The SEC has brought enforcement actions over failure to disclose aircraft usage. In January, it filed a civil case accusing a Kansas-based website provider, NIC Inc., of failing to disclose perks, including payments for its former CEO to live in a Wyoming ski lodge and commute to headquarters by private jet. NIC and three current and former executives paid a total of $2.8 million to settle, without admitting or denying the allegations.
This, from an article “Corporate Jet Set: Leisure vs. Business”. Google the phrase – you’ll get access to the full article in the Wall Street Journal. The article should be read in full: it is investigative journalism at its best.
The substory is interesting in itself: a former employee of private company NIC Inc, Jeffrey Fraser lived in a Wyoming ski lodge and worked at his office in Kansas, commuting by plane everyday.
This is from the SEC rapsheet on the case that was ‘settled without admitting or denying the allegations’
NIC, Fraser, Herington and Bur agreed to settle the Commission’s charges without admitting or denying the allegations against them. The Commission’s litigation continues against Kovzan.
The Commission’s complaints, filed in federal court in the District of Kansas, contain the following additional allegations:
Fraser’s undisclosed perquisites included over $4,000 per month to live in a ski lodge in Wyoming; monthly cash payments for purported rent for a Kansas house owned by an entity Fraser set up and controlled; vacations for Fraser, his girlfriend and his family; Fraser’s flight training, hunting, spa, skiing and health club expenses; computers and electronics for Fraser and his family; a leased Lexus SUV; costs for Fraser to commute by private aircraft from his home in Wyoming to his office at NIC’s Kansas headquarters; and other day-to-day living expenses such as groceries, liquor, tobacco, nutritional supplements, and clothing.
Fraser, who did not have a personal credit card, routinely charged living expenses on NIC credit cards and submitted expense vouchers falsely claiming personal items were business related in order to have NIC pay for these personal expenses. Fraser also sought reimbursement for certain expenses he had not incurred.
Interestingly, NIC Inc’s corporate governance page on its website has the following:
Our success is defined by helping government partners, employees, and investors achieve their goals. We do this by:
Respecting and preserving the environment
NIC Inc’s present CEO Harry Herrington, one of those who struck a deal with the SEC begins the 2010 annual report (pdf) for his company thus:
Dear fellow stockholders,
Doesn’t it seem like more than ever, everyone is on the go?
Fraser, it appears, stepped in to save his former company after the dot-com bust of the early 2000s, when he came out of retirement to become CEO again. At one point, NIC’s assistant financial officer is reported to have said that [Fraser] has “spent a crap load over the last three years…[and] now we’re spinning it or sticking [our] heads in the sand.”