Hawaii execs
to sign off
on financials

Hawaiian Electric is the only
publicly traded company that
must meet next week's deadline

By Dave Segal

Pictures of corporate executives led away in handcuffs linger like a smoking gun.

Fudge a number and go to jail. Or pay a fine. Or get hit with both.

The Securities and Exchange Commission and the Bush administration have tightened the rules and now Hawaii companies and others around the country are about to answer.

Hawaiian Electric Industries Inc., the only Hawaii company on the SEC list of the nation's 947 biggest companies, said it plans to submit sworn statements by Wednesday's deadline from its chief executive and chief financial officers certifying the accuracy of last month's second-quarter financial report. Bob Mougeot, the company's chief financial officer, said the company will not be restating earnings.

"We feel confident in our disclosures," Mougeot said.

It is the possible restatement of earnings from the nation's largest companies that has traumatized financial markets in recent weeks as skeptical investors wait to see if top executives alter their financials in order to avoid possible civil and criminal litigation.

Hawaiian Electric was included on the SEC's list of big companies because the $1.7 billion in revenue it generated last year topped the SEC's cutoff point of $1.2 billion.

While the SEC's June 27 order applies only to the largest U.S. corporations, top executives from all of Hawaii's companies nevertheless will be required to put themselves on the line by their respective filing deadlines in order to comply with the provisions of the Sarbanes-Oxley Act that was signed into law July 30 by President Bush.

A Star-Bulletin poll of the state's top 12 publicly traded companies found that all the top executives plan to certify or have already certified their financial reports.

"We're used to putting our name on the financials and sort of standing behind them," said Maui Land & Pineapple Co. Chief Financial Officer Paul Meyer, whose company has filed its sworn certifications. "This new federal law certification is a little bit different in its form and it has, of course, federally mandated larger penalties. But we don't view this certification as a significant change from the way we felt about certifying the quality of our financials and the accuracy in the past."

In most cases, the SEC's filing deadline for 10-Q, or quarterly, financial reports is Wednesday since most companies operate on a calendar-year basis and their most recent quarter ended June 30. Companies that use fiscal-year reporting have deadlines that vary depending upon when their quarter ends.

"I think the SEC has the responsibility to make sure the investing public is aware of the material factors affecting a company," Mougeot said. "And if the SEC has to propose a condition or reporting mechanism to make sure the investing public is better served with respect to information, then I think it's incumbent upon a public company to follow those dictates."

The SEC order and congressional legislation, put on a fast track in the wake of the accounting scandals involving Enron Corp. and others, is meant to restore investor confidence and to instill accuracy in the financial reporting system. Executives who run afoul of the law face stiff penalties, ranging from $1 million to $5 million in fines and from 10 to 20 years in prison.

Daniel Rabun, a corporate and securities partner for Baker & McKenzie, the world's largest law firm, said the hurried nature in which Congress passed the bill has created some confusion because the act has two provisions with different deadlines.

The criminal certification, which includes fines and penalties for knowingly certifying a fraudulent report, went into effect immediately. The civil certification, which asks the signing officers to certify they've taken six outlined steps, goes into effect 30 days after Bush's July 30 signing.

Some of the companies outside of the SEC's 947 targeted ones have been confused, Rabun said, because the 30-day period before the civil certification takes effect extends past Wednesday's deadline and applies to third-quarter earnings' mid-November deadline.

"A lot of people don't know, though, they have to do this additional criminal certification which went into effect immediately," Rabun said.

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