U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21149A / July 23, 2009
Accounting and Auditing Release No. 3025 / July 23, 2009
Securities and Exchange Commission v. Maynard L. Jenkins, Case No. CV 09-1510-PHX-JWS (D. Ariz.)
SEC SEEKS RETURN OF $4 MILLION IN BONUSES AND STOCK SALE PROFITS FROM FORMER CEO OF CSK AUTO CORP.
Enforcement Action Is First Solely Under Section 304 of Sarbanes-Oxley Act of 2002
On July 22, 2009, the Securities and Exchange Commission asked the U.S. District Court for the District of Arizona to order the former chief executive officer of CSK Auto Corporation to reimburse the company and its shareholders more than $4 million that he received in bonuses and stock sale profits while CSK was committing accounting fraud. The SEC's enforcement action charges Maynard L. Jenkins of Scottsdale, Ariz., with violations of Section 304 of the Sarbanes-Oxley Act of 2002. It is the first action seeking reimbursement under Section 304 from an individual who is not alleged to have otherwise violated the securities laws. Section 304 deprives corporate executives of money that they earned while their companies were misleading investors.
According to the SEC's complaint, Jenkins made $2,091,020 in bonuses and $2,018,893 in company stock sales that should have been reimbursed to CSK pursuant to Section 304. The complaint alleges that CSK was required to prepare an accounting restatement due to its fraudulent conduct. While Jenkins served as CEO, CSK filed two such restatements related to its overstated vendor allowances. The complaint further alleges that, in violation of Section 304, Jenkins failed to reimburse CSK for bonuses, or other incentive-based or equity-based compensation, and profits from the sale of CSK stock he received during the 12-month periods following the filing of each of CSK's fraudulent financial statements. The SEC's complaint does not allege that Jenkins engaged in the fraudulent conduct.
CSK was an automotive parts and accessories retailer headquartered in Arizona during the relevant time period. In July 2008, after the conduct alleged in the complaint, CSK became a wholly-owned subsidiary of O'Reilly Automotive, Inc.
This is the third enforcement action in the SEC's investigation into CSK's alleged accounting misconduct. In March 2009, the SEC filed a civil injunctive action in federal court charging CSK's former president and chief operating officer, former chief financial officer, former controller, and former director of credits and receivables with securities fraud, among other charges. In May 2009, the SEC instituted settled cease-and-desist proceedings against CSK and found that the company had fraudulently filed false financial statements as set forth above for fiscal years 2002 through 2004. In that settled proceeding, the SEC ordered CSK to cease and desist from committing or causing any violations and any future violations of the anti-fraud, reporting, books and records, and internal control provisions of the federal securities laws. CSK, in agreeing to that settlement, neither admitted nor denied the SEC's findings.