United Rentals last week reached a final settlement with the Securities and Exchange Commission of the SEC’s previously announced inquiry. This settlement brings the inquiry to a close for the company.
The inquiry related to a range of the company’s historical accounting practices, principally during 2002 and prior years, which were also the subject of an investigation by a special committee of the company’s independent directors. The settlement covers the issues identified in the special committee’s findings, which were publicly reported in January 2006, and the company’s restatement of its results of operations for the years ended Dec. 31, 2003 and 2002, and retained earnings at Dec. 31, 2001, as reported in the 2004 annual report on Form 10-K filed by the company in March 2006.
Under the terms of the settlement, which has been submitted for court approval, the company consented, without admitting or denying the allegations in the SEC’s complaint, to the entry of a judgment requiring it to pay a civil penalty of $14 million and disgorgement of one dollar and enjoining the company from violations of certain provisions of the federal securities laws in the future. As reported earlier, the company previously recognized a charge of $14 million relating to the settlement of this matter in the second quarter of 2008. Accordingly, the settlement will have no effect on the company’s third-quarter operating results.
“We are very pleased to bring this matter to a conclusion for the company,” said Michael Kneeland, president and CEO. “The company has cooperated fully with the SEC throughout the commission’s review of our historical accounting practices. We have also made a number of important changes since the SEC inquiry began in 2004, including restructuring the company’s finance, treasury, internal audit and compliance functions, among many other positive steps.”
Separately, as previously announced, the company has entered into a memorandum of understanding with lead plaintiff’s counsel to settle the purported class action litigation that was filed following the initial announcement of the SEC inquiry in August 2004. The contemplated settlement, which is subject to the prior satisfaction of a number of contingencies, provides that the claims of the plaintiff class will be settled for a cash payment of $27.5 million. The company currently expects, taking into account anticipated settlement funding and defense cost reimbursements which it expects to receive from its insurance carriers, that the contemplated class action settlement will not have a material effect on its results of operations or cash flows for any period.
The company continues to cooperate fully with a related U.S. Attorney’s office inquiry that has led to charges against its two former chief financial officers.
Former United Rentals chief financial officer Michael Nolan pleaded guilty last year to making false filings with regulators that enabled him to make a profit of $11 million, according to federal prosecutors. John Milne, who succeeded Nolan in the role of CFO and also served as vice chairman and president of the company, was indicted earlier this year by a federal grand jury for conspiracy, securities fraud, insider trading and making false filings with the Securities and Exchange Commission. Federal prosecutors say Milne used insider information when he sold 850,000 shares of United Rentals stock and made more than $22 million.
Greenwich, Conn.-based United Rentals is No. 1 on the RER 100.
