According to a recent Wall Street Journal article, “new fraud crackdown looms” for publicly traded companies that skirt financial-reporting obligations. For support, the article notes that the Securities and Exchange Commission has launched the Financial Reporting and Auditing Task Force, a new task force of about eight attorneys and accountants who will focus on common problem areas: revenue recognition, valuation, capitalized versus non-capitalized expenses, reserves, acquisition accounting and other performance benchmarks that don’t follow standard accounting principles.
Since the SEC task force can comfortably fit into a standard minivan, why will this be a game-changer for corporate fraudsters? The answer is that the task force will be an “incubator” to build accounting-fraud cases from SEC whistleblower complaints. Thus, the task force will shepherd along meritorious SEC whistleblower actions involving accounting fraud, and then hand them over to bigger units for full investigations.
“Frauds in the accounting area are often difficult to detect without somebody from the inside,” said David Woodcock, who will head the new task force. The SEC is investigating several accounting-fraud cases referred by whistleblowers that it wouldn’t have detected otherwise, he said.
Oftentimes, such SEC investigations of medical device and pharmaceutical makers begin as False Claims Act qui tam lawsuits.
With the launch of the SEC Task Force, healthcare whistleblowers may now have an additional, viable option for fighting against publicly traded corporations that fraudulently struggle with basic accounting.
More information for whistleblowers is located at the Nolan Auerbach & White website.