SEC accuses Granite of fraud, company pays $12 million

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diving letter:

  • In the culmination of an investigation that prompted Granite Construction to restate its three-year financial results, the Securities and Exchange Commission charged the California-based contractor and a former executive with financial reporting fraud. Granite agreed to pay $12 million to settle the SEC’s charges against the company.
  • The agency named Granite and former senior vice president Dale Swanberg in its Thursday announcement. It is alleged that Swanberg, who oversaw Granite’s heavy civil society, had hidden cost increases and manipulated profit margins at the Flagg unit from 2017 onwards. The alleged scheme was unraveled in mid-2019, when several projects were nearing completion and acknowledging increased costs could no longer be deferred.
  • In separate administrative filings, the company’s former CEO James H. Roberts and former CFOs Laurel Krzeminski and Jigisha Desai settled, without charges of wrongdoing, more than $1.4 million, $327,000 and $176,000, respectively -Repay dollars in bonuses and compensation to Granite, according to the SEC.

Dive insight:

Mike Barker, Granite’s vice president of investor relations, told Construction Dive in an emailed statement that the company has been working with the SEC to resolve the charges against the company.

“We have cooperated fully with the SEC in its investigation of this matter, and we are pleased to put this matter behind us as we move forward under new leadership,” Barker said. “Granite is committed to conducting our business ethically and transparently, and we have implemented numerous remedial actions and internal control improvements to improve our processes and create value for shareholders.”

However, Greenberg Traurig’s attorney, William Michael Jr., representing Swanberg, said his client carried the fall for the company’s lack of oversight.

“Dale is a builder by trade,” Michael told Construction Dive. “He is not an auditor, he is not a controller and he is not trained in the requirements for the disclosure of financial information by publicly traded companies. And everything he did was completely transparent to the company and its financial professionals.”

Granite did not immediately respond to a request for comment on what it knew of Swanberg’s actions. But Michael said the SEC’s charges against him were misguided given Swanberg’s background.

“We look forward to challenging this in court and clearing Dale’s name,” said Michael.

Following the financial reporting missteps, Granite reorganized, appointing Kyle Larkin as President in 2020 and CEO in 2021. Since Larkin took the lead, the company has shifted its strategy from mega-projects worth more than $500 million to focus on smaller, less complex work that involves less risk and is easier to execute.

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