Federal Securities Litigation
Athena Advisors LLC was engaged by legal counsel for an individual defendant to provide expert testimony in a case brought in Federal District Court by the Securities and Exchange Commission. The defendant was the former Chief Executive Officer of a public computer storage device company who was alleged to have engaged in illegal insider trading in connection with a secondary offering of the company’s stock. The SEC sought $270 million in disgorgement, plus penalties and interest from the individual defendant. The purported material nonpublic information related to the company’s forward-looking revenue guidance in earnings press releases. Ms. Troe prepared a 60 page analysis and expert opinion that addressed, among other things, corporate internal forecasting of revenue, revenue recognition under generally accepted accounting principles (GAAP), and public company forward-looking guidance and related disclosures.
SEC legal staff deposed Ms. Troe for 10 hours. The SEC also moved to bar the report and proffered testimony on the grounds that the issues covered involved legal analysis that could not be addressed by a non-lawyer. The Court ruled that Ms. Troe was a qualified expert based upon her 10 years of experience as a member of the SEC Enforcement Division staff and particularly in her role as regional chief enforcement accountant. After a three week trial, the jury found in favor of the former CEO client and the complaint was dismissed.
Internal Corporate Investigation
Athena Advisors LLC was engaged by a public company’s outside law firm to conduct an investigation of allegations made by a whistleblower who was a senior executive of a major business unit of the public company. The circumstances were particularly sensitive and potentially damaging because the allegations had been leaked to the press. As is typically the case, Athena Advisors LLC was engaged by legal counsel in order for statements and work product to be covered by attorney-client privilege. Ms. Troe reviewed relevant documents and conducted interviews of relevant parties including the whistleblower.
After her inquiry and analysis of the documentary and testimonial evidence concerning the company’s internal financial forecasting and development of its publicly disclosed earnings guidance, Ms. Troe provided her observations and conclusions to the whistleblower, the company’s General Counsel and outside legal counsel. Athena Advisors LLC‘s findings and conclusions and Ms. Troe’s direct communications with the parties in interest were a critical factor in achieving a resolution of the matter that was satisfactory to the company and the whistleblower, who continued in his management position.
The company had faced an existential threat because of its very high public profile, controversy over the recent acquisition of the business unit that had resulted in loss of local control, and extensive commentary by business and political leaders. Ms. Troe’s approach to the conduct of the investigation and her skill in communicating with the parties was a key element in avoiding a public relations, business and shareholder disaster.
Athena Advisors LLC was engaged in late 2014 by the outside law firm for a large public company that provided logistics services to third parties from 310 offices in 50 countries. (The company has since been acquired.) Athena Advisors LLC‘s engagement was at the specific request of the chair of the company’s audit committee after the company was advised that it was the subject of an investigation by the SEC Enforcement Division. The investigation related to the company’s integration of international accounting and operational systems in connection with numerous acquisitions in multiple international locations. The issues included systems of internal controls, internal rollup of financial reporting information, and disclosure to investors through SEC periodic filings and earnings and other press releases.
Ms. Troe reviewed relevant documents, assisted in witness interviews and in the preparation of employee witnesses for testimony before the SEC Division of Enforcement Staff. In 2015, Ms. Troe, together with outside legal counsel, met with and made a presentation to SEC Enforcement Staff. To date, the SEC Staff has taken no further action.