Granite Construction is alleged to have inflated the financial performance of the major subdivision that Swanberg managed.
In 2021 Granite restated its financial statements from 2017 to 2019 to correct revenue and profit margin errors allegedly caused by Swanberg’s misconduct. The company agreed to pay US$12m to settle the SEC’s charges.
In separate administrative proceedings, the company’s former chief executive James H Roberts, and former CFOs Laurel Krzeminski and Jigisha Desai, while not charged with misconduct, have agreed to return to Granite more than $1.4m, $327,000, and $176,000, respectively, in bonuses and compensation. This is in accordance with a US law that requires executives to reimburse certain compensation when an issuer is required to restate its financials as a result of misconduct.
The SEC’s complaint against Swanberg alleges that, beginning in 2017, he faced demands within Granite to turn around the flagging performance of his group. Swanberg and his group, however, allegedly encountered significant increases in expected costs for their construction projects that, if recorded, would have hit profits. The complaint alleges that Swanberg, when faced with these competing demands, orchestrated a scheme to manipulate profit margins and improperly defer the recording of expected costs to hide the group’s flagging performance. The scheme allegedly unravelled in mid-2019 when several construction projects neared completion and Swanberg could no longer defer recognition of the cost increases.
“Swanberg’s alleged manipulation of financial metrics to hide deteriorating performance inflated Granite’s stock, and predictably, the price plunged after there was full disclosure resulting in significant harm to investors,” said Monique Winkler, regional director of the SEC’s San Francisco regional office. “When executives hide material facts from investors, as alleged in our complaint, the SEC will take action against companies and individuals to ensure we maintain fair and open markets.”
Granite is a diversified construction and construction materials company that has been trading for 100 years and turns over $3bn a year
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