The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Recently, Mark Poerio of Paul Hastings posted this on ExecutiveLoyalty.org: In litigation against two CFOs re their failure to disclose perquisites provided for the CEO, the SEC has prevailed in a motion to have its expert testify about a “primary purpose” methodology that is applicable under from the Internal Revenue Code for determining whether an item is a business or a personal expense. The federal district court decision in SEC v. Das states:

(1) “Contrary to the Defendants’ assertion, a comparison of the two methodologies reveals that a methodology borrowed from the IRC [Internal Revenue Code] would be less conservative and rigorous, and therefore, should result in fewer items being classified as perquisites, than the SEC methodology”; and

(2) “Although such a methodology might not reveal the exact amount of perquisites received by Info’s CEO, it would not prejudice the Defendants, and it would be helpful to the jury because it is relevant and reliable to show the general scope of the perquisites received by Info’s CEO during the relevant time period.”