS operates seamlessly with the internal audit, operational risk and compliance management solutions of the platform or can be used as a stand-alone application.

Article found in Treasury Management, Tools & Technology, Risk Management, Compliance