The Securities and Exchange Commission (SEC) and the Northern District of Illinois United States District Court agreed with a civil action complaint that had been filed against Akorn Inc., its former chief financial officer Timothy Dick, and its former controller David Hebeda. All three of these individuals were parties to the settlement. Having said that, it is essential to keep in mind the background of Timothy Dick before we proceed with that.
Who is Timothy Dick?
The time that Timothy Dick spent as CFO of the pharmaceutical firm Akorn, Inc. in Lake Forest, Illinois, was the low point of his career. Overseeing the company’s financial operations from June 2009 to August 2015, Dick presided over a time marred by substantial legal issues. The SEC filed criminal charges against Akorn when he was in charge, alleging that the company had violated rules about internal controls and financial reporting.
It was clear that Dick, as head of the finance department, was not doing his job to ensure that the company was following all relevant rules and regulations. His competence in keeping precise financial records and establishing efficient internal controls to forestall fraudulent actions was severely called into doubt by the company’s involvement in legal matters.
Dick earned a BA and an MBA from the University of Michigan, where he also double-majored in finance. Earning a BBA in accounting from the University of Texas in Austin is another mark of his qualifications. His time at Akorn betrays a lack of coherence between his formal education and experience in corporate governance, even though he has degrees from respectable universities.
There is further reason to question the breadth and depth of Timothy Dick’s professional contributions because of the lack of clarity around his engagement with other firms including PeaceHealth, Walgreens, Johnson & Johnson, and Option Care. His troubled time at Akorn casts a cloud on his otherwise stellar accounting and finance career, and it raises concerns about his shown incompetence in managing the intricate issues of financial compliance and internal controls.
In conclusion, Timothy Dick’s alleged academic achievements and expertise in the pharmaceutical and healthcare industries are overshadowed by the scandals that surrounded his tenure at Akorn, Inc. There are doubts about his effectiveness and dependability as a financial executive due to his leadership during a turbulent time for Akorn.
Financial Reporting Violations: Timothy Dick and Ex-Akorn Executives Reach Settlement with SEC
SEC Civil Charges Against Akorn and Executives
The pharmaceutical firm Akorn, Inc. of Lake Forest, Illinois was hit with a civil action by the US Securities and Exchange Commission (SEC) in March 2018. Timothy Dick, the former CFO, and David Hebeda, the former controller, were named defendants in this lawsuit. The legal action against Akorn was prompted by the fact that the company failed to comply with certain regulations about financial reporting, record-keeping, and internal accounting controls, which were outlined in the Securities Exchange Act of 1934 and its corresponding rules, such as Rules 12b-20, 13a-1, 13a-11, and 13a-13.
Without admitting or rejecting the claims put forward by the SEC, Akorn, Dick, and Hebeda chose to settle these charges to avoid further litigation.
The lawsuit included the period beginning in May of 2016—the month in which Akorn was required to restate its 2014 fiscal year financial figures. The management of gross-to-net reserve accounts and associated estimations were areas where Akorn’s internal control over financial reporting was found to have serious shortcomings, as highlighted by this restatement.
As a result, in comparison to its earlier financial statements, Akorn acknowledged that it had inflated its net sales for 2014 by over 7% and its income from continuing operations before income taxes by roughly 136%. There were serious errors in the company’s financial accounts for 2014 due to these problems that lasted for many reporting years.
David Hebeda and Timothy Dick’s accountability
As part of their responsibilities in supervising Akorn’s internal accounting controls during the relevant time, Timothy Dick and David Hebeda were further implicated in the SEC’s lawsuit. The problems with revenue recognition and gross-to-net accounting were attributed to both persons. Because of Akorn’s transgressions, the SEC levied control person responsibility charges against them under Section 20(a) of the Securities Exchange Act.
Results from Settlement
All parties involved were subject to fines and specified agreements as part of the settlement. Akorn consented to a long-term injunction order that would prohibit any further breaches of the Exchange Act’s requirements for financial reporting, record-keeping, and internal accounting controls. The following orders were entered into effect with the assent of Timothy Dick and David Hebeda:
- A court order that forbids them from ever again overseeing anybody whose job it is to ensure that the company is following the Exchange Act’s regulations for financial reporting, record-keeping, and internal accounting controls.
- The civil penalty is twenty thousand dollars per offense.
Two SEC agents, Michael Mueller and Timothy Tatman, oversaw the investigation.
Timothy Dick: Resolving SEC Allegations
In a settlement, Akorn Inc., its former chief financial officer Timothy Dick, and its former controller David Hebeda admitted to releasing inaccurate financial statements for the 2014 fiscal year. Akorn was exempt from financial penalties as a result of this settlement, which was announced by the U.S. Securities and Exchange Commission (SEC). However, to prevent future violations of financial reporting and internal accounting control laws, Akorn was ordered to comply with a court order.
Neither David Hebeda nor Timothy Dick acknowledged guilt in the settlement, although they did agree to pay a $20,000 civil penalty. Akorn did not.
After an inquiry by the SEC exposed serious flaws in Akorn’s internal controls, the company was forced to restate its financials for 2014 in May 2016. These shortcomings were most apparent in the way the company handled gross-to-net reserve balances and projections. Net sales were inflated by around 7% and revenue from continuing operations before taxes by a significant 136% for 2014, according to Akorn’s restatement.
At the time that the SEC found problems, Dick and Hebeda were in charge of Akorn’s internal financial controls.
Effect on Akorn Acquisitions
Akron, which makes a variety of medicinal goods including eye drops, topical creams, and oral treatments, was up for acquisition by Fresenius SE & Co. KGaA for $4.75 billion in April 2017. But CEO Stephan Sturm of Fresenius had hinted a month before the announcement that the purchase would be rethought if an inquiry into the data integrity of Akorn turned any wrongdoing.
No word yet from Fresenius on how these developments turned out, according to the latest reports.
This revised version reorganizes the original material to focus on the allegations against Timothy Dick and David Hebeda, the terms of the settlement, and the roles played by the SEC; it also makes note of the possible effect on Fresenius’s purchase of Akorn.
Conclusion
During his time as CFO of Akorn, Inc., Timothy Dick was the subject of accusations and a settlement with the SEC, which severely damaged his career. The legal case casts doubt on his ability to oversee the company’s financial operations and maintain compliance with regulations since it highlights infractions of financial reporting, record-keeping, and internal controls.
Despite Dick’s credentials and experience working with reputable organizations, his time spent with Akorn during a time of major legal troubles casts considerable questions on his honesty and ability to lead the company’s finances.
The severity of the company’s misstatements in its 2014 financial reporting was highlighted by the settlement, which spared Akorn from financial penalties but imposed civil fines on Timothy Dick and former Controller David Hebeda. Due to his supervision failings, Timothy Dick was personally implicated in the SEC’s inquiry that uncovered overstated financial statistics and inadequate internal controls.
Internal control breaches during Dick’s tenure had far-reaching effects since the financial reporting scandal at Akorn was a key factor in the jeopardy of a large purchase agreement with Fresenius SE & Co. KGaA.
Finally, the SEC’s decision to drop charges against Akorn and Timothy Dick is a sobering reminder of how important it is for corporate governance to have strong internal controls and to present financial data transparently. It brings to light the lasting effects of insufficient financial regulation in the pharmaceutical sector and puts doubt on Dick’s professional reputation.
