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Luis Aguilar Lashes out at SEC-Issued Fines in Affiliated Computer Services Case

After the Securities and Exchange Commission (“SEC”) issued penalties in a case regarding alleged financial reporting fraud, Luis Aguilar criticized the agency last week for being too lenient in its settlement order. Per the case, former chief executive officer Lynn Blodgett and ex-chief financial officer (CFO) Kevin Kyser of Affiliated Computer Services (“ACS”) were accused of organizing an equipment manufacturer to redirect through the company’s pre-existing orders that were previously received from one of its customers. As a result, the ACS’ reselling of transactions gave the illusion of strong revenues during fiscal year 2009. While Blodgett and Kyser settled with the SEC and agreed to pay fines of $465,000 and $210,000 respectively, the agency’s commissioner said their punishment lacked fraud charges and was comparable to a slap on the wrist.

Aguilar also expressed concern that the SEC is becoming more content accepting settlements rather than levying fraud charges or suspending accountants. During fiscal 2010, for instance, the SEC handled 117 financial reporting and disclosure cases, and enforced suspensions in 54 percent of such cases. The following year, the number dropped to 86 and suspensions occurred in 53 percent of the cases. In 2012, there were 76 cases and 49 percent of them had suspensions. Last year, the cases continued dropping to 68 and 41 percent accepted suspensions.

In response to Aguilar, Andrew Ceresney of the SEC’s Division of Enforcement said the SEC remains dedicated to the prosecution of accounting and financial fraud. Supporting the agency’s commitment, he referenced the number of financial reporting cases for the year have already passed 2013’s total by 21 percent. To see how we can assist your business in fraud matters, visit the Cherry Bekaert Fraud & Forensics advisory page.

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