February 7, 2005
Riggs National Bank Acquisition by PNC Financial Scuttled
As discussed in earlier posts (here and here), the acquisition of Riggs National Bank by PNC Financial was delayed by the federal investigation of possible money laundering violations by Riggs, including the bank's failure to monitor transactions by former Chilean dictator Augusto Pinochet. Riggs ultimately settled the criminal case by agreeing to plead guilty to a violation of the Bank Secrecy Act and pay a $16 million fine. The fallout from that case, and "continued deterioration" in Riggs' operations, led PNC to seek to modify the terms of the transaction, and Riggs has struck back by withdrawing from the deal and suing PNC in DC Superior Court. An article in the Wall Street Journal (Feb. 7) discusses the collapse of the deal, which will likely result in Riggs drifting even further unless another can be located that might be interested in acquiring the bank. Unfortunately for Riggs (and its shareholders), the prospect of a fire sale looms. (ph)
Botox Users Beware!
The U.S. Attorney's Office for the Southern District of Florida (Miami) announced the indictment of three doctors and four corporations on mail/wire fraud, drug labeling, and conspiracy charges related to the sale of unapproved Botox to doctors for use in facial enhancement programs for their patients. According to the press release:
[T]he defendants purchased 3,081 vials, each containing five (5) nanograms of Botulinum Toxin Type A and other ingredients, in a formulation designed to imitate Allergan’s Botox®Cosmetic, the only product made with Botulinum Toxin Type A that is approved by the FDA for use in human beings. The defendants then engaged in a scheme to defraud by marketing and selling to health care providers for use in human patients the fake Botox as a cheap alternative to Allergan’s Botox® Cosmetic, without the administering health care providers advising their human patients that the fake Botox was not Allergan’s Botox® Cosmetic and was not approved by the FDA for use in human beings.
February 6, 2005
Sarbanes Oxley - So What? Let Me Tell You!
Has Sarbanes-Oxley changed the landscape in the white collar area? Passed in 2002, it requires accounting procedures that are intended to reduce fraud. We spoke of some of its ramifications, for example in the post titled "Penthouse Execs Accused of Accounting & Sarbanes-Oxley Violations" and more recently we see it as playing a part in the trial of Scrushy. (see also here).
The New York Times now speaks about another collateral consequence of the Sarbanes-Oxley Act here. The article reports on the fact that some "top accounting and audit firms" are dropping clients in light of this Act.
Is this good? Well perhaps in light of the government's indictment of Andersen (now on certiorari before the Supeme Court), which reduced the number from five to four of major accounting firms, this is beneficial to other accounting firms. But what about the smaller companies that need to hire an accounting firm to comply with Sarbanes-Oxley? Will the cost to the smaller companies drive some of them out of business? Will the increased scrutiny and exposure of fraud when weighed against these costs prove to be beneficial for all? Perhaps we need more time to fully evaluate the effect of Sarbanes-Oxley.