He's a "player" alright....
SEC BRINGS ENFORCEMENT ACTIONS IN FALSE FINANCIAL REPORTING CASE INVOLVING HANOVER COMPRESSOR
On December 18, 2003, the Securities and Exchange Commission filed a complaint in the United States District Court for the Southern District of Texas, against Charles D. Erwin, the former Chief Operating Officer of Hanover Compressor Company ("Hanover"), and against Michael J. McGhan, its former Chief Executive Officer, alleging that they orchestrated a managed earnings scheme to inflate the company's reported pre-tax income and meet Hanover's earnings goals and estimates during 2000 and 2001. The complaint alleges that the scheme, together with internal control deficiencies, resulted in the overstatement of Hanover's pre-tax income during the relevant reporting periods in amounts ranging from 4.9% to 22.6%. The SEC's charges against Erwin and McGhan include securities fraud and other securities law violations. To settle the SEC's claims against them, McGhan and Erwin have agreed to pay a combined total of $672,171, and consent to permanent injunctions against future violations of the securities laws and five year bars from serving as an officer or director of a publicly held company.
The Commission simultaneously instituted settled cease-and-desist proceedings against Hanover and against William S. Goldberg, Hanover's former interim Chief Financial Officer, based on Hanover's violations of the record keeping, reporting and internal control provisions of the federal securities laws and Goldberg's causing those violations. In addition to the cease-and-desist order, Goldberg has agreed to pay a civil penalty of $50,000.
Hanover is a Houston, Texas based company that manufactures, rents and operates natural gas compressors and other oil field equipment. Hanover's common stock trades on the New York Stock Exchange. McGhan and Erwin are residents of Houston, and Goldberg resides in a Chicago suburb.
According to the SEC's allegations, Erwin and McGhan fraudulently inflated Hanover's reported pre-tax income during the third and fourth quarters of 2000, and Erwin inflated the company's reported pre-tax income during the second and third quarters of 2001, to meet Hanover's earnings goals and estimates. The SEC alleges that Erwin and McGhan failed to inform Hanover's accountants - or, consequently, its auditors - about side agreements that should have precluded Hanover from recognizing revenue on sales of equipment in Nigeria. The SEC alleges that Erwin also failed to inform Hanover's accountants - or, consequently, its auditors - about important facts relating to three turbine sales, and structured certain transactions to deceive Hanover's accountants and auditors about payments for the turbines. As a result, according to the SEC, Hanover recognized revenue on those deals in contravention of Generally Accepted Accounting Principles, and included false financial statements in its Form 10-K for the year ended December 31, 2000, and in its Forms 10-Q for the third quarter 2000 and the second and third quarters of 2001. Additionally, the SEC alleges that Erwin benefited from the inflated financial statements by selling stock in a March 2001 secondary offering of Hanover common stock. The SEC also claims that Hanover's deficient internal controls facilitated Erwin and McGhan's misconduct, that McGhan, among others, was responsible for Hanover's deficient internal controls and record keeping, and that McGhan and Erwin were both responsible for the company's filing of false financial statements with the Commission.
AI
