SEC: Engine Manufacturing Company To Pay Penalty, Take Remedial Measures To Settle Charges Of Accounting Fraud
The Securities and Exchange Commission today announced that Chicago-area engine manufacturing company Power Solutions International Inc., has agreed to settle accounting fraud charges related to the company's overstatement of revenues by almost $25 million.
According to the SEC's order, Power Solutions fraudulently recorded revenue in several circumstances that were not in accordance with U.S. generally accepted accounting principles. For example, the order finds that Power Solutions recorded revenue for purported sales of products that were not complete, for products that the customer had not agreed to accept, for products for which the price was falsely inflated, and for improper "bill and hold" arrangements. The order finds that, as a result of its fraud, Power Solutions issued materially misstated financial statements in its public filings from the fourth quarter of 2014 through the fourth quarter of 2015. The SEC previously charged Power Solutions' former CEO Gary Winemaster and two former senior sales executives, Craig Davis and James Needham, for their roles in the fraud.
"Public companies have a duty to be truthful to investors about their company's financial condition," said Kathryn Pyszka, Associate Regional Director of the SEC's Chicago Regional Office. "The order finds that Power Solutions deprived investors of truthful information about its financial health by fraudulently recording revenue to meet revenue targets and projections."
The SEC's order finds that Power Solutions violated the antifraud, books and records, reporting, and internal accounting controls provisions of the federal securities laws. Power Solutions agreed to cease and desist from future violations of these provisions, pay a $1.7 million civil penalty, and comply with an undertaking to remediate deficiencies in its internal controls over financial reporting.
Separately, the U.S. Attorney's Office for the Northern District of Illinois today announced a non-prosecution agreement with Power Solutions related to the same misconduct.
The SEC's investigation, which is continuing, was conducted by Michael Mueller and Timothy Tatman of the Chicago Regional Office, assisted by senior trial counsel Daniel Hayes, and supervised by Steven Klawans. The SEC appreciates the assistance of the U.S. Attorney's Office for the Northern District of Illinois and the Federal Bureau of Investigation.