West Marine, the Watsonville-based boating supply retailer, reported today that the Securities and Exchange Commission approved a final settlement of the federal agency’s investigation into certain of the company’s accounting practices.
The SEC alleged today in a complaint filed in a federal court in San Jose thatin early 2004 , shortly after pre-announcing its fiscal 2003 earnings, West Marine “determined that it needed to change the way in which the company valued its inventory,” thereby reducing its value by $13.2 million and “dramatically decreasing the company’s previously announced earnings.”
“Rather than disclose this change to investors and report reduced earnings in its annual report, the SEC alleges, West Marine sought an offset and eventually devised a solution of capitalizing certain store occupancy expenses (such as rent and utilities), according to a press release issued by the SEC. The change in accounting was “neither disclosed to investors nor in compliance with Generally Accepted Accounting Principles.” According to the SEC, West Marine failed to properly disclose these “significant accounting changes” to its auditor by suggesting that its accounting methodology was “consistent with prior years.”
As part of the settlement — which involved no fines, penalties or other monetary sanctions, according to West Marine — the company, which “neither admits nor denies” any of the SEC’s allegation, agreed in the future to never do the things its been accused of by the SEC.
Furthermore, the company said it “understands” that the SEC is not proceeding against any of West Marine’s “past or current employees or directors.”
The company’s former chief accounting officer, Peter Van Handel, left the company abruptly in April 2008, about 8 months after the SEC first began its inquiry into the matter.