The Securities and Exchange Commission (SEC) filed charges against a California-based civil engineering and infrastructure company charging fraud connected to inflating the company's financial performance. The company agreed to pay $12 million to resolve the claims.
Dale Swanberg, a former senior vice president and group manager at the company, is accused of engaging in inappropriate behavior, Granite Construction self-reported to the SEC on Thursday. Swanberg was charged separately in U.S. District Court for the Northern District of California while Granite reached a settlement, subject to court approval, without acknowledging or disputing the conclusions of the agency.
Each complaint focused on Swanberg's oversight of a section within the business that had difficulty meeting financial targets in 2017. The project's revenues were negatively impacted by its high costs. The SEC claimed that Swanberg changed the project's financial records by faking profit margins and omitting to include costs.
Swanberg was caught up in the plan in 2019, the SEC claimed, when multiple building projects were close to completion and it became impossible to continue concealing their true costs.
Swanberg was accused by the SEC of breaking anti-fraud and other federal securities laws. In its lawsuit, the agency is requesting prejudgment interest, disgorgement, unspecified financial penalties, and an officer-and-director bar.
The SEC praised Granite in its lawsuit, which was founded on Swanberg's alleged fraud, for self-reporting and fixing its accounting practices. The business updated its financial statements for the years 2017 through 19 in 2021 and revealed that its revenues had been overestimated by around $31 million in 2017 and 2018 and understated by about $62 million in the first three quarters of 2019.
Granite consented to pay the fine and follow securities regulations.
According to the SEC, Granite took action to stop similar misbehavior from occurring again by increasing transparency in its accounting controls, rules, and practices, including how anticipated expenses for construction projects are documented.
The firm stated in an email that Granite "fully cooperated with the SEC in its investigation into this matter, and we are pleased to put this matter behind us as we move forward under new leadership. Granite is committed to conducting our business ethically and transparently, and we have implemented numerous remedial actions and internal control enhancements to improve our processes and build value for shareholders."
The SEC ordered three Granite executives to repay a portion of their bonuses and income when the alleged fraud came to light. This was required by Section 304 of the Sarbanes-Oxley Act (SOX), which is necessary when a firm restates its official financial reporting as a result of misbehavior.
According to the SEC, Jigisha Desai, a former CFO, returned $176,000, Laurel Krzeminski, a former chief financial officer, returned $327,000, and James Roberts, a former chief executive officer, was ordered to repay more than $1.4 million.
Gurbir Grewal, the director of the SEC's Enforcement Division, stated in a press release, "We are committed to using SOX 304 as Congress intended, to incentivize a culture of compliance at public companies by ensuring that senior executives are not rewarded when their firms violate core reporting requirements. Executives should be on notice that we view SOX 304 as broad authority in seeking all forms of compensation that should be reimbursed to the company."
By fLEXI tEAM