(Updates with a comment from Pruitt’s attorney)
By Sarah N. Lynch
WASHINGTON, April 28 (Reuters) - U.S. regulators on Friday filed civil charges against two former executives at government contractor L3 Technologies over accounting violations that led the company to improperly recognize $17.9 million in revenue from a contract with the U.S. Army.
The Securities and Exchange Commission said that David Pruitt, former vice president of finance in the Army Sustainment Division at L3, plans to fight the charges, while L3’s former Army Sustainment Division President Mark Wentlent has agreed to settle related charges.
The company previously settled with the SEC in January and paid a $1.6 million penalty.
The SEC said Friday that the improper recognition of the company’s revenue was caused by the creation of invoices that were not actually delivered at the same time the revenue was recorded.
The regulator said that Pruitt, a CPA, allegedly tried to hide the issues with the undelivered invoices from L3’s corporate office and its external auditor.
Pruitt’s attorney John Carney said that his client, a “highly decorated career Army officer,” will be vindicated at his hearing before an SEC administrative law judge.
“It is highly unusual for the SEC to bring a revenue recognition case where there is no allegation of fraud and it is undisputed that the work was fully performed, the amounts were immaterial and the company fully collected on the receivables at issue,” Carney said.
The SEC also said that Wentlent, meanwhile, failed to follow up on the red flags “that Pruitt had caused L3.”
He is settling without admitting or denying the charges, and will pay a $25,000 penalty. The company also separately rescinded his bonus.
An attorney for Wentlent could not be immediately reached for comment. (Reporting by Sarah N. Lynch; editing by Bernard Orr and Diane Craft)