• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Facebook
  • LinkedIn
  • Twitter
Bast Amron

Bast Amron

Miami Business and Bankruptcy Litigation Law Firm

  • Home
  • Who We Are
  • Our Team
  • What We Do
    • Litigation
    • Insolvency
    • Business
  • Our Work
    • Representative Experience
    • Case Highlights
    • Client Insights
  • News
    • Client Alerts
    • BA Blog
    • Articles
    • Events
    • In The News
    • The Practice Podcast
    • Business Advantage Forum
    • Careers
  • Contact Us

ABA FLASH REPORT-SEC Sues General Counsel of RPM International Based on Alleged Disclosure and Accounting Failures, Apparently in Violation of Corporate Reporting and Disclosure Requirements

ABA FLASH REPORT-SEC Sues General Counsel of RPM International Based on Alleged Disclosure and Accounting Failures, Apparently in Violation of Corporate Reporting and Disclosure Requirements

September 10, 2016 by Maylynn

September 10th, 2016 - Posted in In The News

The following is a reposting of the International Based on Alleged Disclosure and Accounting Failures, Apparently in Violation of Corporate Reporting and Disclosure Requirements, written by Brett M. Amron, Development Chair of the D&O Liability Committee for the Business Law section of the ABA.

On September 9, 2016, the U.S. Securities and Exchange Commission (SEC) filed civil fraud charges against Edward W. Moore, who serves as general counsel for the Ohio-based chemical products company, RPM International Inc. The 28-page complaint accuses Moore of violating “antifraud, books and records, and misleading accountant or auditor provisions of the securities laws” based on his alleged failure to disclose a material loss contingency, or record an accrual for, a government investigation when required to do so.

Beginning in 2011, RPM and one of its subsidiaries, Tremco, were under investigation by the U.S. Department of Justice (DOJ) for overcharging the government by at least $11.9 million on various roofing contracts. According to the SEC, Moore oversaw RPM’s response to the investigation, but failed to keep senior management and auditors abreast of material facts regarding the investigation and did not inform shareholders of the investigation in a timely manner. As a result, when RPM settled for $60.9 million in 2013, the company had not established a reserve to make the payment.

Knowing that disclosure of the investigation could cause reputational harm to the company, the agency alleges that Moore chose to downplay the situation to protect his own financial position. At the time, Moore held over $1.8 million worth of RPM’s stock. The SEC further stated that in the last few months of 2012 “Moore was aware of pressure to avoid, or at least postpone, recording another one-time charge,” after the company disclosed two one-time charges unrelated to the DOJ investigation totaling $56 million.

As a result of Moore’s conduct, the SEC contends that RPM submitted “false and misleading filings” from October 2012 through December 2013. Because the $11.9 million estimate was equal to 30 percent of its first quarter revenues, it was “material” and therefore needed to be disclosed.

This is a unique case where the SEC takes action against an individual corporate officer, alleging that he caused a company’s failure to disclose an investigation and settlement, in violation of the notoriously broad corporate disclosure requirements. According to the complaint, the agency now claims that “A public company facing a loss contingency, such as a lawsuit or a government investigation, is required under accounting principles and the securities laws to (1) disclose the loss contingency if a material loss is reasonably possible, and (2) record an accrual for the loss contingency if a material loss is probably and reasonably estimable.”

RPM CEO and chairman Frank C. Sullivan has issued a statement that these accusations by the SEC “have absolutely no merit and are the product of prosecutorial overreach. We intend to vigorously defend ourselves and expect our position to be vindicated in court.”

A copy of the complaint is available at: https://www.sec.gov/litigation/complaints/2016/comp23639.pdf

The following is a reposting of the International Based on Alleged Disclosure and Accounting Failures, Apparently in Violation of Corporate Reporting and Disclosure Requirements, written by Brett M. Amron, Development Chair of the D&O Liability Committee for the Business Law section of the ABA.

On September 9, 2016, the U.S. Securities and Exchange Commission (SEC) filed civil fraud charges against Edward W. Moore, who serves as general counsel for the Ohio-based chemical products company, RPM International Inc. The 28-page complaint accuses Moore of violating “antifraud, books and records, and misleading accountant or auditor provisions of the securities laws” based on his alleged failure to disclose a material loss contingency, or record an accrual for, a government investigation when required to do so.

Beginning in 2011, RPM and one of its subsidiaries, Tremco, were under investigation by the U.S. Department of Justice (DOJ) for overcharging the government by at least $11.9 million on various roofing contracts. According to the SEC, Moore oversaw RPM’s response to the investigation, but failed to keep senior management and auditors abreast of material facts regarding the investigation and did not inform shareholders of the investigation in a timely manner. As a result, when RPM settled for $60.9 million in 2013, the company had not established a reserve to make the payment.

Knowing that disclosure of the investigation could cause reputational harm to the company, the agency alleges that Moore chose to downplay the situation to protect his own financial position. At the time, Moore held over $1.8 million worth of RPM’s stock. The SEC further stated that in the last few months of 2012 “Moore was aware of pressure to avoid, or at least postpone, recording another one-time charge,” after the company disclosed two one-time charges unrelated to the DOJ investigation totaling $56 million.

As a result of Moore’s conduct, the SEC contends that RPM submitted “false and misleading filings” from October 2012 through December 2013. Because the $11.9 million estimate was equal to 30 percent of its first quarter revenues, it was “material” and therefore needed to be disclosed.

This is a unique case where the SEC takes action against an individual corporate officer, alleging that he caused a company’s failure to disclose an investigation and settlement, in violation of the notoriously broad corporate disclosure requirements. According to the complaint, the agency now claims that “A public company facing a loss contingency, such as a lawsuit or a government investigation, is required under accounting principles and the securities laws to (1) disclose the loss contingency if a material loss is reasonably possible, and (2) record an accrual for the loss contingency if a material loss is probably and reasonably estimable.”

RPM CEO and chairman Frank C. Sullivan has issued a statement that these accusations by the SEC “have absolutely no merit and are the product of prosecutorial overreach. We intend to vigorously defend ourselves and expect our position to be vindicated in court.”

A copy of the complaint is available at: https://www.sec.gov/litigation/complaints/2016/comp23639.pdf

Primary Sidebar

  • Client Alerts
  • BA Blog
  • Articles
  • Events
  • In The News
  • The Practice Podcast
  • Business Advantage Forum
  • Careers

Bastamron Youtube Podcast

Bastamron Google Play Podcast

Bastamron Spotify Podcast

Bastamron Apple Podcast

Maylynn Menoud  | Marketing Director
T: (305) 379-7904 | D: (305) 357-4794
mmenoud@bastamron.com

BAST AMRON is a boutique law firm focused on business insolvency and litigation. Our insolvency practice emphasizes workouts, restructurings, liquidations, bankruptcy, and bankruptcy avoidance. We represent debtors, creditors, committees, trustees, and other fiduciaries in bankruptcies, receiverships, and assignments for the benefit of creditors. Our litigation practice is primarily plaintiff oriented. We know how to investigate, formulate and prosecute claims arising from business disputes. By combining our business insolvency knowledge with our extensive courtroom experience, we successfully guide our clients through all aspects and types of commercial litigation in state and federal courts across the country. Whether the issue is litigation or insolvency or both, we view our clients’ needs through a holistic lens to formulate and implement dynamic solutions to their most important challenges.

Footer

Copyright © 2023
Bast Amron LLP. All rights reserved.
Attorney Advertising. Prior results do not guarantee a similar result.

Careers | Sitemap | Disclaimer | Eco Friendly

One Southeast Third Avenue,
Suite 2410 | Miami, FL 33131
T: 305.379.7904 | F: 305.379.7905
Return to top
  • Facebook
  • LinkedIn
  • Twitter