Additionally, CFO Kevin Nash has agreed to pay $75,000 to settle similar charges of violating the Securities Exchange Act.
The SEC announced the charges and settlement payments on Tuesday. The charges involved “financial reporting, books-and-records, and internal accounting controls violations arising out of the company’s accounting for its executive and employee bonus compensation programs,” according to the SEC.
Under the settlement, Gentex (Nasdaq: GNTX) and Nash agree to cease-and-desist orders in addition to the civil fines. The settlement neither admits to or denies the SEC’s findings.
“We’re pleased to have settled this SEC inquiry and to arrive at a resolution to put the matter behind us and to continue the job of delivering shareholder value,” Gentex Spokesperson Craig Piersma told Crain’s sister publication MiBiz.
While closing out the third quarter of 2015, Nash allegedly directed the reduction of an accrual for a performance-based bonus program that caused the company to report earnings per share that met analysts’ revenue estimates, according to the SEC charge.
“Nash directed the reduction without performing an analysis of relevant criteria under (generally accepted accounting principles) and without documenting the basis for his decision,” according to the SEC.
The agency also charged the company with making adjustments to bonus compensation accruals without adequate documentation from 2015-2018.
“These entries were made possible by Gentex’s failure to devise and maintain a sufficient system of internal accounting controls related to its closing process, including its accounting for bonus compensation, and failure to maintain internal control over financial reporting,” according to the SEC.
Piersma said since 2015 and during the period of time in question, the company and Nash in particular have instituted several “process improvements” to the company’s accounting department to ensure compliance with federal regulations.
Piersma also noted that the SEC order did not accuse Gentex of fraudulent activities.
“Basically it was that we had incomplete documentation,” he said, adding that Nash remains a “critical member of our management team.”
The enforcement action stems from the SEC’s Earnings Per Share Initiative, which uses data analytics to uncover potential accounting and disclosure violations.
From MiBiz.
