• SEC Applies Qualitative Materiality Factors of SAB 99 in Enforcement Action against Huntington Bancshares Accounting Fraud
  • July 25, 2005 | Authors: Roger K. Harris; Victor Hsu
  • Law Firms: Fulbright & Jaworski L.L.P. - Houston Office ; Fulbright & Jaworski L.L.P. - Los Angeles Office
  • On June 2, 2005, the Securities and Exchange Commission ("SEC") filed a civil action in federal district court and issued a cease-and-desist order in a related administrative proceeding against Huntington Bancshares Incorporated ("Huntington"), a Maryland corporation and bank holding company headquartered in Columbus, Ohio. The SEC complaint alleged that Huntington, its chairman and chief executive officer, Thomas E. Hoaglin, its former chief financial officer, Michael J. McMennamin, and its former controller, John Van Fleet, engaged in financial reporting fraud in connection with the annual reports Huntington filed with the SEC for fiscal years 2001 and 2002. 1 The SEC's enforcement action focused on accounting misstatements that improperly inflated Huntington's annual earnings per share ("EPS"). Even though each of Huntington's accounting improprieties individually affected EPS by less than 5% (and most of them had an EPS impact of less than 1%), the SEC emphasized that the misstatements were nonetheless material under the qualitative factors described in SEC Staff Accounting Bulletin No. 99 ("SAB 99"). 2