FILE PHOTO: The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly/File Photo
By Jonathan Stempel
(Reuters) – Evoqua Water Technologies (NYSE:AQUA) Corp will pay an $8.5 million fine to settle U.S. Securities and Exchange Commission (SEC)charges that the water treatment company used improper accounting to fraudulently inflate revenue in 2017 and 2018, including during its initial public offering.
The SEC said on Monday that its civil settlement with the Pittsburgh-based company also resolves charges against Imran Parekh, a former finance director at its Neptune Benson unit and the “ultimate decision maker” within his group.
Evoqua was accused of recognizing revenue too early from the sale of filtration products through alleged improper accounting for “bill-and-hold” transactions, where companies bill for products that are delivered on a later date.
According to the SEC, Rhode Island-based Neptune improperly recognized revenue in connection with at least 120 transactions, and Evoqua reported nearly $12 million of extra expected revenue in filings related to its Nov. 2017 IPO.
Parekh allegedly faced internal pressure after one of his bosses sent a Sept. 1, 2017 email about the need to meet financial targets “as the timing for the IPO gets firmed up and the company wants to demonstrate a solid performance,” the SEC said.
The SEC said Parekh agreed to an injunction against further securities law violations, and will be subject to a civil fine and disgorgement.
Evoqua said it cooperated with the SEC, and settled based on its “strong desire” to put the matter behind it. Parekh declined to comment.
Both settlements require approval by a federal judge in Rhode Island, where the case was filed. Neither defendant admitted or denied wrongdoing.