SEC Charges Terex Corporation With Accounting Fraud
FOR IMMEDIATE RELEASE
Washington, D.C., Aug. 12, 2009 — The Securities and Exchange Commission today charged Terex Corporation, a Westport, Conn.-based heavy equipment manufacturer, with accounting fraud for making material misstatements in its own financial reports to investors, as well as aiding and abetting a fraudulent accounting scheme at United Rentals, Inc. (URI), another Connecticut-based public company.
Terex has agreed to settle the SEC's charges and pay a penalty of $8 million. The SEC previously charged URI with fraud as well as officers of URI and Terex.
"Terex is being charged with helping United Rentals pull off a sophisticated accounting scheme," said Fredric D. Firestone, Associate Director in the SEC's Division of Enforcement. "These two public companies inflated year-end results in order to mislead investors during a period of industry recession."
The SEC's complaint, filed in U.S. District Court for the District of Connecticut, alleges that Terex aided and abetted the fraudulent accounting by URI for two year-end transactions that were undertaken to allow URI to meet its earnings forecasts. These fraudulent transactions also allowed Terex to prematurely recognize revenue from its sales to URI. The fraud occurred through URI's sales of used equipment to a financing company and its lease-back of that equipment for a short period. As part of the scheme, Terex agreed to sell the equipment at the end of the lease period and guarantee the financing company against any losses. URI separately guaranteed Terex against losses it might incur under the guarantee it had extended to the financing company.
The SEC's complaint also alleges that from 2000 through June 2004, Terex's accounting staff failed to resolve imbalances arising from certain intercompany transactions. Instead of investigating and correcting the imbalances, Terex offset the imbalances with unsupported and improper entries. As a result, costs were not recorded as expenses, and, on a consolidated basis, Terex appeared to be more profitable than it was.
Without admitting or denying the SEC's charges, Terex agreed to settle the Commission's action by consenting to be permanently enjoined from violating the antifraud, reporting, books and records and internal control provisions of the federal securities laws and by paying the $8 million penalty. The settlement is subject to court approval.
The Commission acknowledges the assistance of the U.S. Attorney's Office for the District of Connecticut and the New Haven Field Office of the Federal Bureau of Investigation in this matter.
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For more information, contact:
Fredric D. Firestone
Associate Director, Division of Enforcement
Kenneth R. Lench
Assistant Director, Division of Enforcement