SEC charges Granite with fraud, firm pays $12M

Dive Brief:

In the culmination of an investigation that caused Granite Construction to restate three years of its financial results, the Securities and Exchange Commission charged the California-based contractor and a former executive with financial reporting fraud. Granite agreed to pay $12 million to settle the SEC’s charges against the company.
The agency named Granite and former senior vice president Dale Swanberg in its Thursday announcement. It alleged Swanberg, who oversaw Granite’s heavy civil group, hid cost increases and manipulated profit margins in the flagging unit beginning in 2017. The alleged scheme unraveled in mid-2019 when several projects neared completion, and the recognition of increased costs could no longer be deferred.
In separate administrative proceedings, the company’s former CEO, James H. Roberts, and former CFOs, Laurel Krzeminski and Jigisha Desai, while not charged with misconduct, agreed to return more than $1.4 million, $327,000, and $176,000, respectively, in bonuses and compensation to Granite, according to the SEC.

Dive Insight:

Granite Vice President of Investor Relations Mike Barker told Construction Dive in an emailed statement that the company worked with the SEC to settle the charges against it.

“We fully cooperated with the SEC in its investigation into this matter, and we are pleased to put this matter behind us as we move forward under new leadership,” Barker said. “Granite is committed to conducting our business ethically and transparently, and we have implemented numerous remedial actions and internal control enhancements to improve our processes and build value for shareholders.”

But Greenberg Traurig attorney William Michael Jr., who represents Swanberg, said his client is taking the fall for the company’s lack of oversight.

“Dale, by profession, is a builder,” Michael told Construction Dive. “He's not a CPA, he's not a controller and he's not trained in the financial disclosure requirements of public companies. And everything that he did was fully transparent to the company and its financial experts.”

Granite did not immediately respond to a request for comment of what it knew about Swanberg’s actions. But Michael said given Swanberg’s background, the SEC’s charges against him are misguided.

“We look forward to challenging this in court and clearing Dale's name,” Michael said.

Following the financial reporting missteps, Granite reorganized and appointed Kyle Larkin president in 2020 and CEO in 2021. Since Larkin took the lead, the firm has shifted its strategy away from mega projects worth more than $500 million to focus on smaller, less complex work that carries less risk and is easier to execute.