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The Permanent Select Committee on Financial Misclosure
Question: When is it ok to cook the books of a public company?
Short Answer: When the head of any of an indeterminate number of Federal departments or agencies says so.
Or more specifically:
15 USC 2B § 78m imposes obligations on any issuer of a security registered pursuant to [15 USC 2B § 78l] to:
...file with the Commission, in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate for the proper protection of investors and to insure fair dealing in the security—
(1) such information and documents (and such copies thereof) as the Commission shall require to keep reasonably current the information and documents required to be included in or filed with an application or registration statement filed pursuant to section 78l of this title, except that the Commission may not require the filing of any material contract wholly executed before July 1, 1962.
(2) such annual reports (and such copies thereof), certified if required by the rules and regulations of the Commission by independent public accountants, and such quarterly reports (and such copies thereof), as the Commission may prescribe.1
At least the effect of this requirement should be fairly familiar to anyone who has looked at the financials of a public company.
With respect to the form of such filings:
Every issuer which has a class of securities registered pursuant to section 78l of this title and every issuer which is required to file reports pursuant to section 78o(d) of this title shall—
(A) make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer;
(B) devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that—(i) transactions are executed in accordance with management’s general or specific authorization;
(ii) transactions are recorded as necessary
(I) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and
(II) to maintain accountability for assets;(iii) access to assets is permitted only in accordance with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences....2
Except that...
With respect to matters concerning the national security of the United States, no duty or liability under paragraph (2) of this subsection shall be imposed upon any person acting in cooperation with the head of any Federal department or agency responsible for such matters if such act in cooperation with such head of a department or agency was done upon the specific, written directive of the head of such department or agency pursuant to Presidential authority to issue such directives. Each directive issued under this paragraph shall set forth the specific facts and circumstances with respect to which the provisions of this paragraph are to be invoked. Each such directive shall, unless renewed in writing, expire one year after the date of issuance. (Emphasis added).3
It is not at all clear what this paragraph intends when it says "responsible for such matters." Does "such matters" map to the "national security of the United States," or to the filing of "Periodical and other reports," or both? An entirely different subset of departments and agencies would seem to have the authority to have firms cook the books depending on one's reading of this sentence. We tend to think it refers to "matters concerning the national security of the United States." Arguably, however, that includes the Department of the Treasury. (How would one argue, exactly, that the Treasury is not responsible for matters concerning the national security of the United States?)
But fear not, dear investor, because...
Each head of a Federal department or agency of the United States who issues a directive pursuant to this paragraph shall maintain a complete file of all such directives and shall, on October 1 of each year, transmit a summary of matters covered by such directives in force at any time during the previous year to the Permanent Select Committee on Intelligence of the House of Representatives and the Select Committee on Intelligence of the Senate.4
Has 15 USC 2B § 78m(b)(3)(A) ever been used to authorize the management of a public company to cook the books intentionally pursuant to a directive by a head of a Federal department or agency of the United States?
We have no idea.
Probably not.
But it seems interesting that Congress and the President decided this provision was necessary and made it law quite recently. January 5, 2009, to be exact. At the very least, this is unfortunate timing.
We suppose that, if this last October 1st triggered a notification requirement to the House Permanent Select Committee on Intelligence, the Committee members might know about it. We take it back. There is a one year lag in the reporting requirements and the statute hasn't been in force long enough for any reporting to be required yet. Still, if you are a constituent, you might ask them, since there is no way we are betting the FOIA fee on getting an answer in writing.
House Permanent Select Committee on Intelligence
Silvestre Reyes, Chairman, Democrat, Texas
Alcee L. Hastings, Democrat, Florida
Anna G. Eshoo, Democrat, California
Rush D. Holt, Democrat, New Jersey
C.A. Dutch Ruppersberger, Democrat, Maryland
John Tierney, Democrat, Massachusetts
Mike Thompson, Democrat, California
Jan Schakowsky, Democrat, Illinois
Jim Langevin, Democrat, Rhode Island
Patrick Murphy, Democrat, Pennsylvania
Adam Schiff, Democrat, California
Adam Smith, Democrat, Washington [irony alert!]
Dan Boren, Democrat, Oklahoma
Peter Hoekstra, Ranking Member, Republican, Michigan
Elton Gallegly, Republican, California
Mac Thornberry, Republican, Texas
Mike Rogers, Republican, Michigan
Sue Myrick, Republican, North Carolina
Roy Blunt, Republican, Missouri
Jeff Miller, Republican, Florida
K. Michael Conaway, Republican, Texas
Pete King, Republican, New York
»
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Good afternoon Ms. Closure!
Good thing we have Sarbanes-Oxley.
PS. Slap an irony alert on Adam Schiff too.
duplicate
triplicate
Marla, now i will have to call you Bond, James Bond...
and you must be kidding about "probably not"...
so this legislation is likely the golden seal making the blackholebanks sacrosanct and national treasures above all law, and without any regard for the people or the country these entities have robbed... more evidence of our status as a banana repiblic.
I'm not sure it would actually be used yet. I mean, you probably don't need a directive to get some fudging on financials. Influence over FASB is enough to get mark to market replaced with mark to mythicunicornthatshitsskittles, it seems. What is interesting is that the statute exists and when it was born.
Since info here would be considered "national security" would all FOIA requests be nullified?
Yep. Clear FOIA exception. That's why we wouldn't bother.
All of the illegal conspiracy shit goes down the drain. These asswipes are way ahead of us.
FASB is wavering on the clusterfuk of overstated valuations......for which they are apparently held harmless anyway. But they most certainly know this con is going to end badly.
So usage will come in Jan. '10..........just before the CRE crap begins to really hit the fan.
mythicunicornthatshitsskittles
I love me some skittles. :)
"MARK IT ZERO, DUDE"
Can I have a banana with that Republic?
Yeah, I came across that landmine a while ago. No one seems to care. That means to me that any CEO who thinks their company is vital to US interests, can cook its books. The companies most likely to do this are the ones who have bought the FASB. Did I just say ZOMBIE banks?
That doesn't appear to be the case, at least from my read. You'd have to get Marla's take for sure though, given my lack of a JD or whatnot.
Aren't the proceedings of the Intelligence committees "secret"? If so, it would be hard to get a meaningful report.
Maybe I am thinking of the wrong committees.
They are all being cooked to at least avoid paying taxes anyway.
If no-one talks about this too much, it will get buried again.
Now sit up straight in that chair.
What’s an “investor”???
(Didn’t they go extinct about 65 million years ago?)
lol
"Adam Smith, Democrat, Washington [irony alert!]"he's rebelling against his name.
(please read this as a change of name from "hooligan" listed above to FBI implant".
Now look, enough of this children, you can't have it back, you have been grounded and if you carry on like this, not only will we, the Federal side (who are better than you because we take your money and you can't do a thing about it, sucks to be you hey?) know whats best for you, so just let us keep all your money and your childrens money and your grandchildrens money so we can perform our agenda. Which is to make us better off and you work harder for zero. Now be good little children and stop complaining, you know it's for your own good. Any more nonsense and we will shut your web site down and then where would you be? It's only because us Feds of the fifth column let you use our internet that you can even think, so think well, you have been warned!
(wonders if they have human beings in Federal agencies or if they are all brainwashed hooligans)
damn..the Feds read my key strokes as i'm typing them and deleted my comment! arghhhh
Lets see when a country can consume 2 trillion dollars worth of goods and mount 12 trillion dollars worth of debt while doing it the question isn't when is it ok to cook the books? The question is when did people begin believing that there was such a thing as legitimate real honest accounting? It's not a question of IF a companies books are cooked but only HOW MUCH. All hail fractional reserve banking. All participate in the futile exercise of liquidating hard assets made of SQUAND.
http://www.youtube.com/watch?v=prMOfdjyFK0
Marla, don't forget.. all that is needed is an Executive Order stating that there exists a clear and present danger to the national security interest of the United States and the door is swung all the way open for any firm or individual, public or private to gain exclusion. In that instance your cite is rendered moot with the possible exception that the structure of diffusion of authority remains intact.
For public consumption.
http://www.businessweek.com/bwdaily/dnflash/may2006/nf20060523_2210.htm?...
Unbeknownst to almost all of Washington and the financial world, Bush and every other President since Jimmy Carter have had the authority to exempt companies working on certain top-secret defense projects from portions of the 1934 Securities Exchange Act. Administration officials told BusinessWeek that they believe this is the first time a President has ever delegated the authority to someone outside the Oval Office. It couldn't be immediately determined whether any company has received a waiver under this provision.
BTW, your abservation as to the genesis of that particular statute and the history behind it are indeed noteworthy.
Cheers
"Marla, don't forget.. all that is needed is an Executive Order stating that there exists a clear and present danger to the national security interest of the United States and the door is swung all the way open for any firm or individual, public or private to gain exclusion."
Miles,
It's already done. Every year since 9/11/2001, the President has signed a legal declaration stating we are still in a state of emergency. Barrack did the same this past September. I believe this is why Congress suddenly went off the deep end with special appropriations and pork for every pot, both wars were fought "off budget" with emergency appropriations, the justice department went along with extraordinary renditions and domestic spying and so on.
I won't go any further on this because I'll be branded a conspiracy theorist. But this is conspiracy fact.
CD - It goes back further on a purely defense and intelligence related activities. I agree that since 9/11 the door has been wide open
But are they defending us or are they defending themselves by using us?
They are deluded. The politicans and those that they are protecting believe that by conflating "private" with "secretive" they are doing the publics business. And in so doing the rule of law and responsible self governance are casualties.
I fully agree it goes back further, many decades and even centuries back, but the flood gates were released on 09-12-2001. I've done extensive research on this subject. Everywhere you care to look, to examine, you find what you call judicial exclusion but everyone else calls a rigged game with favored players.
Ironically we are all to blame in our own way. Americans for decades have averted their eyes to small corruptions local or national. Almost along the lines of "Oh well, that's part of capitalism" and as long as there were enough crumbs left for me to get a little ahead and feed my family, I won't squawk.
Now that the pigs have cornered the trough and the muscle standbehind the pigs, everyone is looking around for someone (else) to DO SOIMETHING. Too late folks. It's either all of us as one or it continues to its ugly fascist end.
Come on CD, please tell the rest of your story for those of us who know you are right on!
Nope. I started to do so a month ago and was reprimanded by Marla to "post it elsewhere" and "it's not appropriate for this forum" which doesn't mean ZH believes or disbelieves what I'm posting. Just do it elsewhere.
ZH is attempting to maintain credibility and they recognize that if they stray too far off topic, they will open themselves to mud slinging and attacks the likes of which this blog has not yet seen. In this world, you can speak truth but only up to a certain point.
Hitler and other proficient mass murders understood that the BIG lie is much more effective and more easily defensible because it's so outrageous. Tell people your neighbor's husband is screwing around with the meter maid and people will believe it because it conforms with people's view of "normal" bad behaviour.
But say that the neighbor's husband runs death squads for the CIA in domestic operations against major drug dealers on US soil and many innocent bystanders get hurt, a clear violation of dozens of US laws, and people are going to say "What are you talking about? Are you crazy? Where did you get such a story? Where's the proof? Leave me alone." They will then ignore or push aside the "proof" you provide.
It's not about the truth, it's about their world view and how much you disturb it. The second story may be just as true but people will not believe it, especially if the husband vehemently denies it and calls the accuser unpatriotic and a conspiracy theorist etc. People project onto others and onto their government their own personal experience.
Everyone lies to some small extent but few, for whatever reason, would even consider the BIG lie. So they find the BIG lie unbelievable. Same thing with governments. Most peoples' experience with government is Mary down at the DMV or that nice women at the SS office or that person on the phone at the veterans affairs office who was a prick but did what he said he would do. They aren't monsters. So it's inconceivable to think they would be monsters and practice the BIG lie.
Plus, people don't wish to be responsible for anything more than their limited narrow lives, and if someone in government really was guilty of a BIG lie, they might just need to do something about it. Since they don't want to get involved, it's so much easier to stay in denial and give them the benefit of the doubt.
Finally, the so-called "free" press is anything other than free. At a minimum, it is corporate controlled and knows where its (advertising dollars) bread is buttered. If corporate calls CNBS and tells them to drop a story, no intrepid producer is going to disobey orders and run it unless that producer never wants to work in TV again.
There is an overt and covert agreement that the mass media just won't touch certain subjects. Open the eyes and it's obvious. Accept what you are told by MSM as truth and all I am is a conspiracy theorist.
So very well said CD, and I am with you completely-- your name is a fine reminder that there are huge obstacles involved in awakening people to truth that they are not comfortable in accepting. Thank you for your thoughtful response. Have a nice day!!!!!
Business Week wrote on May 23, 2006:
Negroponte - as you may recall - was a key figure in the illegal Iran-Contra scheme.
Thinking along the same lines GW. It does go a bit further than that bit of tower of truth disclosure.
Oddly, I am no longer disturbed by things like this...
I am just so numbed to the fact that the U.S. government has made cheating/stealing an art form.