Accounting & Tax

SEC Takes No Action Against Flowserve

The regulator had opened an inquiry two years ago, shortly after the company announced a restatement.
Stephen TaubJune 2, 2006

Flowserve, a provider of industrial flow-management services, has announced that the staff of the Securities and Exchange Commission has concluded its investigation of the company’s restatements without recommending any enforcement action.

The SEC launched its inquiry in February 2004, shortly after Flowserve disclosed that it would restate its financial results for fiscal years 2000 to 2002 and the first nine months of 2003. The primary reason, the company stated at the time, was to correct inventory balances, resulting in cost-of-sales adjustments.

Flowserve elaborated that the balance adjustments could be attributed mainly to isolated computer-systems implementations at relatively few locations. At the time, the company added that it had already begun to strengthen the relevant controls over systems and inventories.

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In March 2005, the SEC charged Flowserve, chief executive officer C. Scott Greer, and director of investor relations Michael Conley with violations of Regulation Fair Disclosure — the first such case involving an earnings reaffirmation. Without admitting or denying the charges, the company and Greer agreed to pay $350,000 and $50,000 penalties, respectively. Flowserve, Greer, and Conley also consented to a cease-and-desist order.

The company was also recently named by proxy-advisory firm Glass, Lewis as one of a number of chronic late filers. Flowserve was late filing its quarterly report for the first quarter of 2006, as well as its 2005 and 2004 annual reports and all its quarterly reports in those years.