Former CIRCOR Executive Charged with Accounting Fraud, Company Settles with SEC

The Securities and Exchange Commission (SEC) has charged Nicholas Bowerman, a former finance director at CIRCOR International Inc., with accounting fraud. The charges, announced on September 5, 2024, allege that Bowerman's actions led to misleading public statements about CIRCOR's financial performance from 2019 through 2021.

CIRCOR, a technology manufacturer previously traded on public markets, has also settled related charges with the SEC for internal accounting control violations.

According to the SEC's complaint, Bowerman, who worked at CIRCOR's UK-based Pipeline Engineering unit, manipulated internal accounting records by falsifying financial results before their inclusion in CIRCOR's consolidated statements. The alleged fraud involved sophisticated concealment techniques, including manipulated account reconciliations, false certifications, fabricated bank documents, and misleading communications with management and auditors.

The SEC's order against CIRCOR cites the company's failure to maintain adequate internal accounting controls, which allowed Bowerman's alleged fraud to go undetected. This resulted in CIRCOR overstating its financial performance by millions of dollars for fiscal years 2019 and 2020, as well as the first nine months of 2021.

In an unusual move, the SEC did not impose a civil penalty on CIRCOR. Nicholas P. Grippo, Director of the SEC's Philadelphia Regional Office, explained: "While this matter involves serious violations of the securities laws, once the company became aware of the violations, it promptly self-reported, cooperated, and remediated the gaps in its accounting systems."

CIRCOR's proactive response included:

1. Self-reporting financial reporting violations upon commencing an internal investigation
2. Providing substantial cooperation to SEC staff
3. Implementing prompt remedial measures, including strengthening internal controls and hiring additional experienced personnel
4. Canceling compensation for a former executive officer

The SEC's complaint against Bowerman, filed in the U.S. District Court for the District of Massachusetts, seeks injunctive relief, disgorgement with prejudgment interest, and civil penalties. Meanwhile, without admitting or denying the SEC's findings, CIRCOR has agreed to cease and desist from further violations of the charged securities laws.

This case highlights the SEC's continued focus on financial reporting accuracy and the importance of robust internal controls in public companies. It also demonstrates the potential benefits of self-reporting and cooperation in regulatory investigations, as evidenced by the SEC's decision not to impose penalties on CIRCOR.

The outcome of this case may serve as a precedent for how companies handle and report financial irregularities, potentially influencing corporate governance practices across the industry. As the legal proceedings against Bowerman unfold, the financial sector will be watching closely for implications on accountability in corporate finance roles.

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