December 20, 2010
SEC's Announces First Non-Prosecution Agreement for Cooperative Company
The SEC today announced that it was pursuing charges against Carter's former Executive Vice President Joseph M. Elles "for engaging in financial fraud and insider trading," which the SEC claims "caused an understatement of Carter's expenses and a material overstatement of its net income in several financial reporting periods." The SEC decided not to prosecute the company because of
the relatively isolated nature of the unlawful conduct, Carter's prompt and complete self-reporting of the misconduct to the SEC, its exemplary and extensive cooperation in the investigation, including undertaking a thorough and comprehensive internal investigation, and Carter's extensive and substantial remedial actions.
The PDF of the non-prosecution agreement can be found here.
The SEC announced its new policy to encourage company cooperation in January 2010 (release here). The anticipated gains from the new policy were "expected to result in invaluable and early assistance in identifying the scope, participants, victims and ill-gotten gains associated with fraudulent schemes."
It's taken almost a year for the first non-prosecution agreement, so it's not clear to me that the policy was a "game-changer" as the SEC had hoped. It still seems like a good way to encourage companies to help in the process, although it is my impression that a similar informal policy was already in place. Perhaps that's why not much seems to have changed.