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The U.S. Securities and Exchange Commission (SEC) recently charged an energy services provider and four executives for their roles in an accounting fraud in which the company recognized revenue earlier than allowed in order to meet internal targets. Lime Energy Co. agreed to pay $1 million to settle the charges, and its four now-former executives also agreed to settlements.

The agency alleged that Lime Energy improperly recognized $20 million in revenue from at least 2010 to 2012. Two then-executives in the company’s utilities division – vice president of operations Joaquin Alberto Dos Santos Almeida and director of operations Karan Raina – developed procedures to enable the company to recognize revenue on newly signed contracts based on documentation received before year-end 2010. But when documentation did not arrive in time, they allegedly went ahead and booked the revenue anyway.

According to the complaint, Almeida and Raina became even more aggressive in 2011 and 2012 as they further recognized revenue earlier than allowed by accounting principles as they faced increasing pressure to produce results. They eventually went so far as to direct internal accountants to book revenue on jobs that didn’t exist.

The SEC further alleged that Lime Energy’s then-corporate controller Julianne M. Chandler accepted new accounting entries to book millions of dollars in additional 2011 revenue well after the year-end close.  And in February 2012 when Lime Energy still needed $500,000 to meet its 2011 revenue target, the company’s then-executive vice president James G. Smith suddenly sent Chandler new entries that provided the company with even more additional revenue to improperly recognize.

Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement, commented:

Lime Energy and its then-executives engaged in a wide array of wrongdoing, ‎including the improper reporting of a significant amount of fake revenue. The desire to meet earnings or revenue targets cannot override corporate officers’ responsibilities to public shareholders to assure that the company’s accounting reflects financial reality.

None of the executives either admitted or denied the allegations. Smith agreed to pay a $50,000 penalty and be barred from serving as an officer or director of a public company for five years. Chandler agreed to a $25,000 penalty and a five-year officer-and-director bar.  Almeida agreed to a permanent officer-and-director bar, and Raina agreed to a $50,000 penalty.

Separately, Chandler agreed to be suspended from appearing or practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. An SEC order would permit Chandler to apply for reinstatement after five years.