Former CSK Auto CEO to Return Ill-gotten Wealth
The former chief executive officer and chairman of CSK Auto Corporation has agreed to return $2.8 million in bonus compensation and stock profits that he received while the company was committing accounting fraud.
Although Maynard Jenkins of Scottsdale, Ariz., was not personally charged by the SEC for the company’s misconduct, Section 304 of the Sarbanes-Oxley Act (SOX) still requires him to reimburse CSK Auto for incentive-based compensation and stock sale profits that he received during the company’s alleged fraudulent period.
The SEC’s investigation was conducted by Dabney O’Riordan, Robert Conrrad, Rhoda Chang, Spencer Bendell, and Lorraine Echavarria in the Los Angeles Regional Office. The litigation effort was led by Donald Searles.
The Department of Justice, Federal Bureau of Investigation, Internal Revenue Service, and U.S. Postal Service assisted in the investigation.
The SEC filed court papers against Jenkins in July 2009 saying he violated the SOX “clawback” provision by failing to reimburse the company. It marked the agency’s first SOX clawback case against an individual who was not alleged to have otherwise violated the securities laws.
“CEOs should know that they can be deprived of bonuses or stock profits they received while accounting fraud was occurring on their watch,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.
Rosalind Tyson, Director of the SEC’s Los Angeles Regional Office, added, “Jenkins received incentive-based pay while CSK Auto was fraudulently overstating its income to shareholders. His bonuses and stock profits are now being rightfully returned to the company for the benefit of the shareholders.”
The settlement with Jenkins is subject to court approval. Jenkins has agreed to reimburse $2,796,467 to O’Reilly Automotive Inc., which has since acquired CSK Auto.
The SEC previously charged four former CSK Auto executives who perpetrated the accounting fraud, and separately charged the company for filing false financial statements for fiscal years 2002 to 2004. The company settled the charges, and the litigation against three of the former executives is continuing (CSK’s former chief operating officer has since died).
The U.S. Department of Justice brought a criminal indictment against those same executives, who have pleaded guilty to various charges. CSK Auto recently entered into a non-prosecution agreement with the DOJ in which it agreed to pay a $20.9 million penalty.