SEC charges three over $25m accounting fraud

A trio of former senior executives at a US engine manufacturing company are facing charges from the Securities and Exchange Commission (SEC) over their roles in an accounting fraud that deceived auditors and allegedly overstated the publicly-traded company’s revenues by almost $25m (£20m)

The regulator claims Gary Winemaster, former CEO of Chicago-based Power Solutions International, together with two former senior sales executives, Craig Davis and James Needham, caused the company to fraudulently record revenue for purported sales of products that were not complete, that the customer had not agreed to accept, for which the price was falsely inflated, and from improper ‘bill and hold’ arrangements.

The SEC alleges that the three executives misled and concealed key information from Power Solutions’ internal accounting personnel and external auditor.

All three face charges of violating various antifraud, books and records, reporting, and internal controls provisions of the federal securities laws. The SEC is seeking permanent injunctions and penalties against all the executives, disgorgement and prejudgment interest against Needham, an officer-and-director bar against Winemaster, and a clawback of incentive-related compensation paid to Winemaster during the alleged fraud.

Kathryn Pyszka, associate regional director of the SEC’s Chicago regional office, said: ‘Investors depend on company executives to provide accurate, reliable information about their company’s financial condition.

‘As we allege, these executives deprived investors of truthful information about Power Solutions’ financial health by causing the company to fraudulently record revenue to meet revenue targets and projections.’

The three men are also facing criminal charges brought by the US attorney’s office for the Northern District of Illinois for related misconduct.

Pat Sweet | 28-07-2019

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