- The Securities and Exchange Commission (SEC) has charged Connecticut-based Revolution Lighting Technologies with falsely inflating its reported revenues from late 2014 to mid-2018.
- The company is said to have improperly recognized revenue for sales much earlier than is permitted by accounting rules or the firm's own written revenue-recognition policies.
- "Companies are required to provide accurate disclosures of material information so investors are able to understand and evaluate the company's businesses," Paul Levenson of the SEC's Boston Regional Office said in a statement.
According to the SEC, as the company approached the end of each fiscal quarter, its former CEO, Robert LaPenta, and the former CFO, James DePalma, pressured other executives and sales personnel to improperly record anticipated future sales as current "bill and hold" sales to make up for revenue shortfalls. The company then allegedly recognized revenue from the uncompleted sales.
On multiple occasions, Allen Garner, former CFO of the company's largest division, allegedly concealed the practice by providing backdated documents related to "bill and hold" sales to the company's auditor.
DePalma is said to have kept careful track of Revolution Lighting's reporting of bill and hold transactions through a "bill and hold schedule" that Garner, and later Daniel O'Neal, another former division CFO, prepared.
The SEC alleges the defendants failed to disclose that "bill and hold" sales represented a significant portion of Revolution Lighting's revenue or that the company was materially deviating from its stated revenue-recognition policies.
The complaint, filed in federal court in Connecticut, alleges the defendants violated antifraud, books and records, internal controls, and reporting provisions of federal securities laws. In addition, LaPenta and DePalma made false certifications in Revolution Lighting's filings, and DePalma, Garner, and O'Neal circumvented accounting controls or falsified records. It also alleges Garner misled Revolution Lighting's auditor.
Without confirming or denying the allegations, Revolution Lighting, LaPenta, DePalma, Garner, and O'Neal consented to judgments permanently enjoining them from future violations of the charged provisions and requiring them to pay penalties of $1.25 million, $192,768, $100,000, $25,000, and $25,000, respectively. Garner also agreed to be prohibited from acting as a public company officer or director for five years.