Washington (July 6, 2004) — Securities and Exchange Commission Chairman William Donaldson will not participate in the probe of EasyLink Services Corp., a company in which he once served as director that's now under investigation by the SEC, the agency said.
The SEC announcement of Donaldson's recusal on Friday came in response to the Piscataway, N.J.-based company’s disclosure in an 8-K filed this week that the SEC is reviewing deals worth about $3 million of revenue generated by its former advertising network business in 2000.
Donaldson "has not participated and will not participate in any matter before the Commission involving EasyLink," the SEC said. Donaldson became a director of EasyLink in April 1998 and also served on its audit committee. As a member of the audit committee starting in early 2000, Donaldson was charged to act as a watchdog over the company's accounting. He also sat on the compensation committee starting in mid-1999.
“At the outset of its consideration of this matter and without the participation of chairman Donaldson, the commission unanimously agreed that Daniel Nathan, the chief of the Commodity Futures Trading Commission’s Office of Cooperative Enforcement within the CFTC’s Enforcement Division, would act as a special advisor to the commission to closely monitor all staff actions in this matter,” the SEC statement said. “Mr. Nathan has been acting in this capacity, although he is not conducting or leading the staff’s investigation.”
EasyLink was established in 1995 by Gerald Gorman, an investment banker who had worked at Donaldson, Lufkin & Jenrette, the Wall Street firm Donaldson co-founded.
EasyLink didn't pay Donaldson or other independent directors but covered their expenses and granted them options to purchase shares of EasyLink stock, according to published reports.
An AP report also indicated that EasyLink had previously been criticized for excusing a loan made to chief executive Thomas Murawski, a decision made while Donaldson was a director.
Donaldson's predecessor at the SEC, Harvey Pitt, recused himself from the agency's investigation of collapsed Enron and its auditor Arthur Andersen, because as a securities lawyer he had had Andersen as a client. Pitt has said that he had no involvement in the investigation beyond voting with fellow SEC commissioners to authorize it.
— WebCPA staff
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