SEC Charges Construction Management Consulting Company and Former Employees with Accounting Fraud
Litigation Release No. 24720 / January 17, 2020
Securities and Exchange Commission v. Hill International, Inc. et al., No. 1:20-cv-00447 (S.D.N.Y. filed January 16, 2020)
The Securities and Exchange Commission today charged Hill International, Inc., a Pennsylvania-based construction management consulting company, and two of its former executives for engaging in fraudulent accounting practices and failing to maintain accurate books and records, which led Hill to artificially boost net earnings from approximately May 2014 to March 2017. The company and its former Chief Accounting Officer, Ronald Emma, have agreed to settlements to resolve the claims.
As alleged in the complaint, Emma and Nicholas Tornello, a senior accountant reporting to Emma, identified approximately $5 million in errors in accounting for Hill's foreign currency exchange losses. According to the complaint, rather than immediately correcting the error by recognizing the losses, Tornello - with Emma's approval - allegedly attempted to "bleed" the losses out over time in order to reduce the negative impact of those losses on the company's financial statements. As a result, Hill's periodic reports overstated the company's net income.
The SEC's complaint, filed in the U.S. District Court for the Southern District of New York, alleges that Hill violated the antifraud provisions of Sections 17(a)(2) and (3) of the Securities Act of 1933, the reporting, books and records, and internal accounting control provisions of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act of 1934 and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder. The complaint alleges Emma violated Section 17(a)(3) of the Securities Act and Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder, and aided and abetted Hill's violations of 13(a), 13(b)(2)(A), 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13, and that Tornello violated Section 17(a)(3) of the Securities Act and Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder, and aided and abetted Hill's violations of 13(a) and13(b)(2)(A) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13.
Hill and Emma have, without admitting or denying the allegations, consented to the entry of judgments that impose permanent injunctions and civil penalties of $500,000 and $75,000, respectively. Emma agreed to be permanently suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. The settlements are subject to court approval.
The SEC's case is being handled by Jack Easton, Cecilia B. Connor and Daniel Berman, and supervised by Kingdon Kase and Kelly L. Gibson. The SEC's litigation will be handled by John V. Donnelly and supervised by Jennifer Barry.