April 19, 2005
Coke Settles Disclosure Action with SEC’s Enforcement Division
Yesterday, the SEC announced that Coke has settled an enforcement action relating to the company’s failure to disclose certain end-of-quarter sales practices used to meet earnings expectations. In reaction to the SEC’s action, Coke has already voluntarily taken steps to strengthen its internal disclosure review process.
One aspect of this settlement to highlight was that even though Coke’s accounting treatment for sales made in connection with “gallon pushing” (i.e. a form of “channel stuffing” in the beverage industry) was found to be without issue, the SEC still found that the company’s failure to disclose the impact of gallon pushing on current and future earnings in MD&A, as well as the false statements and omissions in a subsequent Form 8-K, violated the antifraud and periodic reporting requirements. In other words, this is not a financial fraud case; it’s a disclosure one.
Notes from the SEC’s Internal Controls Roundtable
If you were not among the standing-room only at last week’s 404 Roundtable – from what I hear, a record crowd! – check out these comprehensive notes from the Roundtable, courtesy of Shearman & Sterling and Alston & Bird. We have posted the notes in both the “Conference Notes” and “Internal Controls” Practice Areas.
Conflicts of Interest and Dicey Engagements
On DealLawyers.com, don’t forget tomorrow’s, Wednesday, April 20th webcast – “Conflicts of Interest and Dicey Engagements” – featuring Peter Douglas of Davis Polk; Brian McCarthy of Skadden, Arps; Kevin Miller of Credit Suisse First Boston; and Morton Pierce of Dewey Ballantine. Among other topics, this program will cover:
• How to determine what conflicts you may face? And what factors you should consider when facing a conflict?
• What issues should you consider to resolve a conflict? What steps are sufficient, such as disclosure and consent, implementing ethical walls, eliminating the conflict or having an advisor withdraw?
• What are the consequences of having a conflict, including how to assess the level of risk and potential liability? How should you deal with insolvent or unsophisticated clients, or unorthodox arrangements?
• What is required disclosure in SEC filings regarding fairness opinions, including permissible disclaimer language? What about disclosure of other potential conflicts? What is the impact of the NASD’s fairness opinion proposal?