Bloomberg has reported that the Securities and Exchange Commission is investigating the accounting of costs and sales at Boeing of two popular aircraft after a tip by an informant to the SEC whistleblower program. In the article, Bloomberg generally suggested that program accounting might allow the aerospace industry to “smooth earnings and obscure potential losses”.
According to the reports with regard to Boeing, the SEC investigation relates to whether Boeing’s financial statements relied on sales forecasts which were too optimistic. The investigation also involves whether declining production costs assumed by its financial calculations will ever be achieved by Boeing.
The whistleblower gave the SEC internal documents and accounting data more than a year ago. From the reports, it sounds like the investigation has not yet proceeded to the point where the SEC might issue a Wells Notice. It is possible at this point that the securities regulator will conclude from its investigation that no charges should be brought.
After the earlier news report, MarketWatch published a piece about the history of whistleblower allegations of manipulation and regulatory investigations into costs and projected sales by the company. The story covered two other incidents at Boeing: production problems in 1997 and two internal auditors reporting problems to journalists in 2007.
Accounting fraud has been an area of focus of the SEC over more than a decade although it was briefly interrupted by the emphasis on improper practices in mortgage backed securities that grew out of the Great Recession. More companies tend to be caught in accounting misstatements during recessions.
This makes the second media report of an accounting whistleblower this week. Earlier this week, Accounting Today reported that a law firm was representing a whistleblower in the Monsanto case. Monsanto agreed to pay $80 million to the United States to resolve the government investigation.
The Dodd-Frank Act authorized the SEC and CFTC to pay securities whistleblowers between 10 and 30 percent of monetary sanctions over $1 million to eligible individuals.