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Behind Merrill's Leadership Void: SOX Legal Risk?

The news that Merrill Lynch had not selected even an interim chief executive caught many by surprise. The official line—that Merrill is waiting to choose a chief executive while it reviews its corporate strategy—is being applauded by many as a sober, thoughtful approach. But it may indicate that even greater write-downs are coming at the company.
We've heard from a source close to the board of directors that at least one potential candidate indicated that he did not want to sign as a the new chief executive until after the losses from derivatives and credit markets had been fully reviewed and new disclosures about deeper losses, which many analysts believe will have to be made, are announced. Stepping into a job that requires as its first public act the announcement of even larger losses is not the "fresh start" that many executives would look forward to.
But it's more than a potential public relations disaster. There is the risk of legal peril in taking the top job. Merrill Lynch will soon be filing its quarterly report with the Securities & Exchange Commission. These will include accounting for the losses, and under Sarbanes Oxley a new CEO would have to sign a written statement certifying that the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the company. That's something a new chief executive might not feel comfortable doing.