- The Securities and Exchange Commission announced charges against Vidul Prakash, the former CFO of California smart window manufacturer View, for failing to ensure that the company’s warranty liabilities were properly disclosed, the SEC said in a press release Monday.
- The SEC settled charges against the company for failing to disclose $28 million in warranty liabilities to address a defect in its windows, it said Monday. View was not charged with civil penalties as it self-reported the misconduct and undertook remedial measures and did not confirm or deny the SEC’s charges, but agreed to cease and desist from future violations of the charged securities laws, the SEC said.
- The complaint against Prakash, filed in the U.S. District Court for the Northern District of California, charges the former CFO with “violating negligence-based antifraud, proxy disclosure, and books and records provisions of the federal securities laws and seeks permanent injunctions, civil penalties, and an officer and director bar,” according to the Monday release.
Headquartered in Milpitas, California, View is a manufacturer of “smart” windows which use artificial intelligence to help control heat, glare and other elements, according to its website. Prakash served as the window maker’s finance chief from March 2019 to November 2021, according to his LinkedIn profile.
Between December 2020 and May 2021, View disclosed warranty liabilities of $22 million to $25 million in its reports and statements filed with the SEC, which largely concerned projected costs of manufacturing replacements for windows with a certain defect. However, the company failed to include the additional costs to ship and install these new windows, which “View had decided to cover and which therefore should have been disclosed under generally accepted accounting principles in the United States,” the SEC said Monday.
With those costs included, View should have disclosed warranty liabilities of between $48 million to $53 million, meaning its warranty liability for fiscal years 2019 and 2020, as well as the first quarter of 2021 were materially misstated, according to the SEC.
The company’s standard warranty — set for a 10-year period — covered replacements of windows with the identified defect, according to the complaint, but did not specifically say that it would cover installation costs. However, company leadership — including its CEO and chief business officer — decided View would cover such costs upon discovering the defect, the SEC said in its complaint filed in the Northern District of California. The company spent more than $2 million dollars on installation costs yearly in 2019, 2020 and 2021.
Prakash as the company’s finance chief was responsible for ensuring that View accurately disclosed these liabilities in compliance with generally accepted accounting principles in the U.S., the SEC’s complaint filed Monday in San Francisco’s federal court said. Prakash knew that the warranty liabilities disclosed by the manufacturer excluded installation costs, the SEC alleges.
“Despite receiving queries from the SEC and from View’s own controller that raised questions and concerns regarding the adequacy of View’s disclosed warranty liabilities, Prakash failed to address those questions and concerns and continued to maintain View’s warranty liabilities at a level that excluded the Installation Costs that View had decided to incur,” the complaint asserts. As a result, View understated its warranty liabilities and subsequent increases in expenses by over $20 million, the filing states.
View acknowledged its warranty liabilities were misstated for these terms on May 31, 2022, when it issued a Form 8-K which restated its 2019 liability as $53 million, and not $25 million as previously reported. The restatement followed an investigation by its audit committee, which concluded both that the liabilities were indeed misstated and that Prakash as its former CFO — as well as certain accounting staff — negligently failed to properly record these liabilities.
Prakash and certain accounting staff also “intentionally failed” to disclose certain information to the company’s board as well as Pricewaterhouse Coopers as its independent public accounting firm, regarding these costs, according to the May 2022 filing.
Prakash resigned from his role as CFO effective November 2021 “in connection with the internal investigation findings,” the company said in the May 2022 filing. Its chief accounting officer, Amy Reeves, was appointed as interim CFO effective that same date.
View did not respond to requests for comment.