Poseidon, based in Calgary, was a fast-growing company that supplied fluid storage tanks for drilling companies.MIKE FUENTES
Three former top executives of oil services company Poseidon Concepts Corp. have reached settlement deals with the Alberta Securities Commission, agreeing to pay a combined total of $375,000 after admitting they filed financial statements that wildly overstated the company's revenue.
Former chief executive officer Lyle Michaluk, former chief financial officer Matthew MacKenzie and former chief operating officer Clifford Wiebe all acknowledged the company's financial statements were inaccurate in 2012, but all said they did not "deliberately or intentionally" intend to contravene Alberta securities laws, according to settlement agreements released Thursday.
The men said they relied on Poseidon's executive vice-president, Joseph Kostelecky, who was in charge of the company's U.S. subsidiary, for information about the performance of the U.S. division. Mr. Kostelecky, who is accused of fraud and failing to maintain proper financial records, was not part of the settlement agreement announced Thursday, and his case is still proceeding before the Alberta regulator.
Calgary-based Poseidon revealed in 2013 that it had to restate its financial statements for the first nine months of 2012, eliminating up to $106-million of the $148-million in total revenue it had previously reported. The company filed for creditor protection in 2013 and ceased operations.
Alberta Securities Commission enforcement director Cynthia Campbell said in a statement that senior executives are responsible for setting and maintaining internal controls to ensure financial reporting is accurate.
"If this responsibility is not met, senior executives will be held accountable," she said.
Under the settlement deal, Mr. Michaluk and Mr. MacKenzie will each pay $150,000 to the ASC, and both have agreed not to serve as a director or officer of any publicly listed company for seven years. Mr. Wiebe will pay $75,000 and will not act as a director or officer for five years.
Poseidon reported explosive growth in 2012 with new deals from its U.S. subsidiary generating the majority of the company's revenues that year. According to the settlement agreements, the company's Canadian executives became concerned later in 2012 about the growing volume of unpaid accounts receivable from U.S. contracts and hired internal staff to work on collecting the payments. As executives grew increasingly concerned about the amounts, Mr. Kostelecky repeatedly gave them written and verbal assurances that the U.S. payments were collectable, the settlement agreements said.
By late December, 2012, the company's board set up a special committee to review the unpaid bills, and Poseidon reported in February, 2013, that its financial statements would have to be restated after staff and its financial advisers determined that between $95-million and $106-million of the company revenue for the first nine months of the year should not have been recorded, and that most of its accounts receivable amounts were inaccurate.
The U.S. Securities and Exchange Commission reached a settlement agreement with Mr. Kostelecky last year. He agreed to pay $75,000 (U.S.) to settle allegations he participated in a fraud that overstated Poseidon's revenue in 2012. The SEC said he reached the settlement "without admitting or denying" the allegations.
The SEC alleged Mr. Kostelecky directed U.S. accounting staff to record revenue for inadequately documented transactions and gave "false assurances" to management in Canada that the U.S. transactions were valid.
Editor's note: The headline on an earlier version of this story incorrectly said former Poseidon executives reached a settlement over fraud allegations. In fact, the three people that reached a settlement were never accused of fraud.
Janet McFarland