SEC Charges Terex Corporation with Accounting Fraud
The Securities and Exchange Commission (SEC) charged Terex Corporation, a Westport, Connecticut-based heavy equipment manufacturer, with accounting fraud for making material misstatements in its own financial reports to investors, as well as aiding and abetting a fraudulent accounting scheme at United Rentals, Inc. (URI), another Connecticut-based public company.
The SEC's complaint alleges that Terex aided and abetted the fraudulent accounting by URI for two year-end transactions that were undertaken to allow URI to meet its earnings forecasts. These fraudulent transactions also allowed Terex to prematurely recognize revenue from its sales to URI.
The fraud occurred through URI's sales of used equipment to a financing company and its lease-back of that equipment for a short period. As part of the scheme, Terex agreed to sell the equipment at the end of the lease period and guarantee the financing company against any losses. URI separately guaranteed Terex against losses it might incur under the guarantee it had extended to the financing company.
Without admitting or denying the SEC's charges, Terex agreed to settle the Commission's action by consenting to be permanently enjoined from violating the antifraud, reporting, books and records and internal control provisions of the federal securities laws and by paying an $8 million penalty.