Pipeline Construction Company Settles Charges Relating to Internal Control Failures
Sept. 21, 2018
File No. 3-18816
Washington, D.C., September 21, 2018 -- The Securities and Exchange Commission today announced that Primoris Services Corporation has agreed to settle charges that it failed to devise and maintain a sufficient system of internal accounting controls, and failed to adequately evaluate these control deficiencies when assessing the effectiveness of its Internal Control over Financial Reporting ("ICFR").
According to the SEC's order, Primoris used contingent cost estimates to cover potential risks inherent in a project that could add unanticipated expenses to Primoris's total costs. Although the calculation of, and adjustments to, contingent cost estimates were critical decisions for properly recognizing revenue, Primoris did not have effective controls in place around its contingent cost accounting. Despite learning of these control deficiencies, the order finds that, when Primoris evaluated its ICFR as of December 31, 2014, it failed to consider the magnitude of potential errors in contingent cost estimates. This failure, among others, led Primoris to incorrectly conclude that its ICFR was effective as of December 31, 2014.
The SEC's order finds that Primoris violated the record keeping and internal controls provisions of Sections 13(b)(2)(A) and (B) of the Securities Exchange Act of 1934 and Rule 13a-15(c) thereunder. Without admitting or denying the findings, Primoris consented to the entry of a cease-and-desist order and agreed to pay a $200,000 civil penalty.
The SEC's investigation was conducted by Joseph Griffin and Brian Palechek and was supervised by Peter Rosario, George Bagnall and Antonia Chion.