Broadwind Energy paid a $1 million penalty after the SEC accused the company of failing to disclose information to investors before its 2010 public offering.
A Cicero-based maker of wind turbines agreed to pay a $1 million penalty after the Securities and Exchange Commission accused the company of failing to disclose information to prospective investors before its initial stock offering in 2010, according to court filings.
A former CEO and a current company officer also agreed to pay a total of $691,000 in penalties, the SEC said.
Broadwind Energy tentatively settled the case without admitting or denying the allegations, the SEC said Thursday.
“These are issues that date back to 2009 and 2010, so we are happy to put this behind us and move forward,” Broadwind Energy spokeswoman Joni Konstantelos said Friday.
The settlements are pending court approval. A hearing is set for Wednesday in federal court in Chicago.
J. Cameron Drecoll, who retired as CEO in 2010, agreed to pay more than $618,000, and Chief Financial Officer Stephanie Kushner settled for more than $73,000. The SEC said those amounts reflected penalties from ill-gotten gains from the stock offering.
Drecoll’s attorney Jim Adducci declined comment.
The SEC said the case hinged on the fact that senior management at Broadwind Energy anticipated substantial declines in the company’s long-term financial prospects because of reduced business from two customers, but did not disclose that information to potential investors ahead of its initial public offering, according to the SEC’s complaint in U.S. District Court.
Broadwind officials did, however, share that information with the company’s auditors, investment bankers and a lender.
Drecoll, who then was CEO, approved the company’s public filings without the disclosures, and Kushner, who was newly hired at the time, failed to ensure that the financial statements and disclosures were accurate, the SEC said.
Drecoll sold 1.1 million shares for $6.3 million in the public offering according to the complaint. Kushner also received a bonus of $130,000, in part for her work in the public offering.
Two months after the public offering, the company disclosed an impairment charge in its annual report, which meant the company was overvalued by $58 million. Its stock price subsequently fell 29 percent.
“Broadwind Energy had received significant evidence that its intangible assets were impaired ahead of a public offering of its stock, but failed to inform the investing public,” Timothy Warren, associate regional director of the SEC’s Chicago office, said in a statement. “Investors deserve to see the full financial picture when making an investment decision.”
Broadwind Energy’s financial hardships hindered its subsidiary’s ability to meet its debt. The subsidiary accelerated revenue to avoid default and other troubles until Broadwind Energy could raise money through the public offering, the complaint said. Broadwind reported $4 million of improperly recognized revenue from the transactions, the government said.
Broadwind Energy also failed to disclose this practice in the registration statement for in the offering, the complaint said.
The company recorded a $1.8 million net loss in the third quarter of 2014 because of delayed production and higher expenses associated with a new wind turbine tower design. Broadwind Energy will release its fourth quarter earnings Feb. 26.
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