Jenner & Block

SuperConference: The New Climate of SEC Investigations

How to successfully manage a company’s response to the recent wave of government investigations focusing on alleged corporate wrongdoing and in the wake of reform-minded laws or regulations was the overarching theme of a panel discussion at the 2005 Corporate Legal Times SuperConference titled, “How to Respond to an SEC Investigation.”

Panelist Thomas C. Newkirk, a Partner in Jenner & Block’s Securities Litigation, Corporate, White Collar Criminal Defense and Counseling, and Securities Practices, focused on best practices in managing a company’s response to a Securities Exchange Commission investigation in today’s scandal-plagued environment, especially those besetting public companies and the mutual fund industry over the last couple years.

Mr. Newkirk advised the audience to keep SEC staff members informed during such an investigation, to deliver on promises made, and to not misstate the facts or otherwise be evasive.  “This is not class-action litigation,” he said.  “People who think that they’re going to hire the most aggressive, in-your-face attorneys to help defend them against the SEC staff, aren’t going to get good results.”

Mr. Newkirk’s experience includes nineteen years as a senior official with the U.S. Securities and Exchange Commission.  For the last eleven years, he was an Associate Director of the Division of Enforcement, and led the investigations of some of the U.S. Securities and Exchange Commission’s most significant cases.  

The panel also consisted of Douglas Hagerman, Senior Vice President, General Counsel & Secretary of Rockwell Automation, Inc., David Hoffman of Investigative & Dispute Services at Ernst & Young LLP, and Edward Weiss, Senior Vice President & Deputy General Counsel of Time Warner Inc.

“Some companies have been punished for not cooperating with the SEC’s staff, when you’d think that cooperating would be a given,” said Mr. Weiss, who played a significant role in coordinating Time Warner’s regulatory approval process in connection with the AOL/Time Warner merger. 

Mr. Hagerman emphasized that self-reporting and the preservation of evidence are key elements to effective compliance.  Mr. Hagerman provides legal counsel on Rockwell Automation’s corporate and commercial matters, and is experienced in providing counsel on corporate governance matters such as audit committee practices, financial reporting practices, and compliance with the Sarbanes-Oxley Act and related SEC and exchange rules.

Mr. Hoffman, who provides accounting, business, and financial dispute-related services to attorneys and their clients throughout an investigation or commercial dispute process, concurred that the changes in strategy influenced by the recent SEC investigations have extended into dealing with independent auditors as well. 

“External auditors have now become more active, both in evaluating the scope and rigor of their responses to government investigators,” said the Ernst & Young executive.

“While it’s important to understand that the indefensible should not be defended,” concluded Mr. Newkirk, “you have the authority and the obligation to make the most of a bad situation and move forward.”