On January 12, 2011, the SEC charged a company and certain of the company’s current and former executive officers with failing to disclose more than $1.18 million in perquisites to the former CEO of the company from at least 2002 to 2007. The SEC alleged that the company filed false and misleading proxy statements, annual reports and registration statements that failed to disclose, or materially understate, the former CEO’s perquisites, and falsely represented that he worked virtually for free for three years. Further, the SEC alleged that the company’s related party transactions disclosures for a period of three years were misleading in failing to disclose its payment of $1 million to fly and operate planes for the former CEO. The perquisites of the former CEO included over $4,000 per month to live in a ski lodge; vacations for the former CEO, his girlfriend and his family; a leased Lexus SUV; and other day-to-day living expenses such as groceries.
The company and each current and former officer of the company that was charged, except for one, agreed to settle. The company agreed to pay a $500,000 civil penalty, hire an independent consultant to recommend, if appropriate, changes to its internal policies and controls and consent to a final judgment enjoining it from violating provisions of the Securities Act and Exchange Act. The former CEO agreed to pay $1,184,246 in disgorgement, $358,844 in prejudgment interest, a $500,000 civil penalty, and consented to an order barring him from serving as an officer or director of a public company and from violating provisions of the Securities Act and Exchange Act.