Engineering and construction company Fluor has reached a settlement with the Securities and Exchange Commission (SEC) after being charged with accounting violations on two major projects. The company has agreed to pay $14.5 million to resolve the charges.
According to the SEC, Fluor submitted bids for the construction projects based on overly optimistic estimates regarding costs and timing. However, the company ran into cost overruns and failed to maintain proper internal controls in accordance with U.S. accounting rules.
The SEC found that Fluor did not include all anticipated costs in its project forecasts, even when those costs were known or should have been known.
In response to the investigation, Fluor restated its financial statements for fiscal years 2016 to 2018, as well as several quarters in 2018 and 2019. The restatements were made to correct overstated earnings resulting from accounting errors on one of the projects. The SEC discovered that these errors had caused the company to significantly overstate its net earnings, by as much as 37%, between fiscal 2016 and the first quarter of fiscal 2019.
As part of the settlement, five former and current Fluor officers and employees have agreed to cease and desist from committing or causing any further violations. They will also pay penalties ranging from $15,000 to $25,000. Neither Fluor nor the officers admitted to or denied the SEC’s claims.
Fluor has taken steps to address the accounting and reporting issues and has made changes to its board and management team. The company’s Chief Executive, David Constable, emphasized that the closure of the SEC investigation is in the best interests of the stakeholders, including shareholders.
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