The Securities and Exchange Commission on Monday charged energy services provider Lime Energy Co. and four executives for their roles in an accounting fraud in which the company recognized revenue earlier than allowed to meet internal targets.

Lime Energy agreed to pay $1 million and the four former executives also agreed to settlements.

The company improperly recognized $20 million in revenue from at least 2010 to 2012, according to the SEC complaint, as two then-executives in the utilities division developed procedures to enable the company to recognize revenue on newly signed contracts based on documents received before year-end 2010. The executives, vice president of operations Joaquin Alberto Dos Santos Almeida and director of operations Karan Raina, allegedly booked the revenue even when the documentation did not arrive in time.

In 2011 and 2012, the SEC alleges that Almeida and Raina further recognized revenue earlier than allowed by accounting principles as they faced pressure to produce results, even directing internal accountants to book revenue on jobs that didn’t exist. According to the SEC complaint, Lime Energy’s then-corporate controller Julianne M. Chandler accepted new accounting entries to book millions of dollars in additional 2011 revenue well after the year-end close.

In February 2012, according to the SEC, Lime Energy still needed $500,000 to meet its 2011 revenue target and the company’s then-executive president James G. Smith sent Chandler new entries providing the company with additional revenue to improperly recognize.

The SEC’s complaint was filed in U.S. District Court for the Southern District of New York, with the settlements subject to court approval. Smith agreed to pay a $50,000 penalty and be barred from serving as an officer or director of a public company for five years; Chandler agreed to a $25,000 penalty and a five-year officer-and-director bar; Almeida agreed to a permanent officer-and-director bar; and Raina agreed to a $50,000 penalty. All neither admitted nor denied the allegations.

Separately, Chandler agreed to be suspended from appearing or practicing before the SEC as an accountant, which means not participating in the financial reporting or audits of public companies, with the ability to apply for reinstatement after five years, as permitted by an SEC order.

“Lime Energy and its then-executives engaged in a wide array of wrongdoing, ‎including the improper reporting of a significant amount of fake revenue,” said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement, in a statement.  “The desire to meet earnings or revenue targets cannot override corporate officers’ responsibilities to public shareholders to assure that the company’s accounting reflects financial reality.” 

The SEC found no personal misconduct by Lime Energy’s then-CEO John E. O’Rourke and then-CFO Jeffrey R. Mistarz, who reimbursed the company $67,728 and $118,196.01 respectively for cash bonuses and certain stock awards they received during the period when the company committed accounting violations. Because of that, it wasn’t necessary for the SEC to pursue a clawback action under Section 304 of the Sarbanes-Oxley Act of 2002. 

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