Michigan-based manufacturer Gentex Corp. agreed to pay $4 million as part of a settlement with the Securities and Exchange Commission (SEC) regarding alleged failures in its internal accounting controls that affected executive and employee bonus compensation programs over several years.
The enforcement action, announced Tuesday, is the latest under the SEC’s earnings per share initiative, in which the Division of Enforcement uses data analytics to uncover accounting and disclosure violations by public companies. In addition to the penalty, Gentex was ordered to cease and desist from future violations of the Securities Exchange Act.
Kevin Nash, Gentex’s chief financial officer, agreed to pay $75,000 in settling with the SEC over his alleged role in the company’s control lapses. Nash served as Gentex’s chief accounting officer during the relevant period.
The details: From the third quarter of 2015 through the second quarter of 2018, Gentex made certain adjustments to performance-based bonus compensation accruals of executives and employees without the required accounting analysis or adequate supporting documentation, according to the SEC’s order. Deficiencies in the company’s documentation, review, and assurance controls caused the alleged violations to go unnoticed.
Nash was responsible for the relevant accounting, which he performed late in the company’s quarterly financial statement closing process, the SEC noted. He “directed the initial accrual for the executive bonus program and the subsequent reduction to the accrual without performing an analysis of the relevant criteria under generally accepted accounting principles in the U.S.,” the agency said, resulting in his alleged violations of the Exchange Act.
Nash’s determinations regarding bonus accruals were not subject to review by other Gentex employees, the SEC added.
Gentex did not respond to a request for comment.