Robin Szeliga, the SEC, and SOX

At the criminal case against Joe Nacchio, the former CEO of Qwest Communications, one of the star witnesses for the prosecution was Robin Szeliga, the former CFO of the Company (serving from March 2001 until July 2002).  Earlier this week, she finally settled with the SEC, closing the book on her legal troubles arising out of her period as Qwest CFO. 

Earlier, Szeliga had pled guilty to one count of insider trading for the sale of 10,000 shares of Qwest on April 31, 2001.  It was, apparently, her only trade during that period.  The transaction grossed $410,000 but netted only $125,000.  As part of the plea deal, Szeliga agreed to two years of probation, six months of home detention, and a $250,000 fine.  Go here for the terms of the plea agreement.  AsThe Race to the Bottom reported, Herbert Stern, lead counsel for Nacchio, described her this way:  

• "Remember Ms. Szeliga, relatively young woman, at least from my point of view, couple of young children. She committed a great crime. She sold 10,000 shares of stock to remodel her kitchen. She had to enter a plea agreement, subjecting her to up to 10 years' imprisonment for one count of insider trading concerning the sale of 10,000 shares of stock for the purpose of remodeling her kitchen."

In the settlement with the SEC, Szeliga agreed to both an injunctive action and an administrative proceeding which suspended her from practicing before the Commission as an accountant.  In the injunctive proceeding, she agreed to disgorge $226,135 in profits, pay prejudgment interest of $100,917 and a penalty of $250,000, for a total of $577,052.  Including the $250,000 fine paid in connection with the criminal plea, Szeliga ended up remitting over $800,000.  

The settlement with the SEC was not for insider trading but for participation in the alleged fraud committed by Qwest over a lengthy period of time.  Szeliga fundamentally made the mistake of signing the relevant filings.  As the SEC complaint noted:

• "While CFO, Szeliga signed all of Qwest's materially false 10-Q quarterly reports filed with the SEC, and its materially false 10-K annual reports for 2000 and 2001. She signed false management representation letters to Qwest's outside auditors. Szeliga drafted and reviewed all earnings releases. As CFO, she spoke at analyst calls."

It is another example of the potential impact of SOX.  During the relevant period, the certification requirements mandated by Section 302 of SOX (imposing on the CEO and CFO the obligation to certify the accuracy of the relevant SEC report) were not in place.  Had Szeliga been required to execute a certification (that carried a possible 20 year prison term for willful violations), one wonders whether she would have been less willing to sign the filings that became the basis of the SEC's action.