SEC Charges Evoqua Water Technologies Corp. and Former Finance Director for Improper Accounting Practices

The Securities and Exchange Commission has accused Evoqua Water Technologies Corp. of engaging in improper accounting. Imran Parekh was its former divisional finance director. Evoqua, based in Pittsburgh, Pennsylvania misrepresented its revenue to the SEC between 2017-2018 as a result of these practices. Evoqua has agreed to pay a civil fine of $8.5m and Parekh, Evoqua’s partner in the settlement, has agreed to an injunction against any future violations. Parekh’s additional relief will be decided by the court later.

In its complaint filed before the federal court in Rhode Island by the SEC, Parekh is accused of participating in fraudulent accounting practices as Finance Director for one of Evoqua’s divisions. Evoqua reported false revenue figures in its financial reports submitted to the SEC as a result of these practices. Parekh, according to the complaint, inflated revenue at year-end and quarterly levels by counting revenue earlier than accounting standards allowed. He also incorrectly accounted for “bill-and-hold” The recognition of revenue from the sale filtration products before accounting requirements and earlier than permitted.

Parekh is accused of engaging in improper accounting practices as a result of negligent conduct by Evoqua. Evoqua reported inaccurately nearly $12 million in expected revenue for its 2017 fiscal year, as a result of the scheme. This was done through its registration statement and Initial Public Offering (IPO) Prospectus. Evoqua continued its misconduct into the first year of being a publicly traded company. This led to inaccurate records and financial statements that were materially misrepresented in the subsequent SEC filings. The complaint alleges that Evoqua misled potential and existing investors by not disclosing that Evoqua had misapplied accounting standards to report uncompleted sales.

Evoqua accepted a final judgement that prohibits the company from violating provisions of Securities Act of 1932, Securities Exchange Act of 1934 (periodic reporting), and Exchange Act provisions relating to books, records, and internal accounting controls. Evoqua must also implement improvements to its internal controls, and pay an $8.5 million civil penalty.

Parekh agreed to a judgement that permanently bars him from violating the antifraud provisions in the Securities Act and Exchange Act. He is also prohibited from aiding and abeting provisions relating to periodic reporting, books and records, internal accounting controls, or knowingly falsifying the books and records of an issuer. Parekh is also ordered to pay prejudgment interests, disgorgement and a civil fine, the amount of which will be decided by the court. Parekh’s future as an executive or director of public companies will be decided by the court. If so, it will determine the length of any ban. Court approval is required for the settlements reached with Evoqua, Parekh and other parties.

Kerry Vasta was the case handler, along with Jonathan Allen, Peter Moores David London and Amy Gwiazda from the Boston Regional Office.

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