Audit, Accounting & Financial Reporting
Financial Services Litigation & Regulation
Strategic Discovery & Information Management
- Defended a former executive of a public company's subsidiary in an SEC enforcement action and parallel criminal proceeding arising from an alleged revenue recognition fraud connected to vendor allowance payments. The client was convicted after a four-week criminal trial in the Southern District of New York. But the conviction was subsequently reversed by the Second Circuit, and the criminal and SEC matters were resolved before retrial.
- Defended a public company and seven of its officers and directors in an SEC enforcement action arising from the company’s financial statements, which allegedly did not conform to GAAP and were part of broader scheme to defraud. The action against the company and three of the officers and directors settled on favorable terms. Following a seven-day bench trial, the court dismissed one of the four remaining defendants and awarded penalties against the other three that were substantially less than what the SEC sought.
- Defended a national bank in an SEC investigation and subsequent enforcement action related to the bank’s accounting for and disclosure of its allowance for loan and lease losses, and coordinated multiple individual representations related to the matter. The client reached a settlement on favorable terms.
- Represented a regional bank in an SEC investigation of the bank’s accounting for and disclosure of its allowance for loan and lease losses related to its commercial loan portfolio.
- Represented a financial services company in an SEC investigation of books and records related to the company’s transfer agent function and related financial disclosures. Following the investigation, the SEC closed the matter without initiating any enforcement action.
- Represented a financial institution in parallel investigations, and charges, by the SEC, DOJ, and New York Attorney General related to disclosures of financial-crisis mortgage-related losses.
- Represented the former chairman of an oil company’s Committee of Managing Directors in a DOJ investigation and in joint investigations by the SEC and the British Financial Services Authority (“FSA”) in connection with the company’s oil and gas reserves. The SEC did not pursue the matter after receiving our Wells submission. The FSA did not pursue the matter after a hearing before its Regulatory Decisions Committee. The DOJ closed its investigation without taking action against our client.
- Represented the former chief financial officer of a public company in an SEC investigation of the company’s accounting and disclosure practices. The company reached a settlement with the SEC. Three former executives were named in a subsequent enforcement action. But the client, who had received a Wells Notice, was not named in the action.
- Represented the chief accounting officer of a public company in SEC and criminal investigations and charges involving manipulation of bad debt write-offs, premature revenue recognition, related party transactions, and capitalization of expenses.
- Represented the chief accounting officer and deputy controller of a public company in an SEC investigation and charges related to online advertising, inflation of subscriber numbers, and round trip transactions.
- Represented the chief accounting officer of a financial institution in an SEC investigation of earnings management, loan loss reserves, valuation allowances, and fair value determinations.
- Represented a former accounting executive of a construction company in an internal investigation and in criminal investigations by the U.S. Attorney’s Office for the Eastern District of New York and the Manhattan District Attorney’s Office arising from allegedly inflated charges, overbilling, and false claims to governmental entities in connection with construction projects. The company entered into a deferred prosecution agreement and one executive was charged.
- SEC investigation following restatements related to intercompany charges. Two clients were not charged. One settled on favorable terms.
- Represented former directors and officers in a failed private placement start-up company in an SEC investigation of allegedly false and misleading financial disclosures connected to the company’s efforts to raise capital.
- Represented two former senior executives of an information technology services company in an SEC investigation of alleged accounting issues, including percentage of completion accounting, in connection with a Department of Defense contract. The SEC charged neither executive.
- Represented two former executives of a reinsurance company in investigations by the SEC and U.S. Attorney’s Office for the Southern District of New York regarding reinsurance transactions that allegedly had no economic substance and no purpose other than to smooth and defer earnings. The company eventually settled with the SEC. No charges were brought against our clients.
- Defended Coopers & Lybrand in Parrott v. Coopers & Lybrand, L.L.P., which addressed the scope of accounting firm liability to third parties not in privity with the firm.
- Defended a Big Four accounting firm in several actions alleging common law fraud, negligent misrepresentation, and professional services liability in connection with tax strategies recommended to several clients.
- Defended a Big Four accounting firm in an action alleging violations of the 1934 Act arising from a tax strategy that the firm recommended to the plaintiff. The action was dismissed on a motion to dismiss.
- Defended an Israeli technology company in a putative class actions alleging violations of the 1934 Act arising from the company’s reporting of allegedly inflated revenues over several years. The company settled for approximately 10 percent of the alleged damages.
- Defended the former chief financial officer of a public company in three putative class actions alleging violations of the 1934 Act arising from the company’s financial disclosures related to subprime mortgages. One action was dismissed, in part, on the pleadings, then settled on favorable terms after class certification was denied. Two actions were dismissed on motions to dismiss; one decision was upheld on appeal, the other decision is on appeal.
- Represented the regional audit practice leader of a Big Four accounting firm in an SEC investigation of alleged accounting fraud at an attest client, and the firm’s unqualified opinion that the client’s financial statements conformed to GAAP and that the firm’s audit was in accordance with GAAS. The SEC brought enforcement actions against the firm and six current and former partners. The SEC did not pursue the matter against our client after receiving our pre-Wells submission.
- Represented an audit partner of a Big Four accounting firm in an SEC investigation of an attest client’s accounting treatment of certain entities and instruments related to sovereign debt crisis. By the time we were retained, the SEC already had notified our client that it intended to bring an enforcement action alleging professional malpractice. The SEC did not pursue the matter after we demonstrated that our client properly applied the relevant accounting principles and complied with the relevant auditing standards in assessing the accounting treatment.
- Currently representing an accounting firm partner in an SEC investigation of audits of an investment advisor that allegedly was running a Ponzi scheme. The SEC’s investigation is ongoing.
- Retained by an audit committee to conduct an internal investigation into issues involving work-in progress inventory accounting. The investigation was triggered by an SEC inquiry.
- Retained by an audit committee to conduct an internal investigation of a whistleblower complaint related to the company’s international business segment. The investigation was a precursor to approving and filing the company’s Form 10-K.
- Retained by an audit committee to conduct a review of potential insider trading by the company’s chief executive officer. The investigation was a precursor to approving and filing the company’s Form 10-K.
- Represented an audit committee in an internal investigation and subsequent SEC investigation into the company’s restatement for work in progress inventory accounting and internal controls issues.
- Represented two audit committee members in an SEC investigation of the company’s accounting for work in process inventory. The clients did not receive Wells Notices.
- Represented a department head in audit committee and SEC investigations of accounting and disclosures related to deferred tax assets.
Representations of Public Companies and Executives before the SEC in Accounting-Related Matters
Accounting-Related Representations in Private Civil Litigation
Representations of Accounting Firms and Partners before the SEC
Representations of Public Company Audit Committees
2022 will be the first full year with a new SEC chair and a largely new PCAOB. As of the end of 2021, the SEC and PCAOB appear to have recovered from slowdowns caused by the COVID-19 pandemic. By most reports, they are back on track with examinations and investigations and appear poised to initiate more enforcement actions over the coming year. The SEC likely will continue its increased focus on company disclosures partly aided by a notable increase in the number of whistleblower tips alleging corporate disclosure missteps. The PCAOB devoted resources to considering the audit risks resulting from the pandemic. Both agencies have signaled additional attention to accounting estimates, with the PCAOB adopting new auditing standards last year. Apart from the pandemic’s impacts, last year’s changes by the SEC and PCAOB to auditor independence rules that back away from some bright-line standards will continue to present new decisions for audit firms. In sum, 2022 appears to hold in store a notable increase in SEC and PCAOB scrutiny of exercises of discretion. Past experience indicates that those instances will bring into relief the benefits of a redoubled effort to appropriately document those judgments in real time in accordance with effective policies.