Securities Law Prof Blog

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

Wednesday, November 16, 2011

Former CSK Auto CEO Agrees to Clawback $2.8 Million to Settle SEC Charges

Under SOX 304, senior officers are required to reimburse their corporation for incentive-based compensation and stock sale profits if the corporation's financial statements are subsequently restated because of material noncompliance, as a result of misconduct, with financial reporting requirements.  This "clawback" is required even if the officers are not personally charged with wrong-doing.  The SEC recently announced that Maynard L. Jenkins, the former chief executive officer and chairman of CSK Auto Corporation, has agreed to return $2.8 million in bonus compensation and stock profits that he received while the company was committing accounting fraud.  The SEC filed court papers against Jenkins in July 2009 saying he violated the SOX “clawback” provision by failing to reimburse the company. It marked the agency’s first SOX clawback case against an individual who was not alleged to have otherwise violated the securities laws.

Jenkins has agreed to reimburse $2,796,467 to O’Reilly Automotive Inc., which has since acquired CSK Auto.

The SEC previously charged four former CSK Auto executives who perpetrated the accounting fraud, and separately charged the company for filing false financial statements for fiscal years 2002 to 2004. The company settled the charges, and the litigation against three of the former executives is continuing (CSK’s former chief operating officer has since died). The U.S. Department of Justice brought a criminal indictment against those same executives, who have pleaded guilty to various charges. CSK Auto recently entered into a non-prosecution agreement with the DOJ in which it agreed to pay a $20.9 million penalty.

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