Securities Law Daily provides daily coverage of developments in the regulation of federal, state, and international securities and futures trading, with objective coverage of the...
July 12 — A pair of KPMG Inc. executives asked the SEC to overturn an in-house judge's 2014 ruling that they be temporarily barred from practicing as accountants before the agency ( In re Aesoph, SEC, Admin. Proc. File No. 3-15168, oral argument 7/12/16 ).
John Aesoph and Darren Bennett argued before the commissioners that there was no foundation for the order finding that they failed to properly audit TierOne Bank in connection with financial crisis losses. At the same hearing, the agency's Enforcement Division asked for longer suspensions.
Aesoph and Bennett appealed an order by Administrative Law Judge Carol Fox Foelak to the commission, claiming their conduct was reasonable (126 SLD, 7/1/14).
In the initial decision, “you see no indication—no indication—of how [Bennett] departed from professional standards or the degree of departure from professional standards, which would ordinarily serve as a foundation of highly unreasonable conduct,” Bennett's attorney, Gary Bendinger of Sidley Austin LLP in New York, said in a July 12 oral argument at Securities and Exchange Commission headquarters in Washington. “That is completely absent.”
Aesoph was represented by George B. Curtis of Gibson, Dunn & Crutcher LLP in Denver.
The SEC's Enforcement Division also appealed Foelak's order, calling for sterner sanctions—though not a lifetime bar—against the pair. Aesoph was suspended for a year and Bennett six months, but enforcers are asking for three years and two years, respectively.
“They failed to follow some of the most fundamental professional standards and they did so repeatedly,” SEC enforcement attorney Nicholas Heinke said. “They didn’t do their jobs.”
The Enforcement Division has claimed that the accountants relied on the bank managers' representations about fair value of collateral underlying loans without enough evidence.
The pair ignored red flags in TierOne's 2008 financial statements and its internal controls as well, it said.
Aesoph and Bennett have also raised constitutional issues with how the SEC's ALJs are hired, but the commission has denied similar claims in other cases.
To contact the reporter on this story: Rob Tricchinelli in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Susan Jenkins at email@example.com
A Securities and Exchange Commission Administrative Law Judge Enforcement Action Tracker is available on Bloomberg Law's Securities Practice Center. This tool provides analysis of ALJ initial decisions in litigated SEC enforcement actions. It enables users to search across these actions based on the types of issues that give rise to these actions, the types of entities involved, the titles of individuals involved in the actions, and the types of non-monetary remediation granted in each case.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)