Hotel Online  Special Report
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The Global Hospitality Advisor

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Corporate Corruption Act Clean Up Affects Hotel Companies Too


October  2002


The Sarbanes-Oxley Act was signed into law by President Bush on July 30, 2002. Although inspired by the corrupt accounting and corporate practices of companies such as Andersen, Enron, WorldCom and the other headline grabbers, it is important to realize that this law applies to all public companies � whether public REITs, hotel, restaurant, timeshare, sports, entertainment, and franchise companies or any other entity with a class of securities registered with the SEC. Moreover, the Act has broad implications for directors, officers and significant shareholders of public hospitality companies.

Some provisions of the Act, such as certification requirements for quarterly and annual public reports, have received extensive coverage. However, there are a number of other requirements that will have an impact on hospitality companies, their officers and directors. Among them are:

Strict Prohibitions on Any Loans to Directors and Officers. 
The Act prohibits a public company from advancing any funds to any director or officer, with very limited exceptions.  Under the new regimen, even charging a personal item on a company credit card and then paying the company back would seem to be prohibited.

Accelerated Reporting of Securities Transactions. 
The Act requires insiders (officers, directors and 10% shareholders) to report purchases and sales of stock within 2 days, and includes, for the first time, options and other derivative securities.  Prior law required disclosure 10 days after the end of the month in which the purchase or sale occurred, and longer for certain derivatives.

Disgorgement of Equity Compensation. 
The Act requires officers and directors to return any equity or stock-based compensation received in the year a company restates its financial statements based on misconduct.

Blackout Periods.
Officers and directors are now subject to extended blackout periods (periods when an officer or director may not buy or sell shares of company stock). 

In addition, the SEC recently adopted rules which will impact larger, publicly held hospitality companies.  These include accelerated quarterly and annual financial reporting, new certification requirements by principal executive and financial officers, and other changes. 
 

Robert Braun is a member of JMBM's Global Hospitality Group and Corporate Department. Robert's hospitality practice focuses on mergers and acquisitions, capital raising, management and franchise agreements and other business agreements, including technology related arrangements.

To discuss these matters with Robert, or for more detailed analysis of the Sarbanes-Oxley Act, please contact Robert E. Braun at 310.785.5331 or [email protected].

The Global Hospitality Group® is a registered trademark of Jeffer, Mangels, Butler & Marmaro LLP

©2002 Jeffer, Mangels, Butler & Marmaro LLP

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For more information:
Jeffer, Mangels, Butler & Marmaro LLP
web site: http://www.jmbm.com
Email Jim Butler at [email protected]
Or contact 
Jim Butler at the Firm
 Jeffer, Mangels, Butler & Marmaro LLP
  1900 Avenue of the Stars
 Los Angeles, CA 90067
     Phone: 310-201-3526 
The premier hospitality practice
in a full-service law firm
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Also See: Time Bomb Waiting to Explode: Wage & hour Claims Over Exempt Employees / The Global Hospitality Advisor / JMBM / Oct 2002
I'm Mad as Hell, and I'm Not Going to Take it Anymore! / The Global Hospitality Advisor / JMBM / Oct 2002
Settlement Procedure Available to California Hotels Plagued by Prop 65 Cases - The Global Hospitality Advisor / April  2002 
Top Ten Investment Challenges Facing the Lodging Industry / Lodging Industry Investment Council / April 2002 
Decertifying a Union? The Employer�s Bill of Rights / The Global Hospitality Advisor / JMBM / April 2002 
Outlook 2002: A Roundtable Discussion /  Bruce Baltin, Bjorn Hanson, Randy Smith, Jack Westergom - The Global Hospitality Advisor / January 2002 
New Rules for Hotel Workouts: REMICs for Dummies / The Global Hospitality Advisor / JMBM / December 2001 
Living in the Wake: Predictions & Practical Implications / The Global Hospitality Advisor / JMBM / December 2001 
Avoiding Liability for Lay-Offs / The Global Hospitality Advisor / December 2001
The Worker Adustment and Retraining Notification Act: Impact on the Hotel Industry / JMBM 
When is an Apartment a Hotel ... and Who Cares? / The Global Hospitality Advisor / JMBM / September 2001 
The 'Perfect Storm' / The Global Hospitality Advisor / JMBM / September 2001 
Richard Kessler's Grand Theme Hotels - Interview with GHG Chairman  Jim Butler / March 2001
Stephen Rushmore's  Industry Trends / Top Markets, Predictions & Opportunities  / Jan 2001
Outlook 2001: A Roundtable Discussion The Global Hospitality Advisor / Jan 2001
Perspectives on Hotel Financing in 2001; Jim Butler, JMBM's Global Hospitality Group Chairman, Interviews Two Active Players in Hotel Finance / Jan 2001 
Robert J. Morse: Millennium�s New President / Interview with GHG Chairman Jim Butler / Nov 2000 
Special Reports / Jeffer, Mangels, Butler & Marmaro LLP

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