SEC Deadline Triggers Paperwork Storm

Yesterday, August 14, was the deadline for many companies asked to vouch for their financials by the U.S. Securities and Exchange Commission (SEC). Despite the ensuing blizzard of press statements and avowals, discerning just who's on track and who's not isn't as easy as it may seem at first glance.

Here's what's known: Yesterday's deadline produced certified accuracy statements from three of the ten companies on the Light Reading Index that have been included in the SEC's list of 947 public firms required to respond to the agency's June order (see Optical Companies Challenged by SEC).

So far, Corning Inc. (NYSE: GLW), Lucent Technologies Inc. (NYSE: LU), and Xilinx Inc. (Nasdaq: XLNX) have filed their forms. So has Acterna Corp. (Nasdaq: ACTR), which isn't on the Index. The others, which are on a different fiscal calendar, have varying deadlines for getting their statements in. Basically, each company must file a report on August 14 or on the first date thereafter on which it's required to file an annual or quarterly report with the SEC.

Table 1: SEC Deadline Update
Company Affirmative certification filed SEC due date
Acterna Corp. (Nasdaq: ACTR) Y 8/14/2002
ADC Telecommunications Inc. (Nasdaq: ADCT) N 9/16/2002
Agilent Technologies Inc. (NYSE: A) N 9/16/2002
Ciena Corp. (Nasdaq: CIEN) N 9/16/2002
Cisco Systems Inc. (Nasdaq: CSCO) N 10/25/2002
Corning Inc. (NYSE: GLW) Y 8/14/2002
JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU) N 9/30/2002
Lucent Technologies Inc. (NYSE: LU) Y 8/14/2002
Molex Inc. (Nasdaq: MOLX/MOLXA) N 9/30/2002
Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) Y 8/14/2002
Xilinx Inc. (Nasdaq: XLNX) Y 11/12/2002

The SEC has been publishing the results of its tally on its Website at www.sec.gov/rules/extra/ceocfo.htm#j. And here's where it gets interesting. Sending in a statement alone isn't the last word. The SEC says that companies have been fiddling with the wording of the voucher document it originally requested them to use in their certifications -- leaving out one or two key financials that were supposed to be mentioned, for instance. In some instances, the doctoring has been innocently done in an effort to be specific about what's covered in the certification. But the SEC is eschewing these changes, too, as not falling within spec.

The SEC is having its lawyers review each document received to ensure that it meets the information requirements. After the legals have ascertained this, the Commission will stick a check mark in the box on the Website, marked "Statement in Exhibit A Form."

So far, only Corning and Xilinx of the companies mentioned above have had their certifications checkmark-approved.

Got that? Now here are a few caveats. First, the SEC's Website isn't up to date. Indeed, at press time it wasn't showing Acterna's or Lucent's statements at all, although both companies issued press releases about the filings they sent yesterday (see Lucent Execs OK Financials and Acterna Execs OK Financials).

A spokesman for the SEC says he isn't sure how much the site is behind on posting information about delivered filings or their qualification as meeting the SEC standard.

Some industry sources have questioned the importance of the exercise at all.

"It's way overblown," maintains Jim Jungjohann of CIBC World Markets in an email to Light Reading today. "I expect all CEOs and CFOs to sign. It's meaningless, but will help investor confidence in the coming quarterly reporting periods."

His response is typical of the sardonic stance many analysts have taken on the certification. Still, for average investors, the exercise is producing some interesting results.

At least four large service providers, for instance, have been forced to state publicly that their top executives can't vouch for their financials:

  • Cable TV company Adelphia Communications Corp. (Nasdaq: ADLAC), for example, says it won't attest to its financials until an ongoing investigation into key shareholders, who are being sued by the board, is complete.

  • Another cable operator, AOL Time Warner Inc. (NYSE: AOL), says a $49 million mislabeling of revenues may have occurred in its financials, delaying certification.

  • WorldCom Inc. (OTC: WCOEQ) CEO John Sidgmore issued an open letter to shareholders yesterday regretting ongoing revelations of financial snafus that make his certification impossible.

  • Qwest Communications International Inc. (NYSE: Q) has issued a tersely worded statement disclosing ongoing investigations of its corporate doings, dated yesterday to coincide with its certification deadline.

  • XO Communications Inc. (OTC: XOXO) hasn't filed anything at all, nor made any press statement regarding its financials, although its deadline was yesterday. The company didn't respond to calls about this today.

Many other carriers filed statements yesterday that don't have any reservations in them, including AT&T Corp. (NYSE: T), BellSouth Corp. (NYSE: BLS), Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cox Communications Inc. (NYSE: COX), EarthLink Inc., Genuity Inc. (Nasdaq: GENU), Level 3 Communications Inc. (Nasdaq: LVLT), Nextel Communications Inc. (Nasdaq: NXTL), SBC Communications Inc., Sprint Corp. (NYSE: FON), and Verizon Communications Inc. (NYSE: VZ).

Of these, BellSouth, Comcast, Cox, Genuity, Sprint, and Verizon are "checkmark approved." So far, at least.

— Mary Jander, Senior Editor, Light Reading
Steve Saunders 12/4/2012 | 9:56:10 PM
re: SEC Deadline Triggers Paperwork Storm "To the best of their knowledge" does appear to be something a giant loophole, doesn't it?

-- Steve
hiddentiger 12/4/2012 | 9:56:10 PM
re: SEC Deadline Triggers Paperwork Storm This whole exercise is completely meaningless. These companies CEOs can't be held responsible even if they sign and errors are found. It seems that the courts would have to prove fradulent intent.
next-gen-wisdom 12/4/2012 | 9:56:02 PM
re: SEC Deadline Triggers Paperwork Storm At least the CEOs & CFOs will think twice before keep stolen money.
BobbyMax 12/4/2012 | 9:56:01 PM
re: SEC Deadline Triggers Paperwork Storm The head of the executive branch of the US Government did want real honest enforcable laws. The head thought that by making empty statements, the public will have some degree of confidence in the current market system. The public confidence will never be restored unless meaningful legislations are passed and the existing laws are reinforced.
Tim Ber 12/4/2012 | 9:56:00 PM
re: SEC Deadline Triggers Paperwork Storm This strikes me as political posturing to fool the public that something is being done about the current economic mess. Nothing will change until we have a new president.

The Bush economy mantra: "Would you like fries with that?"

Sad, but true...
signmeup 12/4/2012 | 9:55:58 PM
re: SEC Deadline Triggers Paperwork Storm It continues to amaze me how uninformed people are when it comes to the economy. Let's just wave our magic wand and wish for a new president and "POOF" all of our economic problems will go away.
Let me ask a question: How can a new president solve our current economic crisis? Regardless of who is filling the position, democrat or republican, the other side will counter any efforts to make changes.

The fact of the matter is the president has very little actual power to change the course of private industry. Corporate greed and a lack of business ethics is what put us in the position we are now in, and we all contributed by beliving the hype. How many of us joined startups over the last 5 years? What was the primary reason? I would venture that the #1 or #2 answer would be to get lots of stock options and become a millionare within a year or two. There are no 'get rich quick' business plans, only 'get rich quick' schemes - and ultimately somebody loses.

Wake up, and smell the new economy - or continue to blame someone else for your mistakes, it's your choice.
Nomoredemo 12/4/2012 | 9:55:58 PM
re: SEC Deadline Triggers Paperwork Storm I think we will be ok for few years ! there is too many people checking every entries in the books these days to take any chances. Also verification firms saw how Andersen got blown away for participating in the book cooking scheme so it will be very difficult to find cooperative auditors. Even if you pay them , you can be sure there will be a whistle blower somewhere to take their sorry a*s on 60 minutes !
papabear 12/4/2012 | 9:55:54 PM
re: SEC Deadline Triggers Paperwork Storm Do you really think that changing the president will fix corporate greed? Some of these restatements go back to 1997. Does that mean we should have replaced Clinton also?

Maybe it's the Congress that needs replaced. Most of them were there for both Presidents. I'm not sure what control the Office of the President has on the markets and corporations.

Go look at corporate political contributions to individuals and you just may find that the majority of the top twenty recipients were Democratic congressmen. In contributions from the telecom sector the Republicans have not received more than the Democrats have since 1992.

The top 20 telecom sector contributions to individuals shows 14 Democrats and 6 Republicans.

I agree that signing a statement certifying the books means nothing and has to many weasel words for them to escape prosecution. It is simply spin of which both presidents were very good at.

As long as the two parties consider political posturing more important than fixing what's broken and helping the American people things will never change. As long as we continue to listen to the "spin doctors" things will never change.
sigint 12/4/2012 | 9:55:12 PM
re: SEC Deadline Triggers Paperwork Storm "To the best of their knowledge" does appear to be something a giant loophole, doesn't it?

-- Steve

Top executives should also declare all their personal assets and each of their sources of income. The SEC should evaluate these assets. In cases where "assets are disproportionate to known sources of income", investigations should follow.

How's that for another deliciously ambiguous clause ?
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