The Securities and Exchange Commission charged dialysis services provider American Renal Associates Holdings Inc. and three executives with a revenue manipulation scheme.
The commission’s complaint alleges that starting in 2017 and for at least a year, ARA made improper “topside” adjustments that are supposed to reflect cash received from insurance companies or updates to estimates of expected payments.
According to the SEC, the company would record improper topside adjustments to make it appear that it had hit key financial metrics, and would occasionally manipulate the timing of proper topside adjustments to create a revenue “cookie jar.”
The commission also charged three former ARA executives with improper conduct, alleging that they misled auditors in order to conceal the revenue manipulations.
These practices led the company to restate its financials in September 2019 to reflect that it has overstated is 2017 revenue by more than 30%, and its revenue for the first three quarters of 2018 by more than 200%.
Without admitting or denying the allegations in the complaint, ARA agreed to settle by consenting to a permanent injunction and a $2 million civil penalty.
"ARA and its senior executives allegedly engaged in an extensive revenue manipulation scheme for nearly two years," said Jennifer Leete, associate director of the SEC’s Division of Enforcement, in a statement. "The SEC will continue to hold companies and their executives responsible for providing investors with misleading financial information."
