SEC Files Settled Charges Against voxeljet AG and Its CFO Rudolf Franz; Notes Self-Reporting, Cooperation, and Remediation
July 1, 2022
File No. 3-20923
July 1, 2022 -The Securities and Exchange Commission today announced a settled cease-and-desist Order against voxeljet AG, a Foreign Private Issuer headquartered in Friedberg, Germany ("voxeljet" or "Company") and Rudolf Franz, its Chief Financial Officer. The Order concerns voxeljet's reporting during two quarters in 2019 of its compliance with a Finance Contract it entered into with the European Investment Bank ("EIB") and the state of its internal accounting controls.
EBITDA Covenant Reporting
According to the Order, the Finance Contract provided that the EIB would disburse credits to voxeljet, but also required voxeljet to comply with debt covenants. One of the debt covenants was a ratio of Total Net Financial Debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) (the "EBITDA Covenant"). The Order finds that, according to a "Progress Report" that voxeljet generated for the EIB on or about June 26, 2019, voxeljet would not be in compliance with the EBITDA Covenant on the June 30, 2019 testing date. voxeljet and the EIB thereafter engaged in discussions about the possibility of amending the EBITDA Covenant and the issuance of a waiver of the EBITDA Covenant. The negotiations began after the June 30, 2019 testing date and continued until March 2020 when the EIB ultimately issued a written waiver to voxeljet.
The Order finds that the financial statements filed with its 2019 second and third quarter filings on Form 6-K did not disclose the breach of the EBITDA Covenant and also misclassified the first tranche loan of €10 million that EIB had disbursed to voxeljet as a non-current liability. On March 12, 2020, voxeljet and the EIB entered into an agreement in which the EIB waived voxeljet's covenant breach. In a Form 6-K dated March 18, 2020, voxeljet first disclosed that it had breached the EBITDA Covenant.
Material Weaknesses in Internal Control of Financial Reporting
The Order also finds that, for several years following voxeljet's initial public offering-including 2018 to 2021-the Company disclosed material weaknesses in internal control over financial reporting. According to the Order, in July 2018, voxeljet's internal audit staff drafted internal controls concerning the financial covenants of the EIB loan. However, the Company had not implemented these internal controls by the time that the Company reported the 2019 second and third quarter financial statements. The Order finds that, as an example of voxeljet's ineffective internal controls, information about the covenant breach was not adequately documented and shared with the auditor at the time of the reviews of the 2019 second and third quarter financial statements.
Self-Reporting, Cooperation, and Remediation
According to the Order, voxeljet self-reported and shared facts developed in its internal investigation, including providing regular updates, analyses and identifying key documents, and also facilitated the Commission staff's interviews and testimony with witnesses. voxeljet has also taken certain remedial measures and implemented new controls over the documentation, review, and reporting of the Company's compliance with its debt covenants. In 2020, voxeljet prepared and began implementing a remediation plan.
As a result of the conduct described above the Order finds that voxeljet violated Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20 and 13a-16 thereunder, and that Franz caused those same violations. The relief includes a cease-and-desist order, civil penalties of $175,000 against voxeljet and $50,000 against Franz, and an undertaking by voxeljet to complete, fully implement, and test its remediation plan.
The SEC's investigation was conducted by Keith O'Donnell, Michi Harthcock, and Dwayne Brown, and supervised by C. Joshua Felker and Melissa Hodgman of the Enforcement Division in Washington, DC.