Wednesday, January 5, 2005
A post here on Nov. 22 (Lawyer Reporting of Corporate Misconduct) discussed the role of two U.S. law firms that advised their client, TV Azteca, regarding the company's disclosure obligations under the federal securities laws and, when the corporate client refused to make the disclosures, the lawyers resigned. The SEC has now charged TV Azteca, a Mexican corporation whose shares are traded on the New York Stock Exchange, and three current and former officers, Ricardo Salinas Pliego, Pedro Padilla Longoria, and Luis Echarte Fernandez, with violating Section 10(b) and Rule 10b-5 for its failure to disclose material information and for making false disclosures. The SEC's Litigation Release states:
The SEC alleges in its Complaint that the defendants engaged in an elaborate scheme to conceal Salinas's role in a series of transactions through which he personally profited by $109 million. The SEC complaint also alleges that Salinas and Padilla sold millions of dollars of TV Azteca stock while Salinas's self-dealing remained undisclosed to the market place.
The SEC's complaint further notes how the resignation of TV Azteca's counsel (and subsequent publicity about it in a New York Times article) affected the company's disclosure:
The Commission further alleged in its Complaint that after the resignation of TV Azteca's U.S. legal counsel and a Dec. 24, 2003, New York Times article concerning the matter, Echarte sent an email to Salinas and Padilla, stating, "The damage is done and the situation that we didn't want to explain openly is now in the hands of the public." Shortly thereafter, on Jan. 9, 2004, TV Azteca issued a press release confirming that Salinas indirectly owned half of Codisco.
Maybe the Sarbanes-Oxley Act isn't so bad after all. (ph)