SEC Charges Engine Manufacturing Company Executives with Accounting Fraud
Litigation Release No. 24544 / July 19, 2019
Securities and Exchange Commission v. Gary Winemaster, Craig Davis and James Needham, Civil Action No. 19-4843 (N.D. Ill. filed July 19, 2019)
The Securities and Exchange Commission today charged the former chief executive officer of a Chicago-area engine manufacturing company and two former senior sales executives for their roles in an accounting fraud that allegedly overstated the publicly-traded company's revenues by almost $25 million.
According to the complaint, filed in federal court in Chicago, Gary Winemaster, Power Solutions International, Inc.'s former CEO, and two former senior sales executives, Craig Davis and James Needham, caused Power Solutions to fraudulently record revenue for purported sales of products that were not complete, that the customer had not agreed to accept, for which the price was falsely inflated, and from improper "bill and hold" arrangements. The SEC further alleges that the defendants misled and concealed key information from Power Solutions' internal accounting personnel and external auditor.
The SEC's complaint alleges that Winemaster, Davis and Needham directly violated or are liable for aiding and abetting or as a control person for violations of the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, the books and records and reporting provisions of Sections 13(a), 13(b)(2)(A) and 13(b)(5) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13 and 13b2-1 thereunder and as to Winemaster, the internal accounting control provisions of Section 13(b)(2)(B) of the Exchange Act, the certification provisions of Rule 13a-14 of the Exchange Act and the lying to accountants provisions of Rule 13b2-2 of the Exchange Act. The complaint seeks permanent injunctions and penalties against all defendants, disgorgement and pre-judgment interest against Needham, an officer-and-director bar against Winemaster, and a clawback of incentive-related compensation paid to Winemaster during the alleged fraud.
The U.S. Attorney's Office for the Northern District of Illinois filed criminal charges against defendants for related misconduct.
The SEC's investigation, which is continuing, was conducted by Michael Mueller and Timothy Tatman of the Chicago Regional Office under the supervision of Steven Klawans. The litigation will be led by Daniel Hayes. The SEC appreciates the assistance of the U.S. Attorney's Office for the Northern District of Illinois and the Federal Bureau of Investigation.