SEC Charges CEO and Former CFO With Violation of Sarbanes-Oxley

On July 30, the Securities and Exchange Commission charged computer equipment company QSGI Inc’s CEO, Marc Sherman, and former CFO, Edward L. Cummings, for misrepresenting to external auditors and the investing public the state of QSGI’s internal controls over financial reporting in violation of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley). Under Sarbanes-Oxley, the CEO and CFO of a company must sign certifications confirming that they have disclosed all significant deficiencies to outside auditors, reviewed the annual report and attested to its accuracy. According to the SEC, Messrs. Sherman and Cummings misled outside auditors by withholding inadequate inventory controls, and misled both auditors and the investing public by withholding information about improper accounting maneuvers, which rendered QSGI’s books and records inaccurate. The SEC asserted that these actions violated Sections 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act). Mr. Cummings consented to a cease-and-desist order finding that he wilfully violated the Exchange Act. He also agreed to pay a $23,000 penalty, to be barred from serving as an officer and director of a publicly traded company for five years, and to be suspended for at least five years from practicing as an accountant on behalf of any publicly traded company. Mr. Sherman, who has not yet settled the charges, faces an upcoming administrative proceeding.  

Matter of Cummings, Admin. Proceeding No. 3-15991 (Jul. 30, 2014); Matter of Sherman, Admin. Proceeding No. 3-15992 (Jul. 30, 2014).

Topics:  Compliance, Fraud, Misrepresentation, Sarbanes-Oxley, SEC

Published In: General Business Updates, Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Katten Muchin Rosenman LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »