An agreement has been reached between the Securities and Exchange Commission (SEC) and all of the parties involved in the civil action complaint that was filed against Akorn Inc., its former controller David Hebeda, and its former chief accounting officer Timothy Dick in the United States District Court for the Northern District of Illinois.
David Hebeda and Timothy Dick are among the parties that have reached this agreement. To get started, however, it would be beneficial to know some background information about David Hebeda and his past.
David Hebeda: An Introduction
David Hebeda has worked with a variety of financial institutions during his career, with an emphasis on those serving the healthcare sector. But he has also received criticism for his work. He is now working as a consultant for customers mostly in the Chicago area as a self-employed individual. Although this might show adaptability, it could also indicate that you aren’t committed to staying in your current role for the long haul.
He probably oversaw the accounting department and strategic planning during his time as Chief Financial Officer at Integrated Rehab Consultants, a company based in Chicago, Illinois. But his resignation from this post after just two years in office casts doubt on his ability to keep key leadership positions steady.
His employment as Corporate Controller at Vein Clinics of America in Downers Grove suggests that he is involved with accounting and financial operations. Having said that, it’s worth noting that this role could not have been at the highest executive level, which might mean he’s hit a career ceiling and can’t go much higher.
As VP of finance and VP/corporate controller at Akorn, Inc., David Hebeda seems to have accomplished a great deal during his tenure there. Conversely, the length of the term—four years and four months—may be seen as a stagnation in career progression throughout that time.
The fact that David Hebeda oversaw finances and made strategic contributions while serving as VP of finance at Sagent Pharmaceuticals, Inc. is more evidence of this. Although he did a good job during his two years there, it raises questions about his ability to hold a prominent position for an extended amount of time at other companies.
To sum up, David Hebeda’s career in finance showcases a diverse range of abilities, especially in the healthcare-related sectors. But there are parts of his previous work that make it seem like he wasn’t committed to the position for the long haul or wanted to develop in his career. Among these factors is the fact that his work history is diverse.
David Hebeda: Former Executives and Pharmaceutical Company Face Fraud Charges from SEC
The pharmaceutical firm Akorn, Inc., with headquarters in Lake Forest, Illinois, was the subject of a civil lawsuit filed by the US Securities and Exchange Commission (SEC) in March 2018. The case listed Timothy Dick, who was formerly Akorn’s Chief Financial Officer (CFO), and David Hebeda, who was previously Controller, as defendants. Both of these people were the targets of the lawsuit.
This legal action was initiated against Akorn due to the company’s violations of financial transparency, documentation and files, and internal accounting controls. These infractions were in flagrant disregard for the 1934 Securities Exchange Act’s Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B). Furthermore, they disregarded the Act-governed Rules 12b-20, 13a-1, 13a-11, and 13a-13.
Note that Akorn, Timothy Dick, and David Hebeda chose to settle their charges without admitting or disputing the SEC’s claims. Despite the SEC bringing these claims to their notice, they made this choice. The purpose of this action was to end any possibility of future legal action against our company.
Akorn chose to restate its financial numbers for fiscal year 2014 in May of 2016, which triggered a chain reaction that culminated in the SEC lawsuit. The decision by the corporation to restate its 2014 performance was the subject of the lawsuit. As this restatement shows, Akorn was quite upfront about the fact that the company needed to do a better job of internally monitoring its financial reporting.
In particular, these shortcomings were linked to the limitations of the company’s gross-to-net reserve accounting and estimations. Akorn said as part of the restatement that it had inflated its 2014 net sales by over 7% and its income from continuing operations before income taxes by nearly 136%.
Both of these figures need to be understood in context with the company’s previous financial reports. Keep in mind that Akorn’s 2014 financial statements had some major errors caused by these major flaws in the company’s internal controls, which remained for a long time.
The lawsuit also claimed that in 2014, Akorn’s CFO Timothy Dick and Controller David Hebeda were responsible for overseeing different parts of the company’s internal accounting procedures. The defendants in the case were both males.
Both men were named as defendants in the lawsuit. Revenue recognition and the conversion of gross to net revenue accounting were just two of the many topics discussed.
The fact that Timothy Dick and David Hebeda were heavily involved in these corporate affairs became public knowledge. Due to this, the SEC has filed charges against both of them, accusing them of being responsible as controlling persons for Akorn’s breaches of Section 20(a) of the Securities Exchange Act.
Fines were levied on those who failed to adhere to the terms of the agreements that were established as a consequence of the judicial proceedings. The provisions of a permanent injunctive order prohibit Akorn from disobeying the requirements of the Exchange Act concerning internal accounting controls, records and evidence, and financial transparency, and the business has expressed its intention to adhere to these orders.
After Akorn agreed to follow the terms of the order, the parties were able to come to this arrangement. The instances of Timothy Dick and David Hebeda also led to the entry of orders in both cases with the individuals’ assent.
- They began by issuing a permanent injunction barring the two from ever again supervising anybody who might be held to account for violations of the Exchange Act’s regulations on financial reporting, records and paperwork, and internal control over financial reporting. The second step was to get a temporary restraining order that lets the two of them keep managing whoever they choose.
- Secondly, for the resolution to be passed, it is a requirement that they each pay a civil penalty of twenty thousand dollars.
The SEC employees responsible for spearheading the inquiry into the many complaints were Michael Mueller and Timothy Tatman.
David Hebeda: Resolution of SEC Case
Allegations that the generic medication producer reported fraudulent financial statements in 2014 have been resolved by Akorn Inc., Timothy Dick (former Chief Financial Officer), and David Hebeda (former Controller). It was disclosed to the general public by the United States Securities and Exchange Commission (SEC) that this transaction had been completed.
No monetary contributions will be required of Akorn under the terms of the agreement. By contrast, it has consented to follow a court order that forbids it from disobeying any further requirements of the Securities Exchange Act about accounting internal controls and financial statements. Once the corporation met all of the requirements outlined in the order, it was issued.
As per the requirement of the Securities and Exchange Commission, former CFO Timothy Dick and former controller David Hebeda have both agreed to pay a fine of $20,000 each. All parties involved, including Akorn, Timothy Dick, and David Hebeda, agreed not to admit or deny any responsibility in the case as part of the arrangement that ended the dispute. Timothy Dick and David Hebeda’s lawyers, together with Akorn, have remained silent on the subject.
Akorn stated in May 2016 that its internal controls were very inadequate and falsified its financial records for the year 2014, according to the SEC inquiry. It all came down to the company’s estimation and management of its gross-to-net reserve balances. Furthermore, Akorn claimed that it had inflated its 2014 net sales by about 7% and its revenues from daily operations before taxes by a substantial 136% in the same year.
During this time, Akorn’s Controller, David Hebeda, and CFO Timothy Dick were responsible for the company’s accounting and internal controls over money. This suggests that they are partially to blame for the problems found by the SEC.
It is worth noting that in April 2017, Fresenius planned to pay $4.75 billion to purchase Akorn. The deal was expected to include a wide variety of pharmaceutical items, including creams, eye drops, and oral liquids. However, Fresenius CEO Stephan Sturm had already hinted a month ago that the acquisition would not go through if an investigation into Akorn’s data integrity revealed evidence of wrongdoing on the part of the firm.
So far, Fresenius has been mum on any comments they may have made on the current events.
Conclusion
A settlement has been reached to end the SEC’s lawsuit against Akorn Inc., its former CFO Timothy Dick, and its former controller David Hebeda. Claims of improper financial reporting and lack of internal control prompted the filing of the lawsuit.
Following a review of its 2014 financial records, Akorn found that its internal controls were inadequate and that it had greatly overstated its revenue and sales.
The settlement includes Akorn’s promise to never disobey the law again, as well as permanent bans and sanctions for Dick and David Hebeda. Strong internal controls and trustworthy financial reporting are critical for publicly listed companies, as this instance shows.
