Tell the truth, and sign on the dotted line

TRIGAUX E-mail: Click here Archive

© St. Petersburg Times
published July 31, 2002

Chief executives at most of the 947 largest companies in America are just starting to personally vouch to the Securities and Exchange Commission under oath that their financial results are accurate and complete.

Bring on the John Hancocks. Most signatures are due two weeks from today: by Aug. 14.

Last Wednesday, Michigan auto partsmaker Delphi Corp. became the first company to file a certified statement with the SEC. Chief executive J.T. Battenberg III signed only after the executives of Delphi's seven divisions also agreed to the validity of the numbers in the statement.

As of late Tuesday afternoon, eight more CEOs and their chief financial officers had signed the one-page SEC document swearing, under oath, that their covered financial reports "did not contain an untrue statement of a material fact" and "did not omit to state a material fact." Among the nine to sign: AMR Corp., Corning, Delphi, Electronic Data Systems, Federal Express, Fiserv, Pepsico, Qualcomm and Textron.

Only 938 to go. Names of those CEOs who have -- and those who have not -- complied with the new rule can be viewed online at the SEC's Web site (www.sec.gov has a link to the page).

This is just Round One. President Bush on Tuesday signed corporate reform legislation that, among other things, extends this SEC certification requirement to CEOs and CFOs at the roughly 15,000 publicly traded companies it oversees. Convictions for willful violation carry fines of up to $5-million and 20 years in prison for fraud or perjury.

At first glance, the idea of requiring 947 CEOs and CFOs to sign a piece of paper saying they think their financial numbers are okay seems kind of silly. Golly, Mr. SEC, we sure thought those figures were right.

But this exercise is right on the mark. First, it forces top executives too busy, too bored or too royal to really take a serious look at their company numbers and accept -- get this! -- personal responsibility.

But here's the real reason for this new SEC tool. It puts an end to that favorite excuse these days of so many in positions of power: plausible deniability.

By personally swearing, in writing, that their financial numbers reflect the true state of their companies, CEOs and CFOs cannot later claim they were out of the loop or uninformed about their bottom line.

Look no further than former Enron CEO Jeff Skilling's testimony before a congressional panel this spring to hear a top executive adopt the deniability defense. Skilling's non-answers to questions became know as the Sgt. Schultz defense: I know nothing!

Needless to say, many CEOs are uneasy about signing off on a complex financial statement when they are depending on others below them to supply accurate information.

One potential solution is offered by David D'Alessandro, the CEO of John Hancock Financial Services, in remarks to the Boston Globe. Before financial reports reach his desk on his company's 59th floor, he expects every department head on the way up to also sign off on the accuracy of the numbers.

Few, if any, CEOs will fight this new SEC requirement. The stock market is in no mood for corporate executives to whine about signing off on accurate accounting.

Plenty of Florida companies are among the first wave of 947 (companies with revenues greater than $1.2-billion) required by the SEC to provide sworn documents from their CEOs and CFOs. Locally, they include: Jabil Circuit, Outback Steakhouse, Raymond James Financial, Tech Data, TECO Energy and Walter Industries.

Other prominent Florida companies among the 947 that must deliver signed oaths are AutoNation, Publix Super Markets, Darden Restaurants (which runs the Red Lobster and Olive Garden chains), FPL Group (parent of Miami's Florida Power & Light), homebuilder Lennar, Office Depot and Winn-Dixie.

Also required to sign are hefty companies based elsewhere with big Tampa Bay operations, including: AutoZone, Bank of America, Wachovia (First Union's new name), Citigroup, J.P. Morgan Chase, Dillard's, Nordstrom, Raytheon, Smithfield, SunTrust, Verizon and Wal-Mart.

Analysts predict a small number of the 947 companies will go public prior to the Aug. 14 deadline and restate their earnings before their executives must certify in writing to the accuracy of their financial reports. Qwest's mea culpa -- saying Sunday it will restate its financial results for 2000 and 2001 because of improper accounting -- is just the start.

Most, but not all, of the 974 companies must deliver the sworn personal oaths and signatures of their CEOs and CFOs by Aug. 14. But about 200 of those corporations don't operate on the calendar year. So they won't have to file with the SEC until the fall, with some allowed to file after Thanksgiving, depending on their fiscal year.

It's sad to say that this country needs a corporate reform package like the one signed by President Bush.

Truth is, if regulators had enforced existing laws against corporate fraud and accounting chicanery, the vast majority of shenanigans found (and still being discovered) at Enron, Global Crossing or Worldcom -- and most recently, irregularities at Qwest Communications and AOL Time Warner -- never would have occurred. If they did happen, most would have been corrected and punished.

Hey. If this latest exercise in lawmaking redundancy discourages more funny accounting and corporate corruption, bravo.

Raise your right hand and sign on the dotted line.

-- Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

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