The SEC has announced that the former chief executive officer and chairman of CSK Auto Corporation, Maynard Jenkins, has agreed to return $2.8 million in bonus compensation and stock profits that he received while the company was committing accounting fraud. Mr. Jenkins was not personally charged by the SEC with any misconduct. The litigation marked the agency’s first SOX clawback case against an individual who was not alleged to have otherwise violated the securities laws.
The SEC originally asked a court to order Mr. Jenkins 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 was initially successful in prevailing over Mr. Jenken’s motion to dismiss the case. As noted on the Federal Securities Law Blog, on March 24, 2011, the parties advised the court that “Mr. Jenkins and the Staff of the Securities and Exchange Commission have reached a tentative settlement agreement to resolve this matter,” noting that “such tentative settlement agreement is subject to approval by the Securities and Exchange Commissioners.” According to the Washington Post article, “the proposed settlement was for less than half the amount the SEC originally sought,” citing a source familiar with the matter.
The Commissioners rejected the proposal. According to a second source “close to the matter,” the combination of two contrasting views resulted in the lack of support for the settlement. In the view of some Commissioners, the amount of the settlement was too low. However, a second view was that the case should not have been brought at all.
But in the end, Mr. Jenkins settled for substantially less than the SEC originally alleged.