The Securities and Exchange Commission has charged telecoms company GTT Communications Inc. with failing to disclose material information about unsupported adjustments the company made to a number of filings that overreported its income by at least 15%.
GTT self-reported the issue, which took place in three quarters in 2019 and 2020, and the SEC is not ordering any civil penalties against the company.
The company had made a series of acquisitions starting in 2017, according to the SEC, and had difficulty reconciling information being generated by two of its key systems, to the point where they were showing a significant discrepancy between its actual expenses (as reflected in invoices), and its expected expenses.
Despite lacking reliable data, GTT made unsupported adjustments of more than $35 million that lowered its cost of revenue and boosted its operating income, without disclosing material information about the adjustments.
In 2020, the company announced that its previous consolidated financial statements should not be relied on, began trying to fix the reporting issues, and disclosed the problem to the SEC.
"At a time when it was still evaluating the nature and impact of the accounting issues it had identified, GTT self-reported to the SEC and followed up by providing substantial cooperation throughout our investigation while taking significant steps to address the shortcomings in its processes," said Mark Cave, associate director of the Division of Enforcement, in a statement. "The SEC recognized GTT's timely self-report, cooperation, and remediation in its decision not to impose a monetary penalty on the company."
GTT neither admitted nor denied the commission's findings, but agreed not to violate any securities laws.
