WASHINGTON, DC - The U.S. Securities and Exchange Commission (SEC) on Friday charged the former chief executive officer of a Chicago-area engine manufacturing company and two former senior sales executives for their roles in an accounting fraud that allegedly overstated the publicly-traded company's revenues by almost $25 million.
According to the complaint, filed in federal court in Chicago, Gary Winemaster, Power Solutions International Inc.'s founder and former CEO, and two former senior sales executives, Craig Davis and James Needham, caused Power Solutions to fraudulently record revenue for sales of products that were not complete, that the customer had not agreed to accept, for which the price was falsely inflated, and from improper "bill and hold" arrangements. The SEC further alleges that the men misled and concealed key information from Power Solutions' internal accounting personnel and external auditor.
"Investors depend on company executives to provide accurate, reliable information about their company's financial condition," Kathryn Pyszka, Associate Regional Director of the SEC's Chicago Regional Office said Friday. "As we allege, these executives deprived investors of truthful information about Power Solutions' financial health by causing the company to fraudulently record revenue to meet revenue targets and projections."
The SEC's complaint charges the men with violating various antifraud, books and records, reporting, and internal controls provisions of the federal securities laws as well as with aiding and abetting violations. The complaint seeks permanent injunctions and penalties against all three executives, disgorgement and prejudgment interest against Needham, an officer-and-director bar against Winemaster, and a clawback of incentive-related compensation paid to Winemaster during the alleged fraud.
The U.S. Attorney's Office for the Northern District of Illinois filed criminal charges against the defendants for related misconduct.
The SEC's investigation, which is continuing, was conducted by Michael Mueller and Timothy Tatman of the Chicago Regional Office under the supervision of Steven Klawans. The litigation will be led by Daniel Hayes. The SEC in a statement published on Friday said it appreciated the assistance of the U.S. Attorney's Office for the Northern District of Illinois and the FBI.