Providing misleading financial guidance to analysts in 2005, as the SEC contended IBM did, never turned into anything as the two sides settled the dispute.
If this were a playground hoops game, one could call it a ‘no harm, no foul’ moment.
IBM got off with a settlement that does not require them to admit wrongdoing or pay a fine. Reuters said the SEC never accused IBM of committing any type of securities fraud.
It’s a strange end to a dispute that started with IBM telling analysts that expensing stock options would impact earnings more than IBM knew they would. Instead of a 14 cents per share hit, it was a 10 cents per share tap.
The SEC found that IBM anticipated this would happen. “IBM misled investors by failing to disclose information that would have allowed them to accurately determine the impact that the company’s decision to expense stock options would have on its financial results,” Reuters cited from a statement by SEC Associate Director of Enforcement Scott W. Friestad.
“The facts here are particularly troubling because the disclosure decision was driven, in part, by management’s perception of how the news would be interpreted by analysts,” Friestad said.
IBM’s actions violated reporting provisions of federal securities laws, the SEC also said. But after over two years, the best the SEC could do was to back off after eliciting a promise from IBM not to violate disclosure laws again.
Maybe the SEC plays by “no autopsy, no foul” rules these days. It’s too bad the SEC got to play with taxpayer money for the investigation.
