I have a “friend” whose service to my cause is to monitor CNBC for anything and everything that might be of interest. I typically get at least one video via email each day – lately more Hank Greenberg than Herb Greenberg, although both are interesting commentators on the Chinese reverse merger issues that are keeping the Big Four audit firms up at night.
On Wednesday my “friend” sent a Jim Cramer Mad Money video segment via email. This is especially helpful since I just can’t watch Cramer live. I hear enough of that obnoxious ranting in my dreams and at every wake, wedding and family picnic.
This time Cramer went off on the JP Morgan Securities settlement with the SEC. In his mind, someone, everyone got off too easy.
It’s a familiar lament. In fact, I’m starting to hear that crying and moaning in my dreams, too.
“Where are the prosecutions? ¡Ay Dios mío! ¡Libranos del mal!”
Unfortunately, like a lot of others, Cramer is “spitting into the wind” when it comes to expecting the SEC and the Department of Justice to make these cases. It’s almost too late and they don’t seem to have the “cojones.”
Cramer makes some good points about those that profit from doing evil. He says it’s not fair.
I hope the fellow who put together the deal also got a huge bonus, and I say that with all of the sincerity I can muster. Think about how hard it must have been to make sure you had bad mortgages packaged to hose the buyers so the more important client knew he had a home run. Sure, lots of mortgages were going bad in 2007 when this obnoxious bomb was cobbled together. Who knows, if they weren’t careful, maybe some of the mortgages might have been good. Catastrophic!
I’ve heard of only two enforcement actions related to Section 304 since the Sarbanes-Oxley Act was put into law in 2002. I’ve seen no Section 302 certification enforcement actions, in spite of some very clear-cut casesand the fact it’s a criminal rather than a civil charge.
Unfortunately, there is no law against corporate types keeping the bonuses they were paid, in most cases, even though the deals that generated the profits and their bonuses were a fraud. Edward Steffelin, the former GSC executive named in a separate complaint by the SECrelated to the J.P. Morgan Securities settlement may have to, “disgorge all profits that he obtained as a result of its conduct, acts, or courses of conduct described in this Complaint, and to pay prejudgment interest,” if a judge agrees with the SEC’s allegations or he settles with the SEC.
But the Sarbanes-Oxley Act, enacted after Enron, and the Dodd-Frank Act, passed last year at this time, don’t cover bonus clawbacks from Steffelin or any JP Morgan executives under these circumstances.
The Sarbanes-Oxley Act included Section 304, a clawback provision that is only triggered if a company restates its financials as a result of accounting manipulation or fraud and the restatement is the result of misconduct. Section 304 only applies to the CEO and CFO – the ones that sign the Section 302 certifications – and seeks to recoup only those amounts received in the year following the first improper SEC filing.
Read the rest at Forbes.com in my column, Accounting Watchdog.