Evoqua Water Technologies agreed to pay $8.5 million as part of a nonprosecution agreement (NPA) with the Department of Justice (DOJ) to settle admitted criminal charges related to fraudulent revenue recognition.

Evoqua, which designs industrial wastewater treatment and filtration plants, was headquartered in Pennsylvania. Its aquatics and disinfection (A&D) division was based in Rhode Island, where the misconduct took place, the DOJ said in a press release Tuesday.

In March 2023, the company settled its civil liabilities related to the same misconduct with the Securities and Exchange Commission (SEC) by agreeing to pay a separate $8.5 million penalty. Evoqua also paid nearly $16.7 million to settle a shareholder class-action lawsuit over the same misconduct.

In May 2023, water technology company Xylem acquired Evoqua.

The details: From late 2016 through 2018, Evoqua’s A&D division falsely inflated and improperly recognized revenue in violation of generally accepted accounting principles.

The company intentionally and improperly booked revenue for sales that were contingent or not reasonably assured, for products that had not shipped to customers in the quarter the revenue was recognized, and/or for component parts that had not been completed and/or assembled.

The A&D division’s improper revenue recognition caused financial misstatements as part of the company’s November 2017 initial public offering and in subsequent annual and quarterly filings with the SEC.

Additionally, from fall 2017 through 2018, the company made materially false and misleading statements and omitted material facts to its external auditors concerning revenue recognition practices.

Compliance considerations: The DOJ acknowledged the company’s cooperation, admission of criminal conduct, remediation efforts, commitment to enhanced compliance, prior settlements with the SEC and shareholders, and its acquisition by Xylem after the misconduct occurred.

The NPA imposed monitoring, reporting, and compliance obligations for two years, including the company adopting new or modifying existing internal controls and policies and procedures to maintain an effective compliance program designed, implemented, and enforced to detect securities fraud.

Evoqua did not immediately respond to a request for comment.