Two top executives which include previous CEO of the sports apparel company Under Armour received Well’s Notice that could possibly lead to civil charges over accounting practices years ago at a time of struggle with unimpressive sales.
The Wells Notice
The company has admitted on an 8K filing that the United States Securities and Exchange Commission (SEC) notified them last week that Kevin Plank, their former CEO and now executive chairman, and David Bergman, Under Armour’s chief financial officer are likely to face enforcement action after probe on the company. The SEC cited some sales record from the company between 2015 third quarter and 2016 fourth quarter, which indicated a “customer sale executed earlier than originally planned.”
Under Armour said the company and its founder Kevin Plank have been warned by the SEC that they could face civil charges over past accounting practices https://t.co/1MK3j5ZseO
— The Wall Street Journal (@WSJ) July 27, 2020
‘Not a formal charge’
Under Armour said that the “Wells Notice” is “neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law.” They further said that there were not any violations in their accounting found by the SEC.
The sportswear company maintained that the officials in question acted out appropriately and “intend to pursue the Wells Notice process, which will include the opportunity to respond to the SEC staff’s position, and also to engage in a dialogue with the SEC staff to work toward a resolution of this matter.”
Struggle in shares
Meanwhile, shares for the company decreased upon their “Wells Notice” announcement, going from $9.62 at opening to $9.55 in afternoon. Forbes also noted that Under Armour’s stock price has also descended by 60 percent.
Under Armour under probe
Last November, Under Armour has revealed that they were under the investigation of federal bodies about their accounting practices from second half of 2015 to last quarter of 2016. Their spokesperson has confirmed that since July 2017, the company has been responsive from “requests for documents and information relating primarily to its accounting practices and related disclosures.” Their CEO at the time Plank has departed from post last January and replaced by Patrik Frisk, a COO for the company.
Wall Street Journal first reported on the probe, citing that the US Department of Justice are looking into the possibility of adjusting sales record from different quarters to maintain good image. CNBC has noted that Under Armour is having a hard time keeping up with competition from Nike, Adidas, and others. In the latest quarter reported by the company, their sales dropped by 23 percent and has slashed costs amounting to $325 million in order to survive the coronavirus outbreak.