Executives Charged with Filing False SOX Certifications

By: Cydney Posner

You might be interested in a recent complaint filed by the SEC against a CEO and CFO for filing false SOX certifications. Click here for the Litigation. The complaint alleges a vast number of egregious violations, among them, filing wildly inaccurate financial statements and electronically forged auditors' reports without the auditors' knowledge or consent. Nevertheless, as described in the complaint, the charge regarding the certification could be applied in far less egregious circumstances if the SEC were of that mind. The complaint alleges that, "in violation of the duties imposed by Sarbanes-Oxley, [the CEO, Kushner] signed the May 20 Filing and the Sarbanes-Oxley certification without having read either document and without having taken any steps to determine their accuracy or truthfulness, relying instead on nothing more than [a director's] representation to that effect. Had [the CEO] read the documents or made any reasonable inquiry, he would have known that the Form 10-KSB which CKP filed on May 20 contained the same material misstatements and omissions that the auditors had alerted him (and other CKP executives) to earlier that day. As the Chief Executive Officer, Kushner had a duty, imposed by the certification requirements of Sarbanes-Oxley and Exchange Act Rule 13a-14 promulgated thereunder, to review and take reasonable steps to determine the accuracy of the May 20 Filing, including the financial information contained therein, prior to signing the document. Because Kushner failed to do so, he knew, or was reckless in not knowing, that the Company's financial statements were materially false and misleading." The action underscores the importance of process (such as actually reading the document) in connection with signing and filing of certifications.

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