Recently read an article about an “informal” inquiry from the SEC of IMAX Corp, the movie theater company. The issue here is that the company inflated its revenue by recognizing revenue from phantom movie theaters, the theaters that weren’t yet opened.This happened in the year 2005. The inflated revenue was to attract a buyer or a merging partner.
A class-action lawsuit has been filed against IMAX Corp., its former CFO, and two other executives alleging that they made “false and misleading statements” about the company’s financial health. The former CFO resigned and took another job at another publicly listed company. According to the regulatory filings of the company the CFO had told the company about his plans to pursue opportunities outside several months ago.
I agree that the CFO resigned, but my question here is how could he be offered another job in another publicly traded company. Did the company offering a job not ask the CFO why he wanted to leave the previous company. Didn’t they verify his prior work history. How could a CFO who is alleged in a lawsuit to be involved with creating false and misleading statements be allowed to be a part of another publicly traded company. Shouldn’t he first be acquitted of charges on this count before he can head the finance department of another firm? Isn’t there a rule somewhere which prohibits people with a lawsuit against them, being a part of a company?
CFOs are the ones who are responsible for the money of the company, if they are not trustworthy, the company is looking towards the Bankruptcy court or SEC inquiry.