GWEN IFILL: But will today's deadlines make it tougher to commit fraud? For more on today's developments we're joined by Linda Griggs, a former chief counsel to the chief accountant of the SEC, she is now a partner at Morgan, Lewis, and Bockius, a Washington law firm. Welcome.
LINDA GRIGGS: Hi.
GWEN IFILL: What is the significance of these signed documents today?
LINDA GRIGGS: Well, there are two sets of signed documents that we're seeing today. The first one is the one that is the sworn statement that refers to prior reports, and that one the SEC ordered 947 CEO's and CFO to certify to. Those 947 companies learned about this order in June, so they've had time to prepare, to figure out how to get comfortable with signing a certification that their old reports were fine. There's another set of certifications that are coming in today too. And that was required by Sarbanes Oxley. And that has --
GWEN IFILL: That's the corporate accountability bill that was signed by the President.
LINDA GRIGGS: That's right. And that one requires a certification that came out of the blue. Corporate America didn't realize that was going to come in so quickly. The SEC had proposed a certification requirement, but there was a comment process that ends on August 19, and so people thought they had some time to get used to it. So all of a sudden we have lots of certifications coming in today.
GWEN IFILL: If these CEO's sign their John Hancock to these documents, can they later say I thought at the time to the best of my knowledge that this was true, but there was just pure sloppiness at work here?
LINDA GRIGGS: Well, best of your knowledge. The sworn statement is to the best of their knowledge they think there's no material omission in those reports. That means they have to do more than just guess. They got to go through a process of and we've advised companies they should take to their management, gel their management involved, we've advised them that they've got to talk to their audit committee, because the other part of that sworn statement is that they discussed the contents of the sworn statement with their audit committee. But they need to get everybody involved in the company so that the company people get vested in making sure these disclosure documents are appropriate.
GWEN IFILL: We've all been watching the SEC Web site today to see who was filing and who wasn't. But one of the loopholes, at least a temporary one, is that people can ask for extensions. Does that raise a red flag when a company like Qwest or WorldCom, as they did, ask for extension?
LINDA GRIGGS: Well, I don't know if it will raise a red flag. Certainly companies who have discovered something that they want to follow through on will be filing or have filed 12B-25s asking for an extension and that gives them another five days to figure out whether they can, in fact, file a correct document or whether they will have to restate. The problem with restating is that it takes time. So if you discover a problem last week, for example, you may not be able to restate quickly enough in order to file even within the extended period of time.
GWEN IFILL: What if the SEC subjects these documents to smell tests and decides that a CEO has not truthfully signed this document. Is there a punishment, is there a penalty involved?
LINDA GRIGGS: Well, the SEC is reading these documents; in fact I bet they're sitting there right now, they've got a room full of people looking at the sworn statements and probably also looking at the other certifications. And on their face it's going to be hard for the SEC to know whether they're wrong. But as you know, Sarbanes-Oxley, the new act, is going to give a lot more money to the SEC, because everybody knows that the SEC hasn't had the manpower to review enough documents. So this will enable to SEC to look at more documents. And if they see something that doesn't make sense, they will certainly raise comments and try to get to the bottom of it.
GWEN IFILL: We saw the Dow Jones today shoot up a couple hundred points and we don't know why this ever happens, but assume for a moment that it's because these documents were arriving today. Are there market consequences for someone's truthfully filling out these documents or failing to do it?
LINDA GRIGGS: Certainly I think there would be if a failed to file it. If they failed to sign the sworn statement or said they can't certify to prior reports it will be shown by the SEC on their Web site in the back bucket; the SEC has two buckets: the good bucket and the bad bucket. And that will not showed up for a few days because the SEC has to read these to determine if it goes to the bad bucket. But if a company can't swear - if their officers can't swear to the accuracy of their documents, they will have to submit a statement or will have already submitted a statement today that says they can't make the representation.
GWEN IFILL: And, if that happens, is there a personal exposure for a CEO who signs, does it come right out of that CEO's pocket or is it the company that's liable?
LINDA GRIGGS: Well, the fact that the CEO or CFO said they couldn't certify isn't going to give them any risk. But the reason they couldn't certify is what will cause the problem. Normally CEO's and CFO's don't actually have to pay money unless they were involved in insider trading at a time when they had material nonpublic information. But the company will certainly have to suffer enforcement action if in fact what is going on is the financial statements are false, or there isn't good disclosure about the company's results of operations.
GWEN IFILL: Now some business people involved in this whole drama have said, listen, a crook is a crook is a crook and a crook who is going to commit fraud anyhow is not going to mind signing an untrue document in this case. Does that undercut the ability of this to actually change what happens?
LINDA GRIGGS: Well, I think you're right. A crook is a crook will still have false financial statements. But I think that there is a multi-faceted approach being under taken right now, Congress passed the law. The New York Stock Exchange, AMEX, and NASDAQ have been proposing far reaching new corporate governance requirements. The SEC is proposing and will be adopting soon new disclosure requirements. Those three coming together are going to have a dramatic impact. And getting more people involved. I can't underestimate the strides that I think will happen because of getting that next level of management involved, getting the audit committee involved.
GWEN IFILL: And if you're an investor who wants to find out whether the company you sent your life savings to has signed one of these documents, has submitted one of these documents, how do you find out?
LINDA GRIGGS: Well, the sworn statements are submitted to the SEC, but most companies are doing what the SEC asked them to do, which is to file a copy of it as an exhibit to an 8-K or to disclose it in an 8-K. And the certifications, if they're not filed as exhibits to a quarterly report, will be filed or at least described in an 8-K. So they can go on the SEC's Web site, look at the SEC filings, anybody can do it. And if you're interested in a particular company, look for that company's filings.
GWEN IFILL: And they can find it there.
LINDA GRIGGS: That's right.
GWEN IFILL: Okay, Linda Griggs, thanks for clearing it all up.
LINDA GRIGGS: Thank you, good to talk to you.