Your Naughty CEO and CFO of the Day

Posted on by Jason Bramwell

By making false statements and omissions to external auditors, which resulted in the improper recognition of $3.6 million in revenue related to a contract with a large public-sector client, ex-WageWorks CEO Joseph Jackson and former CEO Colm Callan had to pay their way out of the SEC’s doghouse.

According to the SEC:

In March 2016, WageWorks, a provider of flexible spending account services, signed a contract with a large client to process benefits claims for certain public-sector employees. The order finds that on multiple occasions after the contract was signed, the client’s employees told WageWorks that it did not intend to pay for certain development and transition work associated with the contract.

As stated in the order, despite these statements, both Callan and Jackson believed that WageWorks was entitled to be paid for this work, so Callan directed WageWorks to recognize $3.6 million in revenue related to the development and transition work. According to the order, despite repeated questioning by WageWorks’s internal accounting staff and external auditor about the status of the $3.6 million that WageWorks had booked but not yet received, Callan and Jackson consistently failed to disclose that the client’s employees had denied that it owed these amounts to WageWorks.

In 2019, WageWorks restated its financial statements for the second quarter, third quarter, and fiscal year 2016, reversing the entire amount of revenue WageWorks had previously recognized in connection with the development and transition work.

The SEC’s order finds that Jackson and Callan violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, made false certifications and misled WageWorks’s auditor in violation of the Securities Exchange Act of 1934, and failed to reimburse WageWorks for certain incentive compensation and stock profits they received during the period when the company was committing accounting violations in violation of the Sarbanes-Oxley Act of 2002. The SEC’s order also finds that Callan and Jackson caused WageWorks to violate the reporting, books and records, and internal accounting controls provisions of the Exchange Act.

Without admitting or denying the SEC’s findings, Jackson and Callan agreed to cease and desist from further violations of the charged provisions. Jackson also agreed to pay a $75,000 penalty and reimburse WageWorks for $1,929,740 representing incentive-based compensation and profits from the sale of WageWorks stock, and Callan agreed to pay a $100,000 penalty and reimburse WageWorks for $157,590 representing incentive-based compensation.

KPMG was WageWork’s independent auditor until 2018 when the company’s audit committee cut ties with The Radio Station.

WageWorks was acquired by HealthEquity for approximately $2 billion in August 2019.

Related Posts

With IFRS Waiting in the Wings, Will Private Companies Get GAAP of Their Own?

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

A blue ribbon panel on private company accounting is holding its inaugural meeting Monday, to assess how financial reporting standards can best meet the needs of users of US private company financial statements, which are mostly for bankers and other types of lenders.

The panel, formed by the Financial Accounting Foundation, the American Institute of Certified Public Accountants and the National Association of State Boards of Accountancy, will meet five times throughout the year and will issue a report with recommendations on the future of standard setting for private companies by the end of the year.


The debate has resurfaced after the International Accounting Standard Board issued international standards for private companies last July (called IFRS for SMEs). Financial experts have been discussing this topic for decades. For instance, in 1996, the Financial Executive Research Foundation issued a paper titled “What do users of private company financial statements want?”

Some of the old and new questions the panel will address:

• What is the key, decision-useful information that the various users need from GAAP financial statements?

• Are current GAAP financial statements meeting those needs?

• How does standard setting for private companies in the US compare to standard setting in other countries, both those that have adopted IFRS for small and medium-size entities and those that have not?

To the extent that current GAAP is not meeting user needs in a cost-beneficial manner, what are some possible alternatives or private company standards?

Even if GAAP is found wanting, however, the panel might not be all that keen on IFRS as an alternative, given the limited experience of US companies with the international regime and rising skepticism on the part of the Securities and Exchange Commission about the independence of the body setting international standards.

Not that public or private US companies are eager to switch to IFRS, which will be costly and cumbersome. At this point, it seems as if private ones would rather have the accounting devil they know, except they no doubt wish it were a bit less hellacious on their results. And that’s been pretty much a forlorn hope for years.

If You Believe the AICPA, Hiring Is Looking Good

Sometimes we get job reports from certain mainstream media outlets that shall remain nameless that look a tad suspect but in the case of this info from the AICPA, I think we can safely rely on the findings.

Here’s the good news via the Journal of Accountancy:

On the demand front, hiring is back on the upswing after decreasing from 2007 to 2008. In 2007, the total number of accounting hires was 36,111. That dropped to 25,488 in 2008 but climbed to 33,321 in 2010. A large portion of that increase was in firms with fewer than 10 CPAs on staff. Firms of that size increased their hiring projections from 11,432 in 2008 to 16,342 in 2010 (see Exhibit 1).

In terms of the types of positions CPA firm new hires were recruited to fill across firms of all sizes, accounting and auditing still commanded a narrow majority at 51%; followed by taxation at 25%; other at 16%; and information technology at 8%.

The accounting and auditing share of new hires was down from 60% in 2007, with the declines coming from firms with 50 or more CPAs. Hiring of new CPA graduates likewise decreased for information technology (down 5 percentage points from 13%). Tax showed a slight increase (2 percentage points) with the strongest gains coming from firms with fewer than 10 CPAs, while the largest growth since 2007 was in the “other” category.

The percentage of overall firms expecting to hire the same or more new accounting graduates than last year also is up—to 89% from 74% when the question was asked in 2008.

Here’s the next obvious question: are we talking about real, created-from-nothing jobs or are we talking about covering massive staff turnover popularized in public accounting by serf-like working conditions and disappointing compensation? Because hiring the same guy in four different firms doesn’t add up the same as hiring four new accounting grads. Duh.

Oh, and something else – where’s 2009? It doesn’t appear in any of the included exhibits, nor is it mentioned in the Journal of Accountancy article even once. The full survey, available from the AICPA’s website, doesn’t specifically mention the exclusion of 2009 in the survey methodology. We aren’t one for conspiracy theories (yeah, right) but it seems suspect that an entire year would just disappear and fail to get a single mention. I mean it was only two years ago.

We’ll dig into the survey results in more detail later, maybe once we track down 2009. Though not specifically mentioned in the above charts, the entire 2009 Trends in the supply of Accounting Graduates and the Demand for Public Accounting Recruits report can be found here.