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Employee gathers knowledge of a misappropriation of corporate funds: What should she do?

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Can you give me your opinion on this: The CFO comes up to you one night and asks you to go out for a drink with her.

She tells you that she is scared out of her mind. She tells you that large amounts of compensation that were paid to the CEO were disguised and not reported properly.

She says that the Board thinks the CEO was paid total compensation of 1.5
million when in fact he really was paid 5 million in compensation, in part through disguised off shore accounts.

She tells you that she was having an "affair" with the CEO at the time and participated in hiding this compensation to the CEO. In return, she tells you, she received a very large but undisguised bonus.

She tells you all was fine until an auditor started asking questions today. After talking with her the auditor walked straight into the office of the Sr. VP for ERM.

She wants your advice. What should she do? Has SOX been violated?

What are the potential penalties? Should she hire a lawyer?

Should she come clean? She want your advice as to what she should do.

What do you say? Do you now have to report this since you both work for the same Company?

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Solution Summary

The cited solution presents a list of five possible actions for the CFO to consider, together with possible repercussions. Authority is cited.

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Here are my comments.

1. Yes, hire a lawyer with SOX background
2. Document everything
3. It seems there is a SOX violation because of the way the compensation was handled.
4. She should come clean ...

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