Sterling Financial will restate its results for at least the three years ending in 2006 after an internal investigation into irregularities in certain financing contracts at a subsidiary.
According to the company, the subsidiary’s president and chief executive officer voluntarily relinquished his positions, and two senior managers were placed on leave.
The broad-based financial services company also stated that it will postpone its 2007 annual meeting.
On April 19, according to Sterling, it had received information suggesting irregularities in certain financing contracts involving its Equipment Finance unit, which provides commercial financing for the soft-pulp logging and land-clearing industries, primarily in the southeastern United States. Sterling subsequently postponed the release of earnings for the quarter ended March 31.
Sterling warned that based on preliminary information from the investigation and management’s own review, its board of directors concluded that the company’s previously issued financial statements, its auditor’s reports on those financials and the related internal controls, and all earnings releases for 2004 through 2006 should no longer be relied upon due to the expected material impact of these irregularities. The impact may also be material for years prior to 2004, the company added.
It did not provide further details about the irregularities.
“I want to assure shareholders, customers and the public that Sterling is moving aggressively to take corrective action on the issues that have emerged during this investigation,” said president and chief executive officer J. Roger Moyer Jr., in a statement. “We are taking steps to strengthen [Equipment Finance’s] management structure and internal control processes immediately.”