SEC Commissioner Luis Aguilar warned Thursday that the agency’s statistics on financial reporting, disclosure cases and Rule 102(e) suspensions reflect a “troubling trend.”
Reacting to the SEC’s recent order accepting the settlement offer of Kevin Kyser, a certified public accountant and former chief financial officer of Affiliated Computer Services Inc., Aguilar said in a public statement that “given the egregious conduct that Mr. Kyser engaged in at ACS, the Commission’s settlement, which lacks fraud charges or a timeout in the form of a Rule 102(e) suspension, is a wrist slap at best.”
The SEC charged former CFO Kyser and former CEO Lynn R. Blodgett of ACS, a Dallas-based information technology company that has since been acquired by Xerox Corp., with mischaracterizing an arrangement with an equipment manufacturer to purport that it was conducting so-called “resale transactions” to inflate the company’s reported revenue.
Blodgett and Kyser have agreed to pay nearly $675,000 to settle the SEC’s charges. Without admitting or denying the findings, they have agreed to collectively disgorge IRG-related bonuses plus prejudgment interest totaling $569,327, and they each must pay $52,000 penalties.
But Augilar noted in his public statement against the settlement that “accountants — especially CPAs — serve as gatekeepers in our securities markets. They play an important role in maintaining investor confidence and fostering fair and efficient markets. When they serve as officers of public companies, they take on an even greater responsibility by virtue of holding a position of public trust.”
To this end, he continued, “when these accountants engage in fraudulent misconduct, the Commission must be willing to charge fraud and must not hesitate to suspend the accountant from appearing or practicing before the Commission.”
Said Aguilar: “The Commission instead chose to charge Mr. Kyser with limited, narrow non-fraud charges, comprising of violations of the books and records, internal controls, reporting, and certification provisions of the federal securities laws.”