A California-based civil engineering and infrastructure firm agreed to pay $12 million to settle charges levied by the Securities and Exchange Commission (SEC) alleging fraud related to inflation of the company’s financial performance.

Granite Construction self-reported alleged misconduct carried out by Dale Swanberg, a former senior vice president and group manager at the firm, the SEC announced Thursday. While Granite settled, subject to court approval, without admitting or denying the agency’s findings, Swanberg was charged separately in U.S. District Court for the Northern District of California.

The charges in each complaint centered on Swanberg’s management of a subdivision at the company that was struggling in 2017 to meet financial goals. The project faced high costs, which dragged down its revenues. Swanberg altered the project’s financial statements by manipulating profit margins and failing to record the costs, the SEC alleged.

The scheme caught up with Swanberg in 2019, when several construction projects were nearing completion and it became impossible to continue to hide their actual costs, the SEC alleged.

The SEC charged Swanberg with violating antifraud and other provisions of federal securities laws. The agency is seeking unspecified civil penalties, disgorgement, prejudgment interest, and an officer-and-director bar in its litigation.

In its complaint against Granite, which was premised on Swanberg’s alleged fraud, the SEC credited the company for self-reporting and remediating its accounting procedures. In 2021, the company restated its financial statements from 2017-19, disclosing its revenues had been overstated by approximately $31 million in 2017 and 2018 and understated by approximately $62 million in the first three quarters of 2019.

In addition to paying the penalty, Granite agreed to comply with securities laws.

Granite took steps to prevent similar misconduct from happening in the future by adding more transparency to its accounting controls, policies, and procedures, including the way expected costs in construction projects are recorded, the SEC said.

Granite “fully cooperated with the SEC in its investigation into this matter, and we are pleased to put this matter behind us as we move forward under new leadership,” the company said in an emailed statement. “Granite is committed to conducting our business ethically and transparently, and we have implemented numerous remedial actions and internal control enhancements to improve our processes and build value for shareholders.”

After the alleged fraud came to light, the SEC ordered three Granite executives to return part of their bonus and compensation packages as called for by Section 304 of the Sarbanes-Oxley Act (SOX), which is required when a company restates its official financial reports due to misconduct.

James Roberts, former chief executive officer, was ordered to return more than $1.4 million; Laurel Krzeminski, a former chief financial officer, returned $327,000; and Jigisha Desai, also a CFO, returned $176,000, the SEC said.

“We are committed to using SOX 304 as Congress intended, to incentivize a culture of compliance at public companies by ensuring that senior executives are not rewarded when their firms violate core reporting requirements,” Gurbir Grewal, director of the SEC’s Enforcement Division, said in a press release. “Executives should be on notice that we view SOX 304 as broad authority in seeking all forms of compensation that should be reimbursed to the company.”