1. The document outlines the process that companies and executives may follow when misreporting financial information to regulators and investors. It involves several phases from initially considering misreporting options, to creating and disclosing manipulated data, to potential investigations and negotiations with regulators. 2. If regulators discover issues, companies can negotiate agreements like NPAs or DPAs to avoid charges if they cooperate and improve compliance. However, failure to comply with such agreements can result in voiding the agreement and criminal charges and trials being pursued. 3. The process is described as taking many steps over long periods of time, involving strategic decisions by company staff and negotiations with regulatory staff, to maximize benefits of misreporting while minimizing risks of being caught and facing

1. 1 VisitingResearchConductedbyArthurMboue,formerVP
ROAD FOLLOWED BY INFORMATIONWHILE DEALING WITH SEC/DOJ STAFF
PHASE TIMELINE & EVENTS STAFF IN
CHARGE
DETAILS OF PROCESS
INITIATION Thinkingaboutthe size andtype
of aggressive informationtoput
inthe incomingreport. Ittakes
a fewdays.
Companystaff For publiclytradedfirms,missingtheirowntarget
earningcan hurttheircompanymarketshare price.
For Wall Street,managementislyingabouttheir
owntarget earningthatmeanstheyhave more
‘skeletonsintheirclosets’. The market
undervaluationistoOUT thembefore itistoo late.
But it ispossible thatthe companymanagementis
justincompetentanddoesnotknowasmuch as
theyshouldtheirowncompany. Whentheyare
toldabouttheirimpendinglow valueormissed
target results thisinformationisstillaprivileged
informationornon-publicinformationonlyknown
by a few staff andtheiragents. Managementwill
findthisinformationunacceptableandwill start
thinkingaboutabetterwayto disclose better
informationinsteadinordertokeepthe investing
publicfromundervaluingtheircompanyvalue. In
short,for themthere isnothingtheycannot
mishandle.
CREATION OF
OPPORTUNITIES
FOR
MISREPORTING
Thisstrugglingtime will endup
findingthe waytofix these data
inorder to make them
attractive. The processtakes
days
“Investorsdon’tlikeuncertainty,
when they is uncertaintythey
alwaysthinkthere is another
shoeto fall...”
Companystaff CEO, CFOand otherTop executivesget the internal
reportof the true data of theirimpendingreport.
Here,if theyhave favorable results,theywillbe
preparingforfuture pressrelease,Wall Street
appearance andanalystscall because theywill not
investinmisreportingfavorable results. But,if they
were informedaboutunfavorable results,theywill
be toldabout all the optionsof misreporting
available tothemincludingtheirprosandcons.
Thispractice of misreporting hasahose of
obstaclesinfrontof themincludinglegal rulesand
the intensityof external monitors(financial
analysts,financial news,Wall Streetregulators,
academic…).If the CEO iscomfortable withthe
strategydevelopedtohide losses,change
depreciationof assets,change the presentationof
10K…report withno itemnumber,more brevity
and pictures or/andincrease valuesof special
purpose entities,…,he will authorize the postingof
thisaggressive informationandhug andmaybe
kissthe CFO forsavinghisjob.
LEARNING OF
INFORMATION
A couple of daysare allocatedto
thisphase.
“A: there wasno otherreason
otherthan September11th
thatI
Companystaff Thismanipulativeanddeceptive dataisinthe
systemnow. That meansonlya fewinsidersof the
companyknow the true healthof the company.
These insiderswill have trouble toreconstructthe
ENTER AGGRESSIVEINFORMATION HERE

2. 2 VisitingResearchConductedbyArthurMboue,formerVP
sold the stock.Q: … Did you
thinkaboutwhetherornot the
decision to sell wasa good
decision?.A: Oh,I agonized over
it…”
true data because of its segregation system. Their
dutyis to prepare andmake available tothe public
the companyfinancial performance andfinancial
positionshowingintheirITsystem. Itis an
argumentthat theyshouldmake sure thisdataare
not updatedbutexecutivesupdate dataall the
time as a routine workto correctdata and have a
systemreflectingthe true data. It has nothingto
do withmisreporting. Isitaboutthe scope of
employment?Youbid
DISCLOSURE
AND PRE-FILING
DECISIONS
More than 15 daysshouldbe
allocated
DCF AND
CORPORATE
STAFF
Companystaff can file forNoAction Letters,
exemptive applications,writteninterpretative
requests,…
 Confidential Treatment Rules canbe requested,
for upto 10 years,some datacan be classified,
that meansnotavailable tothe public
FILING OF
INFORMATION
Firmfilesitsreporttothe SEC.
Please allocatedfrom90days
afterthe Year End to 4 daysor
lessafterevent,size of company
doesmatter.
Companystaff 10-K, 10-Q, N-PX,N-SAR,8-K,….
MARKET
TRADING WITH
THIS
INFORMATION
It isa fastand furiousprocess.
Some online servicesallowtheir
subscribersmemberstoaccess
newlydiscloseddatatothe SEC
a minute before itsposting
Investing
public
The market istradingnot knowingthatthere is
somethingsmellingfraudwiththisdeceptivedata.
Thisinformationisnotattractive tomake financial
decisionbutif youdonot know and youneedto
‘gamble’formore liquid,youdidwinand ‘rape’
your successors. Thishighprofit will be coveredby
highlosswhenthe marketwill learnaboutthe true
information.
INVESTMENT
AND FINANCIAL
DECISIONS
Making investmentandfinancial
decisionbasedonunattractive
information,maybe itcanhelp
whenyouare selling. The
processwill take acouple weeks
“I like my Enron stock,butI was
scared after September11th
. So
when the marketsreopened that
nextMonday Isold 500,000
additionalsharesat$30 a
share.”
Investing
public
If you are makingyourinvestmentdecisionbased
on Form3, 4, 5 and companybuybackactivitydata,
the companycan be underpressure fromitsmain
investors(hedgefunds)toincrease dividendpayout
so itis cuttingitsbuybackprogram not because it
knowsthat itscompanyisovervaluedor/andwill
be undervaluedsoon.Atthe same token,top
executivesare sellingbecauseof theirneedfor
liquidfordivorce settlement,secondoffice
(youngermistress,…allowances),Floridaretirement
mansionunderconstructionorjustto hide his
(their) cocaine line addiction(streetsellercollects
or useris dead;shoppercan createa user and
chooserproblem,can you buy good stuff formeand
takethe rest of money?). ThatsaidWall Streetwill
make whateverinferencescanbe possiblydrawn
aboutexecutivesdecisiontoraise capital and
recommendabuy of thiscompany’sshare withits
false information.
REALIZATION
OF PAY OFFS
ROI (returnoninvestment) on
thismisreportingiseasyand
Investing
public
The payoffsare realizedwithunattractive and
unreliableinformation. The companyandthese

3. 3 VisitingResearchConductedbyArthurMboue,formerVP
quick,butthe marketwill learn
aboutthe mysterybehindthis
information. Itwill be a
correctionandmore side effects
includingfinancial (legal costs,
marketshares,…) andnon-
financial (uptojail time)
top executiveshave opportunitytostartthe next
fiscal yearwithlessworryaboutthe company
marketvaluationandlesshungerforliquid.
AFTER FILING
(review)
Afterfilingof 10-K,10-Q, 8-
K,….anditspostingtakes
average 29 daysfor the SEC to
issue itsfirstcomment
DCF staff 4 typesof reviewswill be conductedatthe
discretionof the staff:
 Preliminary
 Full Review
 Financial Statements
 Targeted/Monitorreview
COMMENT
PERIOD
It will be upload(comments
fromthe staff) andcorresp
(responsesfromthe company)
exchange betweenthe SEC
disclosure operational teamand
the companydisclosure team,
average 41 daysshouldbe
allocatedfromthe 1st
comment
to the completion.
DCF staff Philosophyadoptedtoreview disclosure:
 If disclosure isunclear-SECwill advisethe
companyto provide more clarification
 If disclosure isinconsistent-SECwill advisethe
companyto provide additional orsupporting
data (all the companyposteddocuments,calls,
conferences,releasesare reviewedforFair
Disclosure-FDandcanbe used)
 If the disclosure iswrongandmaterial,it
dependsonthe level of materiality,SECwill
advise the companytocorrect its future filing
or for extreme case,itwill advise the company
to restate itsdisclosure
 The company has10 daysto respondtothe SEC
and can obtain3/5 daysextension.
COMMENT
POSTING
Completionof the SECcomment
letterphase doesnotlimitthe
numberof exchanges
DCF &
corporate
staff
20 days laterthese letterswill be posted
INVESTIGATION The investigationcantake as
longas many years
Enforcement
and FraudDiv
staff
A receiptof subpoenanotice will come withthe
name of the contact staff. The companywill start
doingitsowninternal review andinvestigationas
workproduct. While bothsidesare evaluating
theirchancesof winningduringtrial. Itwill be an
opportunitytopropose toprosecutorfora NPA;
yes ormay be?
SUBPOENA AND
NEGOTIATION
 NPA
 DPA
What a good counsel startshis
negotiationwiththe prosecutor
isa potential NPA (acontractual
agreementbetweenthe US
Gov’t anda companyor
corporate individualfacinga
criminal orcivil corporate
investigationorindictment.
Under the bindingagreement,
the Gov’t refrainsfromfiling
chargesagainstwrongdoersin
Enforcement
and FraudDiv
staff
Aftergatheringevidences,the DoJorSEC will come
witha statementof facts.Prosecutorswill use
several factors to considerwhethertocharge the
corporationor whethertoawardhim a NPA or DPA
 Nature and seriousnessof the offense
 Pervasivenessof wrongdoingwithinthe
corporation
 Corporate historyof similarconduct
 Corporation’stimelyandvoluntarydisclosure
of wrongdoingandits willingnesstocooperate
inthe existingcompliance program

4. 4 VisitingResearchConductedbyArthurMboue,formerVP
exchange forsome Gov’t
imposedprogramandits/his
goodconduct duringa very
superviseddiversionprograms).
It issometimesimpossibletoget
it withouthistoryof self
reportingandgoodcooperation
withthe prosecutor.If your
criminal historyislessstellar
and youdidcommitlessserious
offense,the prosecutorcan
charge yourcompany and
require youtoplea. The
prosecutorinhisowndiscretion
can award youa DPA (a
contractual agreementbetween
the US Gov’tand a defendant
corporationor defendant
corporate individualfacinga
criminal orcivil corporate
indictment.Underthisbinding
agreement,the Gov’twill
postpone the courtproceeding
until a giventime toallowthe
defendantcorporationand
corporate individualto
demonstrate agoodconduct by
followingaverysupervisedpre-
trial probation. If the company
complieswiththe terms of the
agreements,the prosecutorwill
dismissthe chargesat the end
of the program.
 Corporation’sremedial actions
 Collateral consequencesonshareholders,
employees,pensionholders,andthe public
impactof a corporation.
 Adequacyof the prosecutionof the individuals
responsible forthe corporation’smalfeasance
 Adequacyof remediessuchascivil or
regulatoryenforcementactions
 Read U.S.Attorney Manual9-28-300
PS: DPA hasa court criminal record and jacket
when NPA doesnot
AGREEMENT
TERM PERIOD
 CONTRACT
UAL
DEMAND
 CURE
PERIOD
The prosecutorhas
unchallengeddiscretionto
declare anybreachof
agreement.The prosecution
shouldnotifythe company
aboutthe breachand give them
30 days to argue theircase in
writing.
Prosecution
and company
staff
Basedon thisresponse fromthe company,
prosecutionwilldetermineeithertoexercisetheir
contractual right (cure period foraverage 20 days)
or pursue theirprosecutorial right. There isa
breachwhen:
 The prosecutorsays so
 The company commitsandfelony
 The company failstocomply,cooperate or
implementreal changes,…
TRIAL PHASE For a handful groupof
recalcitrantcompanies,
disobeyingthe prosecution
meansa court day withcharges
and privilegedinformationas
evidences
Prosecution&
corporate
legal team
The company andthe U.S Govt previousagreement
isvoid. It cannot challenge anyvenue or
admissibilityof these privilegedinformation
Most CASES END HERE
LONG LIVE THE FRAUD DIVISION,DoJ