The Securities and Exchange Commission charged NIC, a government website provider, and four of its current and former executives with failing to disclose to investors more than $1.18 million in perks.
The Kansas-based firm’s former CEO Jeffrey Fraser, current CEO Harry Herington and former Chief Financial Officer Eric Bur agreed to pay a total of $2.82 million to settle the charges. The agency is still following litigation against Stephen Kovzan, current chief financial officer.
The SEC alleged NIC neglected to disclose that the company funded a series of assorted perks to Jeffrey Fraser, the former chief executive, his family and girlfriend– including vacations, computers and everyday personal expenses. Also, the firm failed to reveal that it paid thousands of dollars each month for Fraser to bunk in a Wyoming sky lodge and commute via private aircraft to NIC’s headquarters.
According to the SEC’s complaint, Kovzan, who previously served as the company’s chief accounting officer authorised the payments made for Fraser’s personal expenses, which bypassed internal controls and policies that required the CEO to track and record the purpose of the former CEO’s ‘business expenses.’
‘Public disclosure of executive perks help investors evaluate whether corporate assets are being used wisely or squandered,’ says Antonia Chion, associate director of the agency’s Division of Enforcement. ‘NIC and its executives did not comply with their disclosure obligations…paying Fraser’s personal expenses while telling shareholders that Fraser was working for little or no compensation.’
Now, NIC is set to pay the Washington-based regulator $500,000 to settle the charges against the recent fraudulent activity. Fraser will pay $1.2 million in disgorgement, $358,844 in prejudgment interest, a $500,000 penalty and has consented to an order prohibiting him from serving as an officer or director of a public company. Herington agreed to pay $200,000, while Bur paid a $75,000 penalty, the SEC said.
‘We have determined that it is in the best interests of the company to settle this matter,’ says Herington.
Art Burtscher, independent lead director of NIC’s board, said that the firm intends to move beyond this issue and focus on building shareholder value since Herington and his executive team ‘are the right people to lead the company into the future.’