President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye.
Unbeknownst to almost all of Washington and the financial world, Bush and every other President since Jimmy Carter have had the authority to exempt companies working on certain top-secret defense projects from portions of the 1934 Securities Exchange Act. Administration officials told BusinessWeek that they believe this is the first time a President has ever delegated the authority to someone outside the Oval Office. It couldn't be immediately determined whether any company has received a waiver under this provision.
The timing of Bush's move is intriguing. On the same day the President signed the memo, Porter Goss resigned as director of the Central Intelligence Agency amid criticism of ineffectiveness and poor morale at the agency. Only six days later, on May 11, USA Today reported that the National Security Agency had obtained millions of calling records of ordinary citizens provided by three major U.S. phone companies. Negroponte oversees both the CIA and NSA in his role as the administration's top intelligence official.
Securities-law experts said they were unfamiliar with the May 5 memo and the underlying Presidential authority at issue. John C. Coffee, a securities-law professor at Columbia University, speculated that defense contractors might want to use such an exemption to mask secret assignments for the Pentagon or CIA.
...William McLucas, the Securities & Exchange Commission's former enforcement chief, suggested that the ability to conceal financial information in the name of national security could lead some companies "to play fast and loose with their numbers."
Thanks to a course in Corporations I know a little bit about the requirements of the SEC, but I'm too ignorant in this field to be able to say why the Bush administration would feel the need to delegate this authority to the Intelligence Czar, or for what intelligence or national security related purposes it would be used. Given this administration's past behavior, it's automatically suspicious that they simply slipped the change into the Federal Register-the daily publication of rules of federal organizations-and didn't even bother to make a public pronouncement. And the timing is certainly very curious. Who would need to hide what, and why? Maybe we'll find out.
1 comment:
From comments I was reading on the story, nobody can think of a good reason for this. That is, they can't think of a reason that doesn't have to do with hiding corruption. I'm no expert, but I really can't think of why any corporation should be hiding what it does. Keep in mind that this doesn't say that information which once was available to the public will be kept hidden. I'm sure that plenty of companies already do classified work and tell the SEC about it. It doesn't mean you can read Wall Street Journal and find out military secrets. This is so that companies don't even have to report to the SEC. Why would that be? What possible reason is there besides hiding "creative accounting"?
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