SEC Charges Texas Company, Executives, and Former Board Member with Disclosure Failures
Sept. 21, 2020
File No. 3-20035; File No. 3-20036
September 21, 2020- The Securities and Exchange Commission today announced settled charges against a Texas-based company, RCI Hospitality Holdings, Inc., its CEO, Eric S. Langan, and CFO, Phillip K. Marshall, for RCI's disclosure and controls failures concerning executive compensation and related party transactions. Former independent board member Steven L. Jenkins, a Texas-licensed accountant, has also agreed to settle charges concerning his failure to disclose his personal bankruptcy history.
The SEC's order as to RCI, Langan, and Marshall finds that, from FY 2014 through FY 2019, RCI failed to disclose a total of $615,000 in executive compensation in the form of perquisites. According to the order, these undisclosed perquisites included the cost of the personal use of the company's aircraft and company provided vehicles, reimbursement for personal airline flights, charitable corporate contributions to the school two of Langan's children attended, and housing costs and a meals allowance for Marshall. In addition, the order finds that RCI failed to disclose related party transactions involving Langan's father and brother and a director's brother. The order further finds that RCI failed to keep books and records that allowed it to report, and lacked sufficient internal controls concerning, these executive perquisites and related party transactions.
The SEC's order as to Jenkins finds that, while he was a member of RCI's board of directors, served on its audit committee, and was listed as a nominee for RCI's board directors in the company's annual proxy statements, he failed to disclose to the company that he filed two personal federal bankruptcy petitions. The order further finds that the company was required to disclose in its proxy statements if an officer or director had filed for personal bankruptcy within the past ten years.
The SEC's order as to RCI, Langan, and Marshall finds that RCI and Langan violated, and Langan and Marshall caused RCI to violate, the proxy solicitation provisions of Section 14(a) of the Securities Exchange Act of 1934 and Rules 14a-3 and 14a-9 thereunder. The order further finds that RCI violated, and Langan and Marshall caused RCI to violate, the reporting provisions of Section 13(a) of the Exchange Act and Rules 13a-1, and 12b-20 thereunder, the books and records provisions of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and the disclosure controls provisions of Rule 13a-15(a) under the Exchange Act. RCI, Langan, and Marshall have agreed, without admitting or denying the SEC's findings, to a cease-and-desist order and to pay civil penalties in the amounts of $400,000, $200,000, and $35,000, respectively.
The SEC's order as to Jenkins finds that Jenkins willfully violated the proxy disclosure provisions of Exchange Act Section 14(a) and Rules 14a-3 and 14a-9 thereunder. Jenkins has agreed, without admitting or denying the SEC's findings, to a cease-and-desist order and to pay a $30,000 civil penalty. Jenkins has further agreed to be suspended from appearing or practicing before the SEC as an accountant, with the right to apply for reinstatement after three years.
The SEC's investigation was conducted by John Rossetti, Douglas McAllister, and Kristen Dieter, and supervised by Anita B. Bandy.