SEC settles charges against Manitex and former executives
By D.Ann Shiffler06 October 2020
The Securities and Exchange Commission settled charges stemming from accounting fraud schemes that resulted in mistated financial statements by Manitex International in 2014 and 2016.
The Securities and Exchange Commission (SEC) in the USA settled charges against Manitex International and three of its former senior executives for two accounting fraud schemes that resulted in the issuance of materially mis-stated financial statements.
According to the SEC orders, Manitex improperly accounted for and misled its outside auditor about inventory that didn’t exist. In 2014, Andrew Rooke, the company’s former chief operating officer, and Stephen Harrison, the former general manager at a Manitex subsidiary, created false inventory lists and shipping documents to cover up a US$ 1.39 million inventory shortfall at a Manitex subsidiary, according to the SEC. Further, Manitex later provided the fabricated documents to its outside auditor, contributed the non-existent inventory to a joint venture, and recorded the non-existent inventory on its books. As a result, the orders find, Manitex materially overstated its 2014 operating and pre-tax income.
According to the orders, Manitex also improperly recognised revenue from and misled its outside auditor about approximately $12 million in purported “bill and hold” crane sales. According to the orders, during a downturn in the oil and gas services industry, Manitex entered into an agreement to sell cranes to a dormant company with no operations. The orders find that, because the company had no ability to obtain financing, Harrison, at Rooke’s direction, secured and, on behalf of Manitex, guaranteed the financing for the purchases.
The orders found that in consultation with Rooke, Harrison also created a purported financing subsidiary for the company and prepared fraudulent invoices to conceal Manitex’s role. As set forth in the orders, Michael Schneider, Manitex’s former controller and CFO, approved the fraudulent invoices despite knowing they were not genuine. As a result, Manitex materially overstated its 2016 net revenues and gross profits.
“The securities laws require public companies and their executives to make truthful disclosures of material information about a company’s financial condition,” said Kathryn Pyszka, an associate director in the SEC’s Division of Enforcement. “The SEC’s orders find that Manitex and these executives misled investors by providing false information concerning the company’s operations and financial condition.”
The SEC charged that Manitex, Rooke, Schneider and Harrison violated certain anti-fraud, reporting, books and records, and internal accounting controls provisions of the federal securities laws. Without admitting or denying the orders’ findings, they agreed to cease and desist from future violations of the charged provisions and Manitex. Rooke and Schneider agreed to pay civil penalties totaling $485,000. Rooke, Schneider and Harrison are barred from serving as officers or directors of public companies, and Rooke and Schneider agreed to suspensions from appearing or practising before the SEC as accountants.
The SEC’s investigation was conducted by Richard Stoltz, Rebecca Hollenbeck and Ben Hanauer of the Chicago Regional Office, and was supervised by Anne McKinley. Based in Bridgeview, Illionois, Manitex produces boom trucks, articulating cranes, industrial and rough terrain cranes.