May 17, 2006

Congressional Republicans Plan to Introduce Bill to Soften Sarbanes-Oxley

Yesterday, according to this Reuters article, a group of Republican members of the House announced they will introduce a bill that would exempt smaller companies from Section 404; a similar Senate bill is also planned.

And I continued yesterday to add sets of notes to my blog about the SEC’s and PCAOB’s Section 404 roundtable – and the SEC posted a full transcript of the roundtable (which will help you appreciate how much effort we put into cleaning up the transcripts of our webcasts before we post them).

A Historical Rambling

Finally got off my duff to manually upload all my blogs from 2002 that comprise my first blog musings from when I founded (and from when I was one of the first lawyers to try this very new thing called a “blog”). Reviewing these old blogs is amusing for two reasons. First – and admittedly personal – is to see how I’ve come along as a home-grown journalist. I would argue that I have more of a “voice” now, partly a function of blogging more frequently and in much greater length. I’m always open to criticism if you think my style can be improved.

Far more interesting is to follow the developments leading up to the passage of Sarbanes-Oxley and the incredible rash of rulemaking that quickly followed. Unbelievably, I used the term “Sarbanes” only twice before the Act was signed into law (see May 13th and May 28th). That is how quickly the Act came into being (and how unprepared we all were when it did). The Sarbanes bill languished from the first day it was drafted and was essentially dead until the WorldCom scandal came to light in July 2002 and then poof – it was a done deal within several weeks.

It’s also interesting to recall what the top issues initially were – in August 2002, the biggest concern involved CEO and CFO certifications and the mechanics of how those newfangled things worked, which really wasn’t fully ironed out for several months. With a smile, I remember the chaos as I put together a last minute teleconference regarding certifications (just two days notice) and we had an incredible turnout as the first batch of certs were due to be filed the next week. It was wild, man. Better than Woodstock…

Can you imagine that internal controls was nowhere on the radar screen at the time? In fact, my March 2003 webcast on the topic (which I appropriately labeled then as a “sleeper,” thanks to a memorable conversation with John Huber) remains the most sparsely attended webcast I have held in my 5 years of hosting them. Look back at the law firm memos drafted right after SOX was passed and you will not find anyone predicting that Section 404 was something formidable. That was because we only had the bandwidth to tackle only the numerous new requirements that were applicable immediately – and Section 404’s implementation seemed so far away.

A lot of surprises looking back – who remembers that four SEC Commissioners were confirmed by Congress on the same day that they passed SOX? It’s true. And what about the fact that John Biggs was quasi-announced as the first PCAOB Chairman, just before the William Webster debacle. Hard to believe this now all comes under the category of “history.” Time flies…

Sentencing Commission Finalizes Amendment to Eliminate Mandated Waiver of Attorney-Client/Work Product Protections

Two weeks ago, the final amendments to the Sentencing Guidelines were submitted to Congress from the US Sentencing Commission. As I blogged about last month, these amendments include the deletion of the provision on waiver of the attorney-client privilege and work product protections. These changes become effective on November 1st, unless Congress takes affirmative action.

In addition to deleting the provision on privilege, a number of commenters had urged the Sentencing Commission to also include an express statement that such waivers are not to be considered in evaluating the level of cooperation or determining the appropriate sentence. The Sentencing Commission didn’t add the requested statement, but did add a reason for the amendment on pages 29-30. We have posted law firm memos on this development in our “Sentencing Guidelines” and “Attorney-Client Privilege” Practice Areas.