Huron Consulting Group Inc agreed to pay a $1 million civil fine to settle U.S. regulatory charges over a 2009 accounting scandal that caused its shares to plunge and led to the replacement of its entire management team.
The settlement announced by the U.S. Securities and Exchange Commission ended a three-year probe. It resolved charges that the Chicago-based company overstated pretax income from 2005 to early 2009 by failing to account for costs connected with its acquisitions of four firms as compensation expenses.
Two former Huron executives, Chief Financial Officer Gary Burge and Chief Accounting Officer Wayne Lipski, settled related SEC accounting charges by agreeing to pay a respective $228,000 and $66,000 in fines, disgorgement and interest.
Huron shares plunged 69 percent in a single day, August 3, 2009, when the company said it would restate more than three years of results and said it senior management team would leave.
That announcement was particularly surprising given that Huron had been founded just seven years earlier by 25 former partners at Arthur Andersen, the Chicago-based auditor that collapsed over its work for the energy company Enron Corp.
The SEC said Huron's restatement reduced net income from 2006 through the first quarter of 2009 by about $56 million.
"A substantial portion of the money it paid to acquire other consulting firms was being used to retain professional talent," said Merri Jo Gillette, director of the SEC's Chicago regional office. "Huron, Burge and Lipski should have known that their flawed accounting gave investors a misleading impression of the profitability of Huron's acquisitions."
None of the Huron defendants admitted or denied wrongdoing in agreeing to settle with the SEC.
John McCartney, Huron's chairman, said the company believes the settlement is in its best interest. Lawyers for Burge and Lipski were not immediately available for comment.
In December 2010, Huron said it had reached a $38 million settlement of shareholder litigation over the restatement, with part of the sum to be paid by its insurers.
Shares of Huron closed Thursday down 14 cents at $32.68 on the Nasdaq. They had traded at $44.35 before the accounting problems came to light.
(Reporting by Jonathan Stempel in New York; Editing by Tim Dobbyn)