Plug Power, a New York-based provider of green hydrogen and hydrogen fuel cell systems, was fined $1.25 million as part of a settlement with the Securities and Exchange Commission (SEC) over alleged accounting failures that the company agreed to fully remediate within one year or face an additional penalty.
Plug Power will be fined another $5 million should it not resolve material weaknesses it uncovered in its internal control over financial reporting (ICFR) upon restating previous annual and quarterly reports to address certain financial reporting and accounting errors, the SEC said in an administrative proceeding published Wednesday.
The company must also remedy deficiencies in its disclosure controls and procedures (DCP), the agency added.
The details: Plug Power announced in March 2021 that its annual reports for 2018 and 2019 and quarterly reports for 2019 and 2020 should no longer be relied upon, after uncovering accounting errors. Its financials were restated in May 2021.
From 2018 through the third quarter of 2020, the company failed to properly account for items including its right-of-use (ROU) assets and lease liabilities for certain transactions, costs related to research and development, loss accruals for extended maintenance contracts, bonus expenses, conversions of stock, and more, according to the SEC’s order. These alleged lapses occurred during a period in which Plug Power raised more than $5 billion from investors, the agency noted.
The company, through its restatements, corrected a $112.7 million overstatement of ROU assets and lease liabilities, more than $40 million in overstatements regarding gross profits, and nearly $7 million in understatements regarding loss accruals, according to the SEC.
Compliance considerations: In restating, Plug Power found it “did not maintain a sufficient complement of trained, knowledgeable resources to execute their responsibilities with respect to [ICFR] for certain financial statement accounts and disclosures” and “did not conduct an effective risk assessment process that was responsive to changes in the company’s operating environment.” These issues, along with a list of ineffective process-level controls activities, led the company to deem its ICFR and DCP problematic.
The SEC found the company has not yet fully remediated these issues, despite previous disclosures of risk management and process-level enhancements. If the company completes remediation as required within the next year, it must publicly disclose its management’s opinion it has done so, according to the agency.
Company response: “Plug has diligently and fully cooperated with the SEC throughout the process and took prompt corrective measures and extensive remedial actions and steps to improve and enhance our policies, procedures, and internal controls over financial reporting,” said Plug Power Chief Executive Andy Marsh in a press release.
The company neither admitted nor denied the SEC’s findings.