Jottings By An Employer's Lawyer

Sunday, February 16, 2003

Sarbanes Oxley - Where It Comes Into Play

Recent news points out a couple of different situations where Sarbanes Oxley has or could come into play. A story about ClearOne Communications in Sunday's Salt Lake Tribune is one of those situations that Sarbanes Oxley seems to have intended to cover. The now terminated vice president of product sales for the company has filed charges with the EEOC alleging sexual harassment and religious discrimination, but has also given information to the SEC that has led to charges being filed against the company. The improper practices challenged by the SEC were 'channel stuffing', forcing distributors to take product at the end of a quarter in order to meet projected sales numbers. Although no indication that a charge has been filed under Sarbanes Oxley, it would be surprising if it weren't.

A different story concerns Kirk Gorman, the former CFO of Universal Health Services, who found himself terminated when he requested that the company's auditor's give him some assurances before signing off on the company's financials, a sign off with heightened significance because of the penalties of Sarbanes Oxley. Undoubtedly to his surprise, KPMG apparently refused to give its blessing to the financials as long as he remained as CFO, and the company chose the audited report over him. The New York Times has the story. Some of the correspondence between Gorman and KPMG can be found here. It is not at all clear that this was the result Congress intended.

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