On Jan. 18, 2017, the SEC settled charges alleging that the issuer (i) failed to disclose certain perquisites paid to its then Chairman and CEO and (ii) violated disclosure rules regarding non-GAAP financial measures.
Failure to disclose perquisites. The issuer failed to disclose approximately $11.3 million of compensation paid to its Chairman and CEO from 2009 through 2014 for a variety of perquisites, including private aircraft usage, cosmetic surgery, yacht- and sports-car-related expenses, jewelry, cash for tips and gratuities, medical expenses for the Chairman and CEO, family members, and others, charitable donations in his name, pet care, vacation and personal travel expenses, and club memberships. After the issuer conducted an internal investigation in response to SEC inquiries, the Chairman and CEO resigned, paid back the amounts he improperly received as perquisites and also returned approximately $10.6 million of annual cash bonuses.
- Failure to comply with non-GAAP financial measure disclosure requirements. The SEC found that the issuer had improperly used certain non-GAAP financial measures in violation of disclosure requirements contained in Regulation G and Item 10(e) of Regulation S-K, despite the fact that the issuer had previously agreed to comply with such requirements in prior correspondence with the SEC. In particular, the issuer (i) failed to afford equal or greater prominence to GAAP measures in its earnings releases containing non-GAAP financial measures and (ii) incorporated an additional reconciling item into its calculation of “organic revenue growth,” a non-GAAP financial measure calculated by the issuer, without informing investors of the change, which resulted in higher “organic revenue growth” results.
The issuer agreed to pay a $1.5 million penalty to the SEC in connection with the settlement.