Written by The Business Journal Staff
A California construction company with a significant Fresno footprint will pay $12 million to the Securities and Exchange Commission to settle charges of financial reporting fraud.
The SEC charged Watsonville-based Granite Construction, Inc. and former Senior Vice President Dale Swanberg with fraud on accusations of inflating the financial performance of Swanberg’s civil engineering division.
According to a complaint filed in federal court, in the face of pressure to turn around the flagging performance of his group, Swanberg “orchestrated a scheme to conceal the deteriorating performance of the Heavy Civil Group by improperly deferring the recording of additional costs that arose on significant projects.”
The scheme resulted in Granite overstating its financial results by about $62 million over several quarters in 2017 and 2018, according to the complaint.
Swanberg ran the Heavy Civil Group within Granite from 2017 to October 2019, overseeing projects including highways, bridges and mass transit centers.
Last year Granite restated its financial statements for that period to correct revenue and profit margin errors. Once the scheme was uncovered, Granite’s stock price fell from nearly $35 a share to $12 a share.
In separate proceedings, the company’s former CEO and CFOs agreed to return nearly $2 million in bonuses and compensation to Granite as part of Section 304 of the Sarbanes-Oxley Act (SOX).
“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,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “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.”
Without admitting or denying the SEC’s finding, Granite settled the case in a proposed judgement subject to court approval. A complaint against Swanberg was filed in federal district court in San Jose.
Granite Construction has worked on a number of road infrastructure projects in the Central Valley, including Highway 198 in western Fresno County. It has an aggregate sales operation in Coalinga, a construction office and equipment rental in Fresno and a well drilling operation in Hanford, according to its website.