By Ann C. Logue
This week, the SEC dealt with some accounting fraud. In the two decades following the passage of the Sarbanes-Oxley Act, it’s been (relatively) rare, with executives at public companies choosing to get out in front of wrongdoing to avoid criminal charges and a lot of companies choosing to stay private rather than get caught up in the quarterly earnings chase.
The SEC charged Synchronoss Technologies and seven of its executives, including the former CFO and the former controller, with accounting fraud from 2013 to 2017. The company is alleged to have improperly recognized revenue and thus inflating reported earnings. Most of the executives have settled by paying cash; the former CFO and controller face criminal charges, thanks to Sarbanes-Oxley.
That case pales next to the SEC’s charges against audit form CohnReznik. The commission alleges that failures in audit review led to misstatements for two client firms, Sequential Brands Group and Longfin. Sequential Brands owned several consumer labels, including Jessica Simpson and And1. It entered bankruptcy and was delisted. Longfin was in the business of cryptocurrency. It, too, was bankrupted and delisted. Fraudulent financial statements can’t stave off the inevitable. In related news, this Sunday’s New York Times Magazine has a great profile of Justin Paperny and his company, White Collar Advice. Paperny and his colleague, Keith Gilabert, were found guilty of running a Ponzi scheme in 2008. Paperny and his partners use their experience to advise criminals on how to manage their sentencing. They also operate a YouTube channel, Prison Professors, to help anyone facing prison time learn what to expect and how to use their time to prepare for their return to society. There are second acts to these stories.