Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, June 21, 2007

Cambrex Settles SEC Charges Involving Improper Accounting

On  June  20, the SEC settled enforcement proceedings against Cambrex Corporation (Cambrex)  for  violations  of the recordkeeping and internal controls provisions of  Section  13  of the  Securities  Exchange  Act  of  1934  (Exchange   Act).   Cambrex is  a  life  sciences company whose common stock trades on the New York  Stock Exchange.  From at least 1997 through 2001, Cambrex failed to properly  reconcile its  intercompany  accounts,  thereby   accruing   an   imbalance   of approximately  $17.1  million.  Of  that  amount,  approximately  $3.5 million was erroneously reflected as income when  in  fact  it  should have been accounted for as an operating expense, and Cambrex could not ascertain whether another $2.6 million was also improperly  booked  as income. As a result, Cambrex  issued  erroneous  periodic  and  annual reports, and, in January 2003, Cambrex restated its financial  results for  the  five-year  period,  reducing  net  income  after  taxes   by approximately $5 million.  The complaint alleges that the officers were aware of the problem but failed to reconcile  its  intercompany  accounts until its  executives  were  faced  with  the  new  executive  officer certification requirements  under  the  Sarbanes-Oxley  Act  of  2002.

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