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American Morning
Interview with Lauren Young
Aired August 14, 2002 - 07:51 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: It is deadline day for hundreds of large American companies. Corporate CEOs for the first time must submit sworn statements certifying their financial statements are, indeed, true. The SEC, the Securities and Exchange Commission, issued that disclosure order after things like Enron and WorldCom and other corporate scandals hit the scene. The SEC also imposing rather stiff penalties for executives found to be lying under oath.
The bottom line for investors: What will this corporate pledge mean to the average Joe or Jane?
For more on that, Lauren Young, "SmartMoney" magazine with us here this morning.
Good to see you again -- good to have you back with us here.
How much bite is there in this deadline today, Lauren?
LAUREN YOUNG, "SMARTMONEY" MAGAZINE: Itsy, bitsy, teeny, tiny, teeny, weenie.
HEMMER: Really?
YOUNG: Not very much. I think what's important is that, you know, companies are trying to come out and restore some confidence in the market, and I think that's good. But what they're certifying, this is what they're supposed to be doing anyway, right?
HEMMER: A couple of basic questions. Why hasn't it been done in the past?
YOUNG: Well...
HEMMER: Why can you run a company and not submit your signature that says, you know what? These are our numbers. Here's our profits, and here are our losses.
YOUNG: If you look at an annual report, the accountants do sign off on it. So people were swearing before. And now, you know -- and CEOs, when they speak to us and when they speak to Wall Street and when they speak to, you know, everyone, they're supposed to be telling the truth.
So it was always inferred, but now, you know, we just have this little extra step. I really don't think at the end the day, though, that it means very much to the average person.
HEMMER: It does not?
YOUNG: No, unfortunately not. I think one way to read it, though, if you're an investor, the companies that did it first, the companies who came out after the SEC asked people to start doing it in June, the companies who came out first are probably really good to invest in, or at least, you know, very solid, because they definitely believe in the numbers that they have.
The ones that wait until today -- and so far, 300 companies have done it. So today, we still have -- 745 are supposed to do it. We still have about 400, you know, and 50 companies out there.
HEMMER: So what you're saying, then, for the average person to interpret this ruling today, is go ahead and check and see which companies have certified their results, and maybe you have more confidence in those numbers. Is that your suggestion?
YOUNG: Right. And you can do it on the SEC's Web site. They have the dates that each company certified at SEC.gov. Not all of the companies are up there, though, yet. As of last night, I think there was 180 or so, because there's a lag, because they're actually submitting paper forms. The SEC has to scan them in and put them on their Web Site.
HEMMER: It's 2002, right?
YOUNG: Yes.
HEMMER: Just checking.
YOUNG: You can also do it by fax.
HEMMER: Yes, the other thing is, a lot of critics have come out and said the SEC is underfunded and understaffed. And if that's the case, then they're going to go through all of these corporate signings and the swear-offs and make sure the numbers are right, it's going to take some time.
YOUNG: Oh, yes, the SEC is severely underfunded, and the SEC chairman, Harvey Pitt, has been asking for more money. It seems like he's going to get some more. But the (UNINTELLIGIBLE) is people is go to the SEC, and then they get plucked away by the -- you know, the biggest law firms out there. So it's just very, very hard to keep talent at the SEC.
HEMMER: It happens there and a few other places like that, too.
Basic question: If a company does not meet the deadline, what happens?
YOUNG: Well, this has really been bandied about, and it's pretty uncertain right now. Congress has talked about imposing 20-year prison sentences on the top CEOs and CFOs, also maybe a $5 million fine, but that is not certain. The SEC, last night, isn't really quite sure. They do not impose criminal charges against people. That is up to the Justice Department, so... HEMMER: They're making this up as they go or what?
YOUNG: Yes.
HEMMER: Really?
YOUNG: I mean...
HEMMER: Kind of sort of or...
YOUNG: Kind of sort of, because it's all happened -- the actual law came into effect after the SEC started doing this. So it's still very uncertain as to what is going to happen to these CEOs.
HEMMER: You know, just to dovetail that, if you pick up the business section of "The New York Times" today, they talk about a lot of these companies do not know what to do. Why the confusion now?
YOUNG: It really all happened very quickly, because they started doing it in June. So we don't know what's going to happen. You can get a five-day extension, and again, it's very hard to figure out. As of last night, no one had asked for an extension, but you can get a five-day extension if you're a company. And later this year, about 200 more are going to report. In total, it's about 900 and change.
HEMMER: Well, thank you, Lauren. SEC.org is one place you recommend.
YOUNG: Absolutely.
HEMMER: OK, we'll see you again, OK? "SmartMoney" magazine's Lauren Young, thanks for stopping by.
YOUNG: Thank you, Bill.
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