Houston-based FMC Technologies has agreed to pay a $2.5 million penalty for accounting violations dating back to 2013.
The Securities and Exchange Commission (SEC) said on Thursday that FMC agreed to pay the penalty to settle charges that it “overstated profits in one of its business segments.”
Two former FMC executives also agreed to settle charges that “they caused the violations to meet internal targets.”
The SEC’s order found that, after “being pressured” to boost the financial performance of FMC’s energy infrastructure segment, the segment’s controller Jeffrey Favret and a business unit controller Steven Croft “artificially reduced the value of a liability the company recorded for employee paid time off.”
Favret and Croft no longer work for FMC Technologies.
The SEC said that the improper adjustments overstated the segment’s pre-tax operating profits by $800,000 and allowed the segment to meet an internal target for the first quarter of 2013.
Without informing the company’s controller, Favret and Croft also corrected a $730,000 error recorded in 2012 that increased their segment’s operating results for first quarter 2013.
However, the SEC found that Favret and Croft later signed management representation letters attesting that there had been no out-of-period adjustments larger than $250,000 recorded during that period.
The SEC’s order also found that Croft “failed to comply” with internal accounting controls when he directed his business unit switch to a new accounting system “without taking reasonable steps to ensure that errors would not arise as a result.”
The agency found that errors occurred that overstated the segment’s results in two quarterly periods in 2014.
The SEC also found that another business unit at FMC “failed to properly account for employee paid time off” and that the company improperly accounted for interest income associated with certain large intercompany loans, resulting in an $8 million out-of-period adjustment in 2014.
FMC Technologies, Favret and Croft consented to the SEC’s order without admitting to or denying the findings.
In addition to the penalty to be paid by FMC Technologies, Favret agreed to pay a $30,000 penalty and Croft agreed to pay a $10,000 penalty.
Both Favret and Croft also agreed to be suspended from appearing or practicing before the SEC as accountants, including agreeing to not participate in the financial reporting or audits of public companies.
The order permits Favret and Croft to apply for reinstatement after two years.