CFOs Must Repay Bonuses and Stock Sale Profits
Two former Chief Financial Officers of a software consulting firm agreed to repay their bonuses and stock sale profits ($337,000 and $141,000) for several years where the company’s financial statements were misstated. The SEC alleges that consultants recorded faulty time records which over-stated the company’s revenues. The SEC said that, although the respondents did not participate in the conduct, they are required by Sarbanes-Oxley to reimburse the company each served as CFO during a period of restatement due to violations of securities laws.
OUR TAKE: This case follows a pattern where the SEC seeks penalties from individuals based on their compensation, rather than specific ill-gotten gain. The twist in this case is that Sarbanes-Oxley allows the SEC to seek compensation from officers who did not even participate in the wrongdoing.