Archive

August 24, 2021

Healthcare Services Group, Inc., which provides housekeeping, dining, and other services to healthcare facilities, will pay $6 million to resolve charges of improper accounting.  The SEC alleged that the company failed to comply with GAAP in 2014 and 2015 by failing to timely accrue for and disclose material loss contingencies related to litigation against the company despite evidence that liability was probable and reasonably estimable.  As a result, the company was able to report earnings per share that matched market expectations.  The SEC investigation resulted from its “EPS Initiative,” which uses data analytics to identify improper accounting and disclosure practices.  HCSG's former CFO John C. Shea and its controller, Derya Warner, will pay penalties of $50,000 and $10,000, respectively.  SEC

August 2, 2021

Ernst & Young LLP and three of its audit partners, along with William Stiehl, who was serving as the chief accounting officer of a public company, collectively agreed to pay more than $10 million to resolve SEC claims of wrongdoing with respect to EY’s pursuit of audit business from the public company.  EY and its partners were alleged to have solicited and received confidential competitive intelligence and confidential audit committee information from Stiehl during the issuer’s auditor’s selection process, in violation of auditor independence rules.  EY agreed to pay $10 million and comply with a detailed set of undertakings for a period of two years; the individual auditors agreed to pay civil monetary penalties between $15,000 and $50,000 and to be suspended from appearing or practicing before the Commission for times ranging from one to three years; Stiehl agreed to pay a civil monetary penalty of $51,000 and to be suspended from appearing or practicing before the Commission for two years.  SEC

May 3, 2021

Sporting goods manufacturer Under Armour Inc. agreed to pay $9 million to resolve SEC allegations that the company engaged in  accounting fraud.  The SEC alleged that in an effort to meet analyst sales forecasts, Under Armour began to "pull forward" revenue by recognizing as current revenue orders that customers had placed for delivery in future quarters, and did not disclose this practice to investors.  SEC

February 24, 2021

William Taylor, the former chief operating officer of publicly-traded biopharmaceutical company MiMedx Group, Inc., was sentenced to one year in prison and ordered to pay a fine or $250,000 following his jury trial conviction on charges arising from accounting fraud.  The government presented evidence at trial that Taylor authorized the false recognition of revenue upon the shipment of MiMedx products to distributors despite knowing that the GAAP criteria for such revenue recognition had not been met.  Instead, MiMedx had promised the distributors that they could return the product or did not need to pay for it, in some cases knowing that the distributors were unable to pay for the product.  As a result, MiMedx reported materially inflated revenue in 2015.  USAO SDNY

December 23, 2020

RPM International Inc. and Edward W. Moore, its general counsel and chief compliance officer, will pay a $2 million penalty to resolve allegations that the roofing company violated generally accepted accounting principles in failing to timely disclose a material loss contingency or accrual arising from its knowledge that the government was investigating alleged overcharges by RPM on government contracts.  In August 2014, RPM restated its results in three prior quarters, although it allegedly knew about the investigation and the company’s exposure earlier.  SEC

December 16, 2020

China-based Luckin Coffee will pay a penalty of $180 million to resolve charges that the company defrauded investors by materially misstating the its revenue, expenses, and net operating loss in an effort to falsely appear to achieve rapid growth and increased profitability and to meet earnings estimates. The SEC alleged that over the course of more than a year, Luckin intentionally fabricated more than $300 million in retail sales, and $190 million in expenses, by using related parties to create false transactions and inflated expenses. Luckin overstated its revenue by 28% and 45% in two different quarters, and raised more than $864 million from debt and equity investors during the relevant time period. Luckin ADRs were traded on NASDAQ until July, 2020.  SEC

September 24, 2020

Illinois manufacturing company Power Solutions International Inc. will pay a $1.7 million penalty to the SEC and admit that its executives and employees participated in a scheme to defraud shareholders by fraudulently inflating the revenue of the company, whose shares were then listed on NASDAQ.  USAO ND IL

September 24, 2020

BMW AG and two of its U.S. subsidiaries will pay $18 million to resolve charges that its public reporting inflated retail sales in the U.S. between 2015 and 2017, allowing it to meet sales targets.  This information, which BMW allegedly knew to be inaccurate, was then provided to investors in bond offerings by BMW’s U.S. subsidiary.  SEC

August 25, 2020

Computer manufacturer Super Micro Computer, Inc. has agreed to pay a penalty of $17.5 million to resolve allegations that the company prematurely recognized revenue and understated expenses.  The SEC alleged that the company, including its former CFO, Howard Hideshima, pushed employees to maximize end-of-quarter revenue.  Hideshima agreed to pay disgorgement and penalties totaling $350,000.  SEC

July 31, 2020

Canadian company Bausch Health, formerly known as Valeant Pharmaceuticals, will pay a $45 million penalty to resolve charges that its executives engaged in improper revenue recognition and misleading disclosures in SEC filings and earnings presentations between 2014 and 2015.  The company was alleged to have recorded false sales of products to specialty pharmacy Philidor Rx Services and its affiliates, which were controlled by Valeant.  In addition, Valeant allegedly misrepresented the source and materiality of revenue it received following a 500% increase in the price of its diabetes drug Glumetza.  Former CEO J. Michael Pearson will pay a civil penalty of $250,000; former CFO Howard B. Schiller will pay a civil penalty of $100,000; former controller Tanya Carro will pay a civil penalty of $75,000.  The individuals also agreed to return specified portions of their incentive compensation to the company.  SEC