Dive Brief:

• The Securities and Exchange Commission dismissed a civil enforcement action alleging former View Inc. CFO Vidul Prakash committed negligence-based fraud, according to a Friday litigation release. The complaint filed in 2023 alleged that Prakash acted negligently by failing to properly disclose $28 million in warranty liabilities to address a defect in the “smart” windows manufactured by the company, which use artificial intelligence to control factors such as temperature and glare.
• The dismissal comes several months after both parties filed a joint stipulation to dismiss the case on Nov. 26, approved Friday by Judge Beth Labson Freeman, according to court documents filed with the US District Court for the Northern District of California. The SEC’s decision to exercise its discretion and seek dismissal is “based on the facts and circumstances of this case and its ongoing review of the evidence, including evidence developed in discovery,” the commission said in the release and joint stipulation.
• “I'm delighted that Vidul has been vindicated after two and a half years of litigation,” Craig Martin, managing partner at Morrison & Foerster and attorney for Prakash told CFO Dive. With the dismissal of the claims, Prakash is free to resume his professional life, which has “been long delayed” by the ongoing case, Martin said.

Dive Insight:

The case’s dismissal is the final chapter in a two-year legal back-and-forth between the SEC and the former CFO. On Nov. 3, shortly before the joint stipulation was filed, Judge Freeman denied a bid by Prakash for summary judgement, noting that a “reasonable jury could conclude that Prakash’s failure to conduct further inquiry into the warranty accrual issue or further inform the accountants addressing the question was a breach of his duty of care,” according to court documents.

The two-year court battle surrounded questions related to View’s financial disclosures relating to costs to manufacture new windows to replace those with a defect int their sealing components, with the SEC charging that the disclosures failed to include shipping and installment expenses related to those windows.

The commission settled charges against View in 2023 without civil penalties, noting it had self-reported the error and taken remedial errors. In its case against Prakash — who served as View’s finance chief from March 2019 until departing in November 2021 in connection with a review by its audit committee — the SEC sought civil penalties, permanent injunctions and an officer and director bar, CFO Dive reported at the time.

“CFOs are easy targets when an accounting disagreement arises,” Martin said of the dismissal. “The reality is that at the vast majority of companies, no one individual makes all of the accounting decisions.” Such decisions are made collaboratively between company departments and executives, he said. 

“The government unfortunately, however, tends to look for an individual, and so CFOs just need to be prepared to explain an accounting decision, sometimes years later, and to fight if necessary. And that's what Vidul did,” he said.

Under the terms of the joint stipulation, the SEC has dismissed all claims against Prakash with prejudice, without costs or fees to either party.

As the legal battle against its former finance chief has unspooled, the smart window manufacturer has also undergone numerous changes aimed at mitigating ongoing financial challenges. The Softbank-backed company reached unicorn status in 2021, but struggled to bank its cash burn and pare down its expenses.

On April 2, 2024, View Inc. entered into a “prepackaged Chapter 11 process” and reached an agreement with investors led by Cantor Fitzgerald and RXR to become a private company, according to a letter posted at the time by then-CEO Rao Mulpuri on its website. The financial restructuring, as well as the bid to become private, aimed to help strengthen the company’s balance sheet, he said. Mulpuri stepped down as CEO in August of that year, Business Insider reported at the time.

The SEC and View Inc. did not immediately respond to requests for comment regarding the action’s dismissal.