January 24, 2011

SEC Brings Rare Perks Enforcement Action

A week ago, the SEC brought a rare enforcement action involving perks when it charged NIC Inc. and four current or former officers with failing to disclose more than $1.18 million in perks paid to the former CEO over a six-year period. Correct me if I’m wrong, but this is the first perks case that the SEC has brought since this Tyson Foods settlement in 2005 (and this General Electric order from the year before that). The company and three of the officers agreed to pay a combined $2.8 million to settle the charges.

The SEC alleges that NIC Inc.’s SEC filings failed to disclose that the company footed the bill for wide-ranging perks enjoyed by the former CEO, his girlfriend, and his family – including vacations, computers, and day-to-day personal living expenses and that NIC’s related party disclosures for 2002 through 2005 also were misleading. Among the alleged undisclosed perks for Fraser outlined in the SEC’s complaints filed in federal court in the District of Kansas:

– More than $4,000 per month to live in a ski lodge in Wyoming.
– Costs for Fraser to commute by private aircraft from his home in Wyoming to his office at NIC’s Kansas headquarters.
– Monthly cash payments for purported rent for a Kansas house owned by an entity Fraser set up and controlled.
– Vacations for Fraser, his girlfriend and his family.
– Fraser’s flight training, hunting, skiing, spa and health club expenses.
– Computers and electronics for Fraser and his family.
– A leased Lexus SUV.
– Other day-to-day living expenses for Fraser such as groceries, liquor, tobacco, nutritional supplements, and clothing.

In his blog about this action, Mike Melbinger notes: “The SEC’s allegations make this seem like an egregious situation. However, this action is still a bit frightening to those of us who are making a variety of tough calls each proxy season on whether to report certain items as perquisites.” And here is Paul Hodgson’s take on the circumstances…

Webcast: Alan Dye on the Latest Section 16 Developments

Tune in tomorrow for the webcast – “Alan Dye on the Latest Section 16 Developments” – to hear Alan Dye of and Hogan Lovells discuss the most recent updates on Section 16, including new SEC Staff interpretations and Section 16(b) litigation. As all memberships expired at the end of the year, renew now to catch this program. If you’re not yet a member, try a no-risk trial now.

Also on, the annual Romeo & Dye year-end compliance checklist, designed to assist companies and compliance officers in integrating the Section 16 compliance program with the year-end 10-K/proxy statement disclosure process, has been updated for 2011.

Deadline: S&P 500 Companies Owe Contact Information to ISS

S&P 500 companies should remember that they have until next Monday – January 31st – to provide contact information to ISS. If ISS doesn’t receive the information, companies will not receive their proxy analysis for review and thus lose the chance to correct factual inaccuracies before an ISS report is released on the company. This is a new policy and an important omission if a S&P company fails to comply.

– Broc Romanek