Platforms was a publicly traded company that developed new technology to provide cellular service to large geographic territories. Martin was the chairman and CEO of Platforms, but he also was an officer in another company called Intermedia that provided consulting services. In two transactions, Platforms transferred 17.45 million shares to Intermedia as payment for Intermedia consulting fees. At least two of Intermedia’s officers were also officers in Platforms. The SEC filed an enforcement action alleging that Platforms had misrepresented material facts about the company in a press release. When the SEC discovered the stock transfer, it claimed that the proceeds of $1.7 million constituted an extraordinary payment.

CASE QUESTIONS

1. Was the stock transfer an extraordinary payment under the SOX Act?

2. If it were shown that the stock transfer was a legitimate transaction, how would that affect your analysis?