Hill International, Philadelphia, and a former accounting executive have settled federal charges that they made ledger errors in the firm’s favor over several years, resulting in a $5.5 million discrepancy that was intentionally covered up and caused a $30 million hit to the construction and project management consultant's net earnings.
The pact, announced on Jan. 17 by the U.S. Securities and Exchange Commission, settled a suit filed in federal district court in New York City, charging the firm, former Chief Accounting Officer Ronald Emma, 68, and former Assistant Corporate Controller Nicholas Tornello, 32, with ten federal counts, including presenting misleading information during a $40 million public offering in 2016, failing to follow internal accounting policies, failing to keep accurate records, and submitting false filings.
The suit alleged the executives had for several years incorrectly logged foreign currency exchange losses on inter company loans – an increasingly complex area for Hill after it went public and became a global operation through a 2006 merger.
Upon discovering the errors in May 2014, "rather than immediately correcting the error by recognizing the losses," said the SEC, Tornello allegedly devised a plan to “bleed out” the losses over time, some filtered through a Greek subsidiary, with e-mails and other records describing efforts to avoid big hits to Hill’s income and scrutiny from company auditors, the SEC claims.
"As a result, Hill's periodic reports overstated the company's net income," said the financial regulator.
After Emma retired and Tornello left in early 2017, other employees allegedly uncovered the errors during preparations to sell Hill’s construction claims group to a London-based private equity firm. The sale closed in May 2017, creating the firm HKA, but Hill later had to refile three years of financial statements.
Hill and Emma settled with the SEC without admitting or denying the claims. Hill agreed to pay $500,000, and Emma $75,000, according to the regulator. A Hill spokeswoman declined to comment.
Emma agreed to be permanently suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies. The settlements are subject to court approval.
Tornello’s attorney issued a statement that he is “disappointed that the SEC decided to proceed with this misguided case, and strongly disputes the allegations in the SEC’s complaint.”
Tornello contends he worked in good faith and that allegations he “sought to conceal information” from superiors is false. No trial date has yet been set.
The SEC suit does not cite Irvin Richter, Hill founder and former chairman and CEO, nor his son and successor David Richter.
Richters Not Cited
David Richter had faced a challenge in 2016 from an activist investor trying to remove his father and two others, from the board. Hill eventually removed all three, and David Richter resigned in May 2017, days before the sale closed.
Hill later named 26-year company veteran Raouf Ghali as CEO, but it took a year to get financial statements back on schedule, with the company’s stock listing temporarily suspended in 2018.
Hill also sued Irvin Richter in March 2019 in New Jersey state court for alleged unauthorized transactions as CEO in 2010, including investing in a now-worthless startup and extending a loan that later defaulted. The parties settled in June 2019.
David Richter also is running for Congress as a Republican in New Jersey's third House of Representatives district, in a self-funded campaign, he confirmed to ENR, switching from its second district where he was a front runner until incumbent Democrat Jeff Van Drew switched parties and won President Trump’s endorsement in December.