Macy's Delays Quarterly Results, Says Employee "Intentionally Hid Up to $154 million of Expenses"

Macy’s says an employee hid up to $154 million in expenses

Macy’s reported stronger-than-expected sales for the third quarter and said it’s delaying the release of its full quarterly results after it discovered an employee intentionally hid up to $154 million of expenses over several years.

The department store chain, which also operates Bloomingdale’s and Bluemercury cosmetics chain in addition to its namesakes stores, was expected to report quarterly results on Tuesday.

The retailer said Monday that it identified an issue related to delivery expenses in one of its accrual accounts earlier this month. An independent investigation and forensic analysis found that a single employee with responsibility for small package delivery expense accounting intentionally made erroneous accounting accrual entries to hide roughly $132 million to $154 million of expenses from the fourth quarter of 2021 through the fiscal quarter ended November 2.

SEC Charges Ken Leech, Former Co-Chief Investment Officer of Western Asset Management Co., with Fraud

The Securities and Exchange Commission today announced fraud charges against Stephen Kenneth (“Ken”) Leech, the former co-chief investment officer (CIO) of registered investment adviser Western Asset Management Company LLC or WAMCO, for engaging in a multi-year scheme to allocate favorable trades to certain portfolios, while allocating unfavorable trades to other portfolios, a practice known as cherry-picking.

The SEC’s complaint alleges that from at least January 2021 through October 2023, Leech placed trades with brokers and then routinely waited until later in the trading day to allocate the trades among clients in the portfolios he managed. According to the complaint, Leech’s delay between placing and allocating trades gave him the opportunity to observe price movements, and then disproportionally allocate trades at a first-day gain to favored portfolios and trades at a first-day loss to disfavored portfolios. As alleged, Leech allocated hundreds of millions of dollars of net first-day gains to favored portfolios, which also benefited Leech personally, and a similar amount of net first-day losses to disfavored portfolios.

SEC Enforcement Actions Fall Significantly As Crypto and Text Message Cases Predominate

In FY 2024, the SEC maintained a strong focus on crypto and off-channel communications, likely for the last time given the impending administration change. It also began to focus on new priorities that could be relevant in the coming year, particularly artificial intelligence.

In addition, the decline in new enforcement actions may stem, at least in part, from the SEC’s heavy litigation burden, particularly resulting from crypto matters. In FY 2023, the SEC filed more than 40% of its standalone matters as litigated matters—a relatively high percentage.While the Commission did not release this statistic for FY 2024, it likely had a similar litigation burden, including previously filed cases against large crypto exchanges and other crypto-related entities, which would likely have put a significant strain on the Division. Crypto cases tend to litigate more often given the novel issues involved and the existential nature of some cases, the latter of which often makes settlement impossible. Another driver of litigation may be the more aggressive settlement demands made by this administration, which also tend to make settlement less likely.

With the presidential administration set to imminently change, it is unlikely that the next Commission and Enforcement Director will fully embrace the priorities reflected in this year’s press release….

Bitcoin Buying Plans Are Supercharging Stocks. Is This a Michael Saylor Redux — or Another ‘Long Island Iced Tea’ Fad?

However, to cynical ears, it all sounds a bit like the passing fad in the late 2010s that involved companies that previously had nothing to do with crypto adding the word “Blockchain” to their corporate name.

The most famous example of this was little-known beverage maker Long Island Iced Tea renaming itself Long Blockchain, with an explosive result, at least initially: Its share price nearly tripled in a single day after the crypto-rechristening. The gains didn’t stick and the stock was later delisted by Nasdaq. (And three people were accused of insider trading by the U.S. Securities and Exchange Commission.)

There have been other magic words. In the 2021 crypto bull market, big-name companies touted their Web3, metaverse and non-fungible token (NFT) initiatives — trying to hitch their shares to crypto and related hype. Facebook even changed its name to Meta to focus on the metaverse business, which subsequently faced massive losses. Meanwhile, companies with languishing share prices and no connection to crypto dipped their toes into bitcoin mining, a then extremely profitable business.

Gibson Dunn Sued by Crypto Client After Lateral Hire Causes Conflict of Interest

Bitcoin trading company Swan Bitcoin has sued Gibson, Dunn & Crutcher in Los Angeles Superior Court, claiming the firm has violated fiduciary duties and ethical standards by withdrawing as its counsel in a trade secrets case when a lateral hire created a conflict of interest.

Swan Bitcoin first retained Gibson Dunn in late September in a trade secrets case against “former-partner-turned-adversary” Tether, which Swan claimed was a “copycat company.”

The following month, Gibson hired five lateral partners from Kramer Levin Naftalis & Frankel, including litigation department leader Barry Berke, who represents Tether in the litigation against Swan. Days before Berke’s arrival at the firm, according to the complaint, the firm notified Swan it would be hiring a lateral attorney who presented a conflict of interest in the litigation, and urged the company to find replacement counsel in the case.

The complaint, filed late Friday, alleges that Gibson “wooed and won Swan as a client with promises that it would loyally represent Swan” against Tether, but then “only weeks later, Gibson embraced Tether as a client and told Swan to get lost. In short, Gibson betrayed its client for Tether’s billions.”