Saturday, January 22, 2005
An article in the Wall Street Journal (Jan. 21) discusses the settlement of an SEC action by Jonathan Orlick, the former general counsel for Gemstar-TV Guide International Inc., for his participation in an accounting fraud. In settling the action, Orlick agreed to a bar from serving as a director or officer of a public company for ten years, a $150,000 civil penalty, and to return $150,000 to investors as part of a bonus he received. According to the article:
The SEC has been cracking down on corporate lawyers, who the agency views as "gatekeepers" crucial to deterring fraud. In more than two years, the agency said it has charged lawyers in more than 30 enforcement cases. The SEC's main argument is that lawyers should be helping companies follow the rules instead of providing a way around securities laws. In Mr. Orlick's case, the SEC said that the former general counsel knew, but failed to disclose, that Gemstar was improperly recognizing and reporting material amounts of licensing revenue from two companies. The SEC also said that Mr. Orlick repeatedly signed false management letters used by Gemstar's auditors regarding the status of negotiations with one of the companies.
The Commission has made lawyers a prime target of its enforcement actions in the past year, particularly in-house counsel who do not take steps to prevent accounting fraud and material misstatements. (ph)