SEC Charges Senior Management of Veolia with Falsifying Financial Records
On January 14, 2014, the Securities and Exchange Commission filed a civil injunctive action in federal district court Milwaukee, Wisconsin, charging Christopher Hohol (“Hohol”) and Brian Poshak (“Poshak”), formerly the senior vice president for operations and the controller, respectively, of Veolia Special Services (“Special Services”), a fourth-tier United States subsidiary of Veolia Environnement S.A. (“Veolia”), a multinational utilities and environmental services company, with falsifying books, financial records, and accounts and circumventing internal controls in order to overstate Special Services’ earnings before taxes (“EBT”) over a period of at least three years.
According to the SEC, beginning no later than January 2008 and continuing through February 2011, Hohol and Poshak, among other things, made and caused others to make false accounting entries in Special Services’ general ledger.
According to the SEC, these falsified financial records included fictitious revenue accruals, and entries that improperly reclassified expenses as inventory and improperly reclassified expenses (such as rental equipment, including industrial tools and diving gear) as prepaid assets, in order to artificially increase Special Services’ monthly EBT to meet internal financial performance projections and create the false appearance that Special Services consistently was profitable. The SEC’s complaint further alleges that both Hohol and Poshak signed monthly certifications falsely verifying the accuracy of Special Services’ financial information and efficacy of Special Services’ internal controls. The complaint also alleges that Poshak forged invoices and other documents to support the false accounting entries and to conceal the scheme. According to the complaint, as a result of Hohol’s and Poshak’s misconduct, Special Services overstated its EBT by a total of approximately $64 million. The complaint also alleges that, as a result of their misconduct, Hohol and Poshak received $136,000 and $28,000, respectively, in ill-gotten bonus payments that were triggered by the inflated financial performance of Special Services. The complaint further alleges that the financial records provided by Special Services were reported up through several intermediate subsidiaries and, ultimately, were consolidated into the parent company’s publicly disclosed financial statements, which were filed with and furnished to the Commission.
The SEC complaint charges Hohol and Poshak with violating Section 13(b)(5) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 13b2-1 thereunder, and aiding and abetting Veolia’s violations of Section 13(b)(2)(A) of the Exchange Act.
Without admitting or denying the allegations in the complaint, Hohol and Poshak have consented to the entry of final judgments that permanently enjoin them from violating Exchange Act Section 13(b)(5) and Rule 13b2-1 thereunder, and aiding and abetting violations of Exchange Act Section 13(b)(2)(A). Hohol also has agreed to disgorge $106,000, and Poshak has agreed to disgorge $28,000, together with prejudgment interest in the amount of $3,500. The settlements, which are subject to court approval, take into account Hohol’s and Poshak’s current financial condition.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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