| UNITED STATES OF AMERICA |
| Before the |
| SECURITIES AND EXCHANGE COMMISSION |
| |
| SECURITIES ACT OF 1933 |
| Release No. 10925 / February 2, 2021 |
| |
| SECURITIES EXCHANGE ACT OF 1934 |
| Release No. 91042 / February 2, 2021 |
| |
| ACCOUNTING AND AUDITING ENFORCEMENT |
| Release No. 4202 / February 2, 2021 |
| |
| ADMINISTRATIVE PROCEEDING |
| File No. 3-20217 |
| |
| In the Matter of |
| |
| Joseph JACKSON and Colm |
| CALLAN, |
| |
| Respondents. |
| |
| |
| |
| |
| ORDER INSTITUTING CEASE-AND- |
| DESIST PROCEEDINGS PURSUANT TO |
| SECTION 8A OF THE SECURITIES ACT |
| OF 1933 AND SECTION 21C OF THE |
| SECURITIES EXCHANGE ACT OF 1934, |
| MAKING FINDINGS, AND IMPOSING A |
| CEASE-AND-DESIST ORDER |
| |
| I. |
| |
| The Securities and Exchange Commission (“Commission”) deems it appropriate that cease- |
| and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act |
| of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange |
| Act”), against Joseph Jackson (“Jackson”) and Colm Callan (“Callan”) (each, a “Respondent”). |
| |
| II. |
| |
| In anticipation of the institution of these proceedings, each Respondent has submitted an |
| Offer of Settlement (“Offer”) which the Commission has determined to accept. Solely for the |
| purpose of these proceedings and any other proceedings brought by or on behalf of the |
| Commission, or to which the Commission is a party, and without admitting or denying the findings |
| herein, except as to the Commission’s jurisdiction over them and the subject matter of these |
| proceedings, which are admitted, and except as provided herein in Section V, each Respondent |
| consents to the entry of this (“Order”), as set forth below. |
| |
| 2 |
| III. |
| |
| On the basis of this Order, Jackson’s Offer, and Callan’s Offer, the Commission finds1 that: |
| |
| Summary |
| 1. These proceedings concern false and misleading statements made by former |
| WageWorks, Inc. (“WageWorks”) CFO Colm Callan and CEO Joseph Jackson and the false |
| financial reporting that resulted from those statements. Over the course of 2016 and 2017, Callan |
| made false and misleading statements to both WageWorks’s internal accountants and the |
| company’s independent auditor related to a significant contract between the company and a large |
| public-sector client (“Client A”). During the same period, Jackson also made misleading |
| statements related to this contract to WageWorks’s auditor. As a result of these false and |
| misleading statements, WageWorks improperly recognized $3.6 million worth of revenue in 2016 |
| from Client A that was not realizable and for which collectability was not reasonably assured. |
| Callan and Jackson both earned incentive-based compensation based on WageWorks’s 2016 |
| financial performance, which neither executive has paid back to the company. After WageWorks’s |
| auditor discovered that Client A never intended to pay this $3.6 million, WageWorks restated its |
| revenues for the second and third quarters, and the fiscal year, of 2016. As a result of this conduct, |
| Jackson and Callan violated Sections 17(a)(2) and 17(a)(3) of the Securities Act, Rules 13a-14, |
| 13b2-1, and 13b2-2 under the Exchange Act, and Section 304 of the Sarbanes-Oxley Act of 2002. |
| Jackson and Callan also caused WageWorks to violate Sections 13(a), 13(b)(2)(A), and |
| 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. |
| Respondents |
| 2. Jackson, age 60, resides in Hillsborough, California. He was the CEO and |
| Chairman of the board of directors of WageWorks from February 2007 to April 2018, and the |
| Executive Chairman of WageWorks’s board of directors from April 2018 to September 2018. |
| Jackson left WageWorks as a result of the events surrounding the company’s restatement. |
| 3. Callan, age 51, resides in Palo Alto, California. He was the CFO of WageWorks |
| from September 2014 to April 2018. Callan left WageWorks as a result of the events surrounding |
| the company’s restatement. |
| Other Relevant Entities |
| 4. WageWorks is a corporation organized under the laws of the state of Delaware and |
| headquartered in San Mateo, California. From May 10, 2012 to August 30, 2019 WageWorks’s |
| common stock was registered with the Commission pursuant to Section 12(b) of the “Exchange |
| Act” and traded on the New York Stock Exchange under the symbol “WAGE.” During that |
| period, WageWorks filed periodic reports, including Forms 10-K and 10-Q, with the Commission |
| pursuant to Section 13(a) of the Exchange Act and related rules thereunder. On August 30, 2019, |
| |
| 1 The findings herein are made pursuant to the Respondents’ Offers of Settlement and are |
| not binding on any other person or entity in this or any other proceeding. |
| |
| 3 |
| HealthEquity, Inc. completed an acquisition of WageWorks. WageWorks is now a wholly-owned |
| subsidiary of HealthEquity. |
| A Large Public-Sector Client Disputes That It Owes WageWorks For Certain Work |
| 5. On March 1, 2016, WageWorks entered into a contract with Client A to provide |
| Flexible Spending Account (“FSA”) benefits servicing to certain public-sector employees. FSAs |
| are accounts funded through voluntary salary reductions which can be used to pay for certain out- |
| of-pocket medical and dependent care expenses. No employment or federal income taxes are |
| deducted from contributions to FSAs. |
| 6. The contract between WageWorks and Client A (the “Contract”) provided that |
| WageWorks would assume full responsibility for servicing FSA benefits claims by September 1, |
| 2016. Between March 1 and September 1, which the Contract referred to as “Base Year 1,” |
| WageWorks was required to undertake development and transition work so as to be ready to |
| assume responsibility for processing claims on September 1.2 |
| 7. The Contract provided that Client A would pay WageWorks a fee on a per-account, |
| per-month basis, meaning that each month WageWorks would earn an amount of revenue equal to |
| the number of participant accounts it administered multiplied by a fixed price. |
| 8. On March 17, 2016, a WageWorks project implementation employee emailed |
| Client A a question regarding billing for Base Year 1. On March 29, in reply, a Client A employee |
| indicated that Client A would not pay WageWorks for Base Year 1, and Callan shared this |
| response with Jackson. |
| 9. On June 10, 2016, during a telephone call between WageWorks project |
| implementation employees and Client A employees, a Client A employee indicated that Client A |
| would not pay for Base Year 1. A WageWorks employee told Callan about this statement in an |
| email, and Callan forwarded the email to Jackson and another WageWorks executive. |
| WageWorks Overstated Revenue in Its Q2, Q3, and Year-End 2016 Financial Statements |
| 10. Over the course of April, May, and June 2016, Callan had discussions with |
| WageWorks’s accounting staff and WageWorks’s independent auditor (the “Audit Firm”) |
| regarding the accounting treatment for the Contract. During a discussion on or about April 9, |
| Callan falsely told an Audit Firm partner that Client A had agreed to pay WageWorks for the Base |
| Year 1 period. |
| 11. At Callan’s direction, WageWorks’s accounting staff started recognizing revenue |
| under the Contract in June 2016 (part of Base Year 1), the month that WageWorks established a |
| call center to address questions about the transition from the public-sector client’s existing FSA |
| benefits provider to WageWorks. WageWorks amortized the recognition of revenue related to the |
| first three months of Base Year 1—March, April, and May–over the period of June 2016 to August |
| |
| 2 Another company had contracted with Client A to service FSA benefits claims through August |
| 31, 2016. |
| |
| 4 |
| 2020. At no point prior to recognizing revenue for Base Year 1 did Callan tell WageWorks’s |
| internal accounting staff or the Audit Firm staff that Client A employees had twice indicated that |
| Client A was not going to pay WageWorks for Base Year 1. |
| 12. Shortly before the end of each fiscal quarter, Callan attended a “Pre-Close Meeting” |
| with members of WageWorks’s finance and accounting staff. One purpose of the meeting was to |
| share information about complex transactions with WageWorks’s accounting staff, so that they |
| could accurately prepare the company’s quarter-end and year-end financial statements. |
| 13. On June 23, 2016, Callan attended the Pre-Close Meeting for the second quarter of |
| 2016. Based on Callan’s directions, WageWorks’s accounting staff anticipated recognizing |
| revenue related to Base Year 1 that quarter, and the meeting participants discussed the Client A |
| Contract. However, Callan did not tell the accounting staff that Client A employees had twice |
| indicated that Client A would not pay WageWorks for the Base Year 1 period. |
| 14. During June and July 2016, WageWorks’s accounting staff prepared a |
| memorandum summarizing the Contract and the company’s accounting treatment for it, including |
| the decision to recognize revenue during Base Year 1. The memo stated that “[Client A] agreed to |
| pay fees to [WageWorks] starting on March 1, 2016” and that WageWorks “was able to contract |
| for fees during the development phase.” Callan reviewed the memo, but he did not tell |
| WageWorks’s accounting staff that Client A employees had twice indicated that Client A would |
| not pay WageWorks for the Base Year 1 period. |
| 15. On August 9, 2016, WageWorks reported its financial results for the second quarter |
| of 2016 in Forms 8-K and 10-Q furnished and filed with the Commission. Those results |
| improperly recognized about $1 million in revenue related to Base Year 1 of the Client A Contract. |
| Callan signed the Form 10-Q, which represented that WageWorks prepared its financial statements |
| in accordance with generally accepted accounting principles in the United States (“GAAP”). |
| Consistent with GAAP, WageWorks stated that it recognized revenue when collectability was |
| reasonably assured, service had been performed, persuasive evidence of an arrangement existed, |
| and there was a fixed or determinable fee. Both Jackson and Callan, who were aware that the |
| company was recognizing revenue related to Base Year 1, certified that, among other matters, the |
| financial statements fairly presented WageWorks’s financial condition, results of operations and |
| cash flows. |
| 16. On or about September 26, 2016, Callan attended the Pre-Close Meeting for the |
| third quarter of 2016. WageWorks’s accounting staff asked Callan if he knew when WageWorks |
| was going to collect amounts due from Client A for Base Year 1, which were recorded in |
| WageWorks’s books and records as an unpaid receivable. In his response, Callan falsely said that |
| Client A had agreed to pay WageWorks for Base Year 1. He did not disclose that Client A |
| employees had twice indicated that Client A would not pay for Base Year 1. |
| 17. After the third fiscal quarter of 2016 ended, the Audit Firm conducted an interim |
| review of WageWorks’s third-quarter financial results. On November 9, 2016, in connection with |
| this review, Jackson and Callan signed a “management representation letter” addressed to the |
| Audit Firm. Among other things, the letter represented that WageWorks’s management had |
| |
| 5 |
| continually assessed the collectability of all amounts that WageWorks said it was owed by Client |
| A (which included amounts related to Base Year 1) and determined that those amounts were |
| reasonably assured of collection. Neither Jackson nor Callan had disclosed to the Audit Firm that |
| Client A had twice indicated that it would not pay WageWorks for the Base Year 1 period. |
| 18. On November 9, 2016, WageWorks reported its financial results for the third |
| quarter of 2016 in Forms 8-K and 10-Q furnished and filed with the Commission. Those results |
| improperly recognized more than $2 million in revenue related to Base Year 1 of the Client A |
| Contract. Callan signed the Form 10-Q, which represented that WageWorks prepared its financials |
| in accordance with GAAP. Jackson and Callan, who were both aware that the company was |
| recognizing revenue related to Base Year 1, certified that, among other matters, the financial |
| statements fairly presented WageWorks’s financial condition, results of operations and cash flows. |
| 19. On December 13 and 14, 2016, Jackson sold 87,749 shares of WageWorks |
| common stock. |
| 20. On February 23, 2017, Jackson and Callan signed another management |
| representation letter to the Audit Firm. That letter represented that WageWorks’s management had |
| continually assessed the collectability of all amounts that WageWorks said it was owed by Client |
| A (which included amounts related to Base Year 1) and determined that those amounts were |
| reasonably assured of collection. Neither Jackson nor Callan had disclosed to the Audit Firm that |
| Client A had twice indicated that it would not pay WageWorks for the Base Year 1 period. |
| 21. On February 23, 2017, WageWorks reported its financial results for fiscal year |
| 2016 in Forms 8-K and 10-K furnished and filed with the Commission. Those results improperly |
| recognized more than $3.6 million in revenue related to Base Year 1 of the Contract. Although |
| they had each had multiple communications with the Audit Firm concerning the Base Year 1 |
| payments, neither Jackson nor Callan had, at any point, disclosed that Client A had twice indicated |
| that it would not pay WageWorks for the Base Year 1 period. Jackson and Callan signed the Form |
| 10-K, which represented that WageWorks prepared its financial statements in accordance with |
| GAAP. They also certified that, among other matters, the financial statements fairly presented |
| WageWorks’s financial condition, results of operations and cash flows. |
| 22. Although Jackson and Callan believed that WageWorks was entitled to payment for |
| the Base Year 1 period, WageWorks’ recognition of revenue during Base Year 1 was improper |
| under GAAP. Because Client A had indicated to WageWorks that it would not pay for Base Year |
| 1, WageWorks’s collection of Base Year 1 revenues was not realizable or reasonably assured. |
| 23. The day after WageWorks filed its year-end 2016 financial statements, |
| WageWorks’s stock price rose above $75 for the first time in the company’s history, and it stayed |
| above $75 for twenty consecutive market days. On the basis of this performance, WageWorks |
| awarded Jackson a bonus of 50,000 shares of WageWorks common stock. |
| 24. Based on WageWorks’s 2016 financial performance, Jackson and Callan both |
| earned cash bonuses. |
| |
| |
| 6 |
| Callan and Jackson Failed to Disclose the Base Year 1 Dispute in 2017 |
| 25. On February 15, 2017, WageWorks sent its first invoice to Client A. The invoice |
| showed charges for the entire period of March 1, 2016 through December 31, 2016, including |
| charges for Base Year 1. |
| 26. Client A rejected WageWorks’s invoice on February 24, 2017. On or about March |
| 3, 2017, Client A explained to Callan and WageWorks project implementation personnel that it |
| had rejected the invoice because it did not believe it owed WageWorks for the Base Year 1 period. |
| 27. Between March 3 and August 17, 2017, WageWorks and Client A officers and |
| employees exchanged emails, letters, phone calls, and voicemails related to the Base Year 1 period. |
| Throughout this period, Client A reiterated that it did not intend to pay WageWorks for these |
| months. Throughout this period, Jackson and Callan were aware of Client A’s position that it did |
| not intend to pay for Base Year 1. |
| 28. On or about March 29, 2017, WageWorks’s accounting staff asked Callan if there |
| were any updates regarding payment of the amounts that Client A purportedly owed to |
| WageWorks for Base Year 1. In response, Callan told the accounting staff that WageWorks was |
| talking to Client A, but he omitted that Client A had denied that it owed WageWorks for the Base |
| Year 1 period. |
| 29. After the first quarter ended on March 31, 2017, the Audit Firm conducted an |
| interim review of WageWorks’s first-quarter financial results. At this time, WageWorks had not |
| received payment from Client A for Base Year 1. In connection with the interim review, an Audit |
| Firm partner interviewed Callan and asked about the status of the amounts that Client A |
| purportedly owed WageWorks. Callan replied that WageWorks was working on collection. |
| Callan omitted that Client A had rejected WageWorks’s invoice and that Client A had denied that |
| it owed WageWorks for the Base Year 1 period. |
| 30. On May 4, 2017, Jackson and Callan signed another management representation |
| letter to the Audit Firm. That letter represented that WageWorks’s management had continually |
| assessed the collectability of all amounts that WageWorks said it was owed by Client A (which |
| included amounts related to Base Year 1) and determined that those amounts were reasonably |
| assured of collection. Neither Jackson nor Callan had disclosed to the Audit Firm that Client A |
| had denied that it owed WageWorks for the Base Year 1 period or that Client A had rejected |
| WageWorks’s invoice. |
| 31. On or about July 3, 2017, Callan attended the second quarter 2017 Pre-Close |
| Meeting with WageWorks’s finance and accounting staff. The accounting staff asked Callan |
| whether he had any updates from Client A or if there was any uncertainty around collecting the |
| amounts that Client A purportedly owed WageWorks. Callan stated that Client A was going to |
| pay and that WageWorks just needed to work through Client A’s processes to receive payment; he |
| omitted that Client A had denied that it owed WageWorks for the Base Year 1 period. |
| 32. After the second quarter ended, the Audit Firm conducted an interim review of |
| WageWorks’s second-quarter financial results. In connection with that review, Audit Firm |
| |
| 7 |
| partners interviewed Jackson and Callan. In each interview, an Audit Firm partner asked about the |
| status of the amounts that Client A purportedly owed WageWorks, which it still had not paid. In |
| their respective responses, both Jackson and Callan said that Client A had rejected WageWorks’s |
| invoice because it had been submitted in the wrong format, and that WageWorks expected to be |
| paid after it resubmitted its invoice. Jackson and Callan omitted that Client A had rejected |
| WageWorks’s invoice because Client A had denied that it owed WageWorks for the Base Year 1 |
| period. |
| 33. On August 1, 2017, Jackson and Callan signed another management representation |
| letter to the Audit Firm. That letter represented that WageWorks’s management had continually |
| assessed the collectability of all amounts that WageWorks said it was owed by Client A (which |
| included amounts related to Base Year 1) and determined that those amounts were reasonably |
| assured of collection. Neither Jackson nor Callan had disclosed to the Audit Firm that Client A |
| had denied that it owed WageWorks for the Base Year 1 period. |
| 34. On August 18, 2017, WageWorks’s outside counsel, with Jackson and Callan’s |
| approval, submitted a formal “certified claim” to Client A on behalf of the company requesting |
| payment for Base Year 1 and explaining the reasons why WageWorks believed that the Contract |
| obligated Client A to pay for Base Year 1 services. WageWorks submitted the certified claim, in |
| part, because it was required to do so before bringing a lawsuit against Client A for the disputed |
| Base Year 1 payment. |
| 35. On September 26, 2017, Callan attended the third-quarter 2017 Pre-Close Meeting |
| with WageWorks’s accounting and finance staff. At the meeting, accounting staff again asked |
| Callan about the status of the unpaid Client A receivable related to Base Year 1. Callan stated that |
| WageWorks was in discussions with Client A. He omitted that WageWorks had submitted a |
| certified claim to Client A and that Client A had denied that it owed WageWorks for the Base Year |
| 1 period. |
| 36. After the third quarter ended, the Audit Firm conducted an interim review of |
| WageWorks’s third-quarter financial results. In connection with that review, Audit Firm partners |
| conducted interviews with Jackson and Callan. In each interview, an Audit Firm partner asked |
| about the status of the payment that Client A purportedly owed WageWorks related to Base Year |
| 1. In their respective responses, both Jackson and Callan said that they expected that WageWorks |
| would be paid by the end of the year. Although they said that WageWorks was going through a |
| process to collect the Base Year 1 fees, they omitted that WageWorks had submitted a certified |
| claim to Client A and that Client A had denied that it owed WageWorks for the Base Year 1 |
| period. |
| 37. On November 8, 2017, Jackson and Callan signed another management |
| representation letter to the Audit Firm. That letter represented that WageWorks’s management had |
| continually assessed the collectability of all amounts that WageWorks said it was owed by Client |
| A (which included amounts related to Base Year 1) and determined that those amounts were |
| reasonably assured of collection. Neither Jackson nor Callan had yet disclosed to the Audit Firm |
| that Client A had denied that it owed WageWorks for the Base Year 1 period. |
| |
| 8 |
| 38. At the end of each fiscal quarter in 2017, the Audit Committee of WageWorks’s |
| Board of Directors met to discuss the company’s quarter-end financial statements and related |
| matters, including outstanding receivables. Jackson and Callan attended these meetings, but they |
| never disclosed to the Audit Committee that Client A had specifically denied that it owed |
| WageWorks for the Base Year 1 period. |
| 39. On December 22, 2017, Client A notified WageWorks that it had rejected the |
| company’s certified claim requesting payment for Base Year 1. |
| WageWorks’s Public Offering |
| 40. On June 19, 2017, WageWorks conducted a public offering of its common stock. |
| The offering prospectus incorporated by reference the company’s year-end 2016 Form 10-K, |
| which improperly included about $3.6 million in revenue related to Base Year 1. |
| 41. WageWorks sought and obtained consent from the Audit Firm to incorporate the |
| Audit Firm’s 2016 audit report into the offering prospectus. Prior to obtaining this consent, neither |
| Jackson nor Callan disclosed to the Audit Firm that Client A had denied that it owed WageWorks |
| for the Base Year 1 period. |
| 42. In the offering, WageWorks sold 1,954,852 shares of its common stock and |
| Jackson sold 495,148 shares of WageWorks common stock. |
| WageWorks’s Restatement |
| 43. On January 10, 2018, WageWorks’s management, including Callan, told the Audit |
| Firm and the company’s internal accounting staff about WageWorks’s certified claim and Client |
| A’s rejection of that claim. This was the first time that the company’s executives disclosed Client |
| A’s denial that it owed WageWorks for the Base Year 1 period to either the Audit Firm or the |
| company’s accounting staff. |
| 44. On March 1 and 2, 2018, WageWorks announced that it would be late in filing its |
| fiscal-year 2017 Form 10-K and that it was conducting an investigation into revenue recognition |
| related to the accounting for a government contract during fiscal 2016. WageWorks’s stock price |
| declined more than 9% on the news. |
| 45. On March 18, 2019, WageWorks restated its year-end financial results for 2016 and |
| its quarter-end financial results for the second and third quarters of 2016. The restated results |
| reversed all revenue from Client A attributable to the Base Year 1 period. |
| 46. During the 12-month periods following filings containing financial results that |
| WageWorks was required to restate, Jackson and Callan received incentive-based compensation, |
| and Jackson realized profits from the sale of WageWorks common stock. Neither Jackson nor |
| Callan has, to date, reimbursed WageWorks for these amounts. |
| |
| |
| 9 |
| Violations |
| 47. As a result of the conduct described above, Jackson and Callan violated Sections |
| 17(a)(2) and 17(a)(3) of the Securities Act. Section 17(a)(2) proscribes obtaining “money or |
| property by means of any untrue statement of a material fact or any omission to state a material |
| fact necessary in order to make the statements made, in light of the circumstances under which |
| they were made, not misleading.” Section 17(a)(3) proscribes engaging “in any transaction, |
| practice, or course of business which operates or would operate as a fraud or deceit upon the |
| purchaser.” A violation of these provisions does not require scienter and may rest on a finding of |
| negligence. See Aaron v. SEC, 446 U.S. 680, 685, 701-02 (1980). |
| 48. As a result of the conduct described above, Jackson and Callan violated Rule 13b2- |
| 1 of the Exchange Act, which prohibits a person from, directly or indirectly, falsifying or causing |
| to be falsified any book, record, or account subject to Section 13(b)(2)(A) of the Exchange Act. |
| 49. As a result of the conduct described above, Jackson and Callan violated Rule 13b2- |
| 2, which prohibits any director or officer of an issuer from (a) directly or indirectly making or |
| causing to be made a materially false or misleading statement or omitting or causing another |
| person to omit to state a material fact necessary in order to make statements made, in light of the |
| circumstances under which such statements were made, not misleading, to an accountant in |
| connection with financial statement audits, reviews, or examinations or the preparation or filing of |
| any document or report required to be filed with the Commission and (b) taking any action to |
| coerce, manipulate, mislead, or fraudulently influence any independent public or certified public |
| accountant engaged in the performance of an audit or review of the financial statements of |
| that issuer that are required to be filed with the Commission pursuant to this subpart or otherwise if |
| that person knew or should have known that such action, if successful, could result in rendering |
| the issuer's financial statements materially misleading. |
| 50. As a result of the conduct described above, Jackson and Callan violated Rule 13a- |
| 14 of the Exchange Act, which requires an issuer’s principal executive officer and principal |
| financial officer, in each quarterly and annual report filed under Section 13(a) of the Exchange Act, |
| to make the certifications specified in Regulation S-K Item 601(b)(31) [17 C.F.R. § |
| 229.601(b)(31)]. |
| 51. As a result of the conduct described above, Jackson and Callan violated Section 304 |
| of the Sarbanes-Oxley Act of 2002, which requires the chief executive officer and chief financial |
| officer of any issuer required to prepare an accounting restatement due to material noncompliance |
| with the securities laws as a result of misconduct to reimburse the issuer for (1) any bonus or other |
| incentive-based or equity-based compensation received by that person from the issuer during the |
| 12-month period following the first public issuance or filing with the Commission of the financial |
| document embodying such financial reporting requirement and (2) any profits realized from the |
| sale of securities of the issuer during that 12- month. Section 304 does not require that a chief |
| executive officer or chief financial officer engage in misconduct to trigger the reimbursement |
| requirement. |
| |
| 10 |
| 52. As a result of the conduct described above, Jackson and Callan caused WageWorks |
| to violate Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 |
| thereunder, which require issuers to file accurate annual, current, and quarterly reports, which |
| include such further information as may be necessary to make the required statements not |
| misleading.3 |
| 53. As a result of the conduct described above, Jackson and Callan caused WageWorks |
| to violate Section 13(b)(2)(A) of the Exchange Act, which requires an issuer to make and keep |
| books, records, and accounts which, in reasonable detail, accurately and fairly reflect the issuer’s |
| transactions and disposition of Assets. |
| 54. As a result of the conduct described above, Jackson and Callan caused WageWorks |
| to violate Section 13(b)(2)(B) of the Exchange Act, which requires an issuer to devise and maintain |
| a system of internal accounting controls sufficient to provide reasonable assurances that: |
| transactions are executed in accordance with management’s general and specific authorization; |
| transactions are recorded as necessary to permit preparation of financial statements in conformity |
| with GAAP or any other criteria applicable to such statements, and to maintain accountability for |
| assets; access to assets is permitted only in accordance with management’s general or specific |
| authorization; and the recorded accountability for assets is compared with the existing assets at |
| reasonable intervals and appropriate action is taken with respect to any differences. |
| IV. |
| |
| In view of the foregoing, the Commission deems it appropriate to impose the sanctions |
| agreed to in Jackson’s Offer and Callan’s Offer. |
| |
| Accordingly, it is hereby ORDERED that: |
| |
| A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, |
| Jackson and Callan cease and desist from committing or causing any violations and |
| any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act, Sections |
| 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, Rules 12b-20, 13a-1, 13a- |
| 11, 13a-13, 13a-14, 13b2-1, and 13b2-2 thereunder, and Section 304 of the |
| Sarbanes-Oxley Act. |
| |
| B. Jackson shall, within 10 days of the entry of this Order, reimburse WageWorks for |
| a total of $1,929,740. Jackson shall simultaneously deliver proof of satisfying this |
| reimbursement obligation to Monique C. Winkler, Associate Regional Director, |
| Securities and Exchange Commission, 44 Montgomery Street, Suite 2800, San |
| Francisco, CA 91404. |
| |
| |
| 3 The Commission may institute cease-and-desist proceedings against any person held to be a |
| cause of violations of the federal securities laws due to acts or omissions such person knew or |
| should have known would contribute to the violation. See 15 U.S.C. § 78u-3(a); Robert M. |
| Fuller, 56 SEC 976, 984 (2003), pet. denied, 95 F. App’x 361 (D.C. Cir. 2004). |
| |
| 11 |
| C. Callan shall, within 10 days of the entry of this Order, reimburse WageWorks for a |
| total of $157,590. Callan shall simultaneously deliver proof of satisfying this |
| reimbursement obligation to Monique C. Winkler, Associate Regional Director, |
| Securities and Exchange Commission, 44 Montgomery Street, Suite 2800, San |
| Francisco, CA 91404. |
| |
| D. Jackson shall, within 10 days of the entry of this Order, pay a civil money penalty |
| in the amount of $75,000 to the Securities and Exchange Commission for transfer |
| to the general fund of the United States Treasury, subject to Exchange Act Section |
| 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant |
| to 31 U.S.C. §3717. |
| |
| E. Callan shall, within 10 days of the entry of this Order, pay a civil money penalty in |
| the amount of $100,000 to the Securities and Exchange Commission for transfer to |
| the general fund of the United States Treasury, subject to Exchange Act Section |
| 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant |
| to 31 U.S.C. §3717. |
| |
| Payment must be made in one of the following ways: |
| |
| (1) Respondent may transmit payment electronically to the Commission, which |
| will provide detailed ACH transfer/Fedwire instructions upon request; |
| |
| (2) Respondent may make direct payment from a bank account via Pay.gov |
| through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or |
| |
| (3) Respondent may pay by certified check, bank cashier’s check, or United |
| States postal money order, made payable to the Securities and Exchange |
| Commission and hand-delivered or mailed to: |
| |
| Enterprise Services Center |
| Accounts Receivable Branch |
| HQ Bldg., Room 181, AMZ-341 |
| 6500 South MacArthur Boulevard |
| Oklahoma City, OK 73169 |
| |
| Payments by check or money order must be accompanied by a cover letter identifying |
| payor as a Respondent in these proceedings, and the file number of these proceedings; a copy of |
| the cover letter and check or money order must be sent to Monique C. Winkler, Associate Regional |
| Director, Securities and Exchange Commission, 44 Montgomery Street, Suite 2800, San Francisco, |
| CA 91404. |
| |
| F. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be |
| treated as penalties paid to the government for all purposes, including all tax |
| purposes. To preserve the deterrent effect of the civil penalty, each Respondent |
| |
| 12 |
| agrees that in any Related Investor Action, he shall not argue that he is entitled to, |
| nor shall he benefit by, offset or reduction of any award of compensatory damages |
| by the amount of any part of such Respondent’s payment of a civil penalty in this |
| action (“Penalty Offset”). If the court in any Related Investor Action grants such a |
| Penalty Offset, each Respondent agrees that he shall, within 30 days after entry of a |
| final order granting the Penalty Offset, notify the Commission's counsel in this |
| action and pay the amount of the Penalty Offset to the Securities and Exchange |
| Commission. Such a payment shall not be deemed an additional civil penalty and |
| shall not be deemed to change the amount of the civil penalty imposed in this |
| proceeding. For purposes of this paragraph, a “Related Investor Action” means a |
| private damages action brought against a Respondent by or on behalf of one or |
| more investors based on substantially the same facts as alleged in the Order |
| instituted by the Commission in this proceeding. |
| |
| V. |
| It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section |
| 523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and admitted by |
| each Respondent, and further, any debt for disgorgement, prejudgment interest, civil penalty or |
| other amounts due by each Respondent under this Order or any other judgment, order, consent |
| order, decree or settlement agreement entered in connection with this proceeding, is a debt for the |
| violation by such Respondent of the federal securities laws or any regulation or order issued under |
| such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. §523(a)(19). |
| |
| |
| By the Commission. |
| |
| |
| |
| Vanessa A. Countryman |
| Secretary |
| |
| |
