Wednesday, June 21, 2006

Rubber Stamp This

Hey there, Mr. CEO. Yeah, you. Think you can just sign those Sarbanes certifications and head off to the Racquet Club for a quick game of squash and a white wine Spritzer (or whatever it is you drink)? Well, you had better think again, especially if you work for (yep, I said it, work for) the shareholders of the American Italian Pasta Company.

That’s right, Judge Ortrie D. Smith (W.D. Mo) (Clinton '95) has ruled that “by signing the Sarbones-Oxley certifications and the Annual Reports filed with the SEC, [the CEO] indicated he had reviewed and was familiar with the underlying facts giving rise to those documents -- meaning he was either aware of the improper accounting, was reckless with regard to the public reports of AIPC's finances, or had not conducted any review and did not act in accordance with the certifications.” Take your pick.

You can read IN RE AMERICAN ITALIAN PASTA COMPANY, issued June 19, 2006, at 2006 U.S. Dist. LEXIS 40548.

Nugget: “The Court is not intending to imply those who sign such certifications are strictly liable for misstatements. However, it is a factor that may, in appropriate circumstances, demonstrate the person certifying the pronouncement has merely 'rubber stamped the numbers' and thereby acted recklessly.”

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