{"id":2759,"date":"2023-11-09T11:52:08","date_gmt":"2023-11-09T16:52:08","guid":{"rendered":"https:\/\/seci.wpenginepowered.com\/?p=2759"},"modified":"2023-11-09T11:52:13","modified_gmt":"2023-11-09T16:52:13","slug":"self-reporting-to-and-cooperation-with-enforcement-do-make-a-difference","status":"publish","type":"post","link":"https:\/\/seciblog.pli.edu\/index.php\/self-reporting-to-and-cooperation-with-enforcement-do-make-a-difference\/","title":{"rendered":"Self-Reporting to and Cooperation with Enforcement Do Make a Difference"},"content":{"rendered":"

On September 25, 2023, the SEC announced<\/a> a settled enforcement action against GTT Communications, Inc.\u00a0 GTT grew rapidly, primarily through acquisitions.\u00a0 This growth created challenges and disruption that eventually resulted in material problems in two of GTT\u2019s key operational and reporting systems.\u00a0 The two systems were used to track elements of expenses, and over time they began reporting diverging amounts.\u00a0Though the company tried, the systems could not be reconciled.\u00a0 As a result, the company could not reasonably determine amounts to record for certain expenses, including its cost of revenue (COR).\u00a0 Without solving this identified problem, company personnel made large, unsupported adjustments to its accounting records.\u00a0 When this situation came to light, the company commenced an internal investigation and ultimately filed this Item 4.02 Form 8-K<\/a> to inform investors that its previously issued financial statements should not be relied upon.<\/p>\n

It is difficult to appreciate the magnitude of GTT\u2019s reporting problems.\u00a0 The company spent more than a year and tens of millions of dollars trying to build the information required to restate its financial statements.\u00a0Ultimately, the company abandoned these efforts.\u00a0 It eventually filed for bankruptcy, emerging as a privately-owned company.\u00a0 Because the company\u2019s historical records could not be reconstructed, upon emerging from bankruptcy, the company used fresh-start accounting.<\/p>\n

Early in its process the company self-reported its problems to the SEC.\u00a0 It also \u201ccooperated extensively with the SEC staff during its investigation.\u201d\u00a0 The company\u2019s remedial measures included \u201cattempting to rebuild its COR accounts, replacing certain members of management, its board of directors, and its auditor, and overhauling its accounting function, including its policies and procedures relating to COR.\u201d<\/p>\n

The company entered into a cease-and-desist order, but as a result of self-reporting, cooperating and taking strong remedial steps, there was no monetary penalty against the company.\u00a0 You can read more in this Press Release<\/a> and the related SEC Order<\/a>.<\/p>\n

This case presents a favorable outcome, but self-reporting and cooperation present several complex questions.\u00a0 When companies find a problem, they must consider whether to self-report, when to self-report, how to approach the staff, and what information to share.\u00a0 For an in-depth discussion of these and a number of related issues, you can listen to this episode of PLI\u2019s inSecurities podcast<\/a>.\u00a0 Host Kurt Wolf and Miller & Chevalier Partner Sandra Hanna discuss a variety of issues including considerations for self-reporting.<\/p>\n

As always, your thoughts and comments are welcome.<\/p>\n","protected":false},"excerpt":{"rendered":"

On September 25, 2023, the SEC announced a settled enforcement action against GTT Communications, Inc.\u00a0 GTT grew rapidly, primarily through acquisitions.\u00a0 This growth created challenges and disruption that eventually resulted in material problems in two of GTT\u2019s key operational and reporting systems.\u00a0 The two systems were used to track elements of expenses, and over time … Continue reading Self-Reporting to and Cooperation with Enforcement Do Make a Difference<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[261,242],"tags":[],"coauthors":[154],"class_list":["post-2759","post","type-post","status-publish","format-standard","hentry","category-enforcement","category-reporting"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/2759","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/comments?post=2759"}],"version-history":[{"count":0,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/posts\/2759\/revisions"}],"wp:attachment":[{"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/media?parent=2759"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/categories?post=2759"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/tags?post=2759"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/seciblog.pli.edu\/index.php\/wp-json\/wp\/v2\/coauthors?post=2759"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}