Appendix 11 Report Of Investigation Pursuant To Section 21(A) Of The Securities Exchange Act Of 1934 And Commission Statement On The Relationship Of Cooperation To Agency Enforcement Decisions (Exchange Act Release No. 44969, Accounting And Auditing Enforcement Release No. 1470, October 23, 2001) ('Cooperation Statement') (Seaboard Opinion)

AuthorRobert W. Tarun
ProfessionFormer Executive Assistant U.S. Attorney in Chicago
Pages988-991
988 APPENDIX 11
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 44969 / October 23, 2001
ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1470 / October 23, 2001
Report of Investigation Pursuant to Section 21(a) of the Securities Exchange
Act of 1934 and Commission Statement on the Relationship of Cooperation to
Agency Enforcement Decisions
Today, we commence and settle a cease-and-desist proceeding against Gisela de
Leon-Meredith, former controller of a public company’s subsidiary.1 Our order
finds that Meredith caused the parent company’s books and records to be inaccu-
rate and its periodic reports misstated, and then covered up those facts.
We are not taking action against the parent company, given the nature of the
conduct and the company’s responses. Within a week of learning about the apparent
misconduct, the company’s internal auditors had conducted a preliminary review
and had advised company management who, in turn, advised the Board’s audit com-
mittee, that Meredith had caused the company’s books and records to be inaccurate
and its financial reports to be misstated. The full Board was advised and authorized
the company to hire an outside law firm to conduct a thorough inquiry. Four days
later, Meredith was dismissed, as were two other employees who, in the company’s
view, had inadequately supervised Meredith; a day later, the company disclosed
publicly and to us that its financial statements would be restated. The price of the
company’s shares did not decline after the announcement or after the restatement
was published. The company pledged and gave complete cooperation to our staff. It
provided the staff with all information relevant to the underlying violations. Among
other things, the company produced the details of its internal investigation, includ-
ing notes and transcripts of interviews of Meredith and others; and it did not invoke
the attorney-client privilege, work product protection or other privileges or protec-
tions with respect to any facts uncovered in the investigation.
The company also strengthened its financial reporting processes to address
Meredith’s conduct—developing a detailed closing process for the subsidiary’s
accounting personnel, consolidating subsidiary accounting functions under a par-
ent company CPA, hiring three new CPAs for the accounting department responsi-
ble for preparing the subsidiary’s financial statements, redesigning the subsidiary’s
minimum annual audit requirements, and requiring the parent company’s con-
troller to interview and approve all senior accounting personnel in its subsidiaries’
reporting processes.
Our willingness to credit such behavior in deciding whether and how to take
enforcement action benefits investors as well as our enforcement program. When
businesses seek out, self-report and rectify illegal conduct, and otherwise coop-
erate with Commission staff, large expenditures of government and shareholder
resources can be avoided and investors can benefit more promptly.2 In setting forth
the criteria listed below, we think a few caveats are in order:
tar51556_22_app11_987-992.indd 988 5/4/15 2:21 PM

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