SEC Charges Gentex and Chief Financial Officer in Connection with EPS Initiative

ADMINISTRATIVE PROCEEDING
File No. 3-21296

February 7, 2023 - The Securities and Exchange Commission today announced charges against Gentex Corporation for financial reporting, books-and-records, and internal accounting controls violations arising out of the company's accounting for its executive and employee bonus compensation programs. The SEC also announced charges against Kevin Nash, Gentex's Chief Financial Officer, for related violations. These actions arise from the Division of Enforcement's Earnings Per Share ("EPS") Initiative, which utilizes risk-based data analytics to uncover potential accounting and disclosure violations caused by, among other things, earnings management practices.

The SEC's order finds that during the quarter closing process in the third quarter of 2015, Nash, Gentex's then-Chief Accounting Officer, directed the reduction of an accrual for a performance-based bonus program, resulting in Gentex reporting EPS that met consensus research analyst estimates. Nash directed the reduction without performing an analysis of relevant criteria under U.S. GAAP and without documenting the basis for his decision. The order further finds that in multiple additional quarters between 2015 and 2018, Nash and other Gentex employees made adjustments to bonus compensation accruals without the required accounting analysis or without adequate supporting documentation. These entries were made possible by Gentex's failure to devise and maintain a sufficient system of internal accounting controls related to its closing process, including its accounting for bonus compensation, and failure to maintain internal control over financial reporting.

The SEC's order finds that Gentex violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934 and Rules 13a-11, 13a-13, 13a-15 and 12b-20 thereunder. The order also finds that Nash violated Section 13(b)(5) and Rule 13b2-1 of the Exchange Act and further caused Gentex's violations. Without admitting or denying the SEC's findings, Gentex and Nash have agreed to cease-and-desist orders and pay civil money penalties of $4 million and $75,000, respectively.

The SEC's investigation was conducted by David Bennett, Mark Oh, and Gary Peters, with assistance from Tim Halloran of the Trial Unit, and was supervised by Fuad Rana, Kristen Dieter and Mark Cave.