The Securities and Exchange Commission has begun an investigation of Huron Consulting Group after the firms top management stepped down amid accounting irregularities.
Huron, founded by two dozen former partners of Arthur Andersen, admitted late last month that its audit committee had discovered that acquisition-related payments had been redistributed among its employees and the employees of some of the firms it had acquired, and that some of the payments were inconsistent with the employees ownership stakes in the acquired companies (see Huron Shareholders Sue over Accounting Scandal).
Although Huron denied that the payments were kickbacks, chairman and CEO Gary Holdren resigned, along with CFO Gary Burge and chief accounting officer Wayne Lipski. The Chicago-based company said it is restating its financial results for 2006, 2007, 2008 and the first quarter of 2009, reducing its reported income by $57 million.
The firm is now facing six shareholder class-action lawsuits, the company said in a regulatory filing on Monday, along with the SEC probe. The company intends to cooperate with the SEC in its investigation, said Huron.
Allan Koltin, president and CEO of Chicago accounting consultancy PDI Global, believes that Huron is facing a number of serious issues. The problem Huron has is threefold, he said by e-mail. The first issue is the continued growth of the firm. They are a public company playing ball in a competitive environment. Potential clients are going to think twice about retaining Huron until the accounting issues and the SEC investigation wrap up. Second, the competition is aggressively trying to steal the top talent from the firm and willing to offer some significant signing bonuses and other related perks. There are a lot of discussions going on right now regarding the enforceability of some of the non-solicitation agreements. Lastly are the intangibles and the public perception of them. Statements like former Andersen partners and being in the business of insuring public trust are things that will continue to haunt them throughout the investigation. The new leadership team is great, but they will have to be more aggressive with clients and top talent than they have ever been in soliciting their retention.
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