📋 Tender Overview
The Securities and Exchange Commission announced that Irving, Texas-based Fluor Corporation will pay $14.5 million to settle charges stemming from the company’s improper accounting on two large-scale, fixed-price construction projects. Five former and current officers and employees also agreed to settle related charges for causing Fluor’s violations.
The five former and current Fluor officers and employees who agreed to settle charges for causing Fluor’s violations are: Bradley R. Scott, a current Fluor business-line CFO, Robin K. Chopra, Fluor’s former Chief Accounting Officer and Controller; James F. Brittain, a former Fluor business-line president; Jon Eric Best, a former Fluor business-line CFO; and Kent N. Smith, a former Fluor business-line senior vice president.
The SEC’s order found that Fluor, a global engineering, procurement, and construction company, bid on the two projects relying on overly optimistic cost and timing estimates and subsequently experienced cost overruns that worsened over time. Fluor then failed to sufficiently maintain internal controls to account for the projects in accordance with the percentage of completion accounting method under U.S. generally accepted accounting principles (GAAP). According to the SEC’s order, Fluor failed to include all anticipated costs that were known or should have been known in each project’s respective forecasts—thereby delaying loss recognition on each. Additionally, Fluor improperly incorporated revenue from unapproved change orders in the forecasts of one of the projects, including change orders that had not yet been submitted to, or had already been rejected by, the customer.
According to the SEC’s order, the accounting errors on one project caused Fluor to materially overstate its net earnings by as much as 37 percent from the company's fiscal year 2016 through the first quarter of its fiscal year 2019. In addition, the delayed loss recognition on the second project caused Fluor to overstate its net earnings by 22 percent in the second quarter of 2018. As a result, Fluor materially misstated the financial statements included in its periodic filings with the Commission for the corresponding reporting periods.
