Accounting & Tax

Former CFO Settles with SEC

The finance chief of bankrupt Health Risk Management agreed to pay a civil penalty and be barred from serving as an officer or a director.
Stephen TaubOctober 27, 2006

The former chief financial officer of a health-care provider has settled civil charges with the Securities and Exchange Commission for allegedly causing his onetime employer to file materially false financial statements. Thomas P. Clark of Health Risk Management (HRM) agreed to pay a civil penalty of $20,000 — which the regulator said “was based, in part, on his financial condition” — and to be barred from serving as an officer or a director of a public company for five years.

The SEC alleged that in August 2000, Clark negotiated a $1.85 million settlement on behalf of HRM, and its wholly owned Medicaid HMO, to settle an arbitration dispute with one of the HMO’s health-care providers. The regulator accused Clark of trying to hide the full amount of the settlement by recasting $1.35 million of the amount as a prepaid “retainer” for consulting services. HRM never needed the consulting services and never received them, according to the complaint.

The SEC also alleged that Clark booked the $1.35 million payment as an asset rather than as a settlement expense, causing the company to file “materially false financial statements” with the commission for the second and third quarters of 2000. The SEC also charged that Clark failed to inform his company’s outside auditors about the consulting agreement and the true amount of the settlement. The company subsequently filed for Chapter 11 bankruptcy protection, and in 2005 terminated its registration with the SEC.

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