SEC to Set Up Special Team to Fight Fraud
The Securities and Exchange Commission is planning to tighten the screws on companies that try to cook their books.
The SEC is setting up a financial fraud SWAT team, headed by two experienced attorneys: Charles D. Niemeier, a partner at the law firm of Williams & Connolly who is expected to join the SEC this week, and Paul R. Berger, associate SEC director of enforcement.
The SWAT team, which will consist of six other attorneys and four other accountants in addition to Niemeier and Berger, will be dedicated solely to pursuing accounting fraud cases.
The stepped-up regulatory effort comes after a series of corporate accounting scandals in recent years, including such high-profile cases as Cendant Corp. and Sunbeam Corp., in which public shareholders lost millions of dollars.
More recently, MicroStrategy Inc., a Vienna, Va., software maker, reported that the SEC has begun an investigation related to its restatement of past financial results. In recent disclosures, MicroStrategy reported that it has been losing money for the past three years, instead of making money as it had previously reported. The company also overstated past revenue. Though it originally stated that it had 1999 revenue of $205.3 million, it revised that to $151.3 million.
Since MicroStrategy first disclosed its accounting problems in March, its stock has fallen 92%.
In recent years, there has been a marked increase in the number of large restatements, SEC officials said. They say they are battling a culture in which companies, particularly new high-tech companies, are under intense pressure to hit quarterly earnings projections to keep stock prices from falling.
“We are living in a time when the economy is changing, and the volatility of the stock market creates incentives and pressures, and those are sometimes too strong for people to resist,” Niemeier said.
The task force will focus on the more complex cases or those with novel accounting issues, while other cases will still be handled by the regular enforcement staff.
