SEC'S COX DEFENDS SOXWashington - In testimony before lawmakers, Securities and Exchange Commission Chairman Christopher Cox defended the Sarbanes-Oxley Act, but sided with critics of the sweeping reform act who maintain that parts of the mandate need to be changed - in particular Section 404.
"There are no irreparable problems with Section 404 implementation," he told the House Committee on Financial Services, "although fixing the problems that have been identified will be challenging."
Critics have charged that meeting SOX 404 compliance places excessive burdens on companies in terms of capital and personnel resources - especially for the smaller filers. Meanwhile, the groundswell to revamp the four-year-old act has gained momentum.
In November, the Committee on Capital Markets Regulation, a group that is co-chaired by former White House economic advisor Glenn Hubbard and Goldman Sachs president John Thornton, will submit its recommendations for changes to SOX.
GAO ON RESTATEMENT TRENDS
Washington - The Government Accountability Office has released an updated listing of public companies that have made a financial restatement announcement because of financial reporting fraud or accounting errors.
The GAO released its original report to Sen. Paul S. Sarbanes, D-Md., on July 24. That listing, titled "Financial Restatements: Update of Public Company Trends, Market Impacts and Regulatory Enforcement Activities," contained some details on around 1,390 financial restatement announcements between July 1, 2002, and Sept. 30, 2005, that meet the restatement criteria. Sarbanes then requested a limited update of that database for the period between Oct. 1, 2005, and June 30, 2006. The GAO used Lexis-Nexis to systematically search for restatement announcements using keywords to collect information on another 396 restatements announced by 360 public companies.
The updated database, along with the database included in the original July 2006 report, can be viewed at www.gao.gov/cgi-bin/getrpt?gao-06-1079sp.
EX-HEALTHSOUTH CFO GETS 3 YEARS
Montgomery, Ala. - After much deliberation, the former chief financial officer for health care company HealthSouth Corp. appears to have received a sentence that will stick.
The former executive, Mike Martin, was sentenced to serve three years in prison for his role in a $2.7 billion fraud at the company - though his original sentence had only required him to serve time on probation and house arrest. The 11th Circuit Court of Appeals called the week-long prison term given to Martin at a second sentencing "shockingly short," before ordering another sentencing.
Martin, 46, was due to begin his new prison sentence Oct. 12, and will serve two years of supervised release after finishing his jail term. The chief financial officer at HealthSouth from late 1997 to early 2000, Martin has already served out his second sentence - seven days in jail and six months of home detention. He also has forfeited $2.3 million that prosecutors said he received from the fraud, and paid a $50,000 fine.
Martin, one of five chief financial officers implicated in the HealthSouth scandal, pleaded guilty to securities fraud and conspiracy, though he did cooperate with agents. He testified last year against former chief executive Richard Scrushy, who was acquitted on all charges, and testified again in May in the government corruption trial of Scrushy and former Gov. Don Siegelman, who were both convicted on bribery charges.
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