NIC Inc., the Olathe, Kansas-based manager of government websites, and four current or former executives will pay $2.8 million to settle U.S. claims that they failed to disclose perks for a former chief executive officer.
Jeffery Fraser, who stepped down as CEO in 2008, got more than $1.18 million in undisclosed benefits, including thousands of dollars per month for a Wyoming ski lodge while he commuted to work by private aircraft, the Securities and Exchange Commission said today. Fraser, 51, who agreed to be barred permanently from serving as an officer or director of a public company, will pay about $2 million.
NIC, Fraser, current CEO Harry Herington and former chief financial officer Eric Bur settled the SEC’s claims without admitting or denying the allegations. Herington agreed to pay $200,000 and Bur will pay $75,000, the SEC said in a statement The SEC’s case against current CFO Stephen Kovzan continues.
“I intend to defend myself vigorously against the charges,” Kovzan said in a statement. The SEC “makes no allegation that NIC’s financial statements were in any way misstated, nor does it allege that I sought or received any improper or undisclosed benefit.”
Eugene Goldman, an attorney for Bur at McDermott Will & Emery in Washington, declined to comment. Phone calls to Andrew Levander, Fraser’s lawyer at Dechert LLP in New York, and Ralph Ferrara, Herington’s attorney at Dewey & LeBoeuf in Washington, weren’t immediately returned.
Fraser, who didn’t have a personal credit card, routinely charged living expenses to NIC credit cards and falsely claimed various personal expenses were business-related, the SEC said. He received payments for flight training, hunting, skiing and spa expenses, as well as vacations for his girlfriend and family, the agency said.
“Disclosure of executive perks helps investors evaluate whether corporate assets are being used wisely,” Antonia Chion, associate director in the SEC’s enforcement division, said in the statement. “NIC and its executives did not comply with their disclosure obligations and the company’s internal controls by paying Fraser’s personal expenses while telling shareholders that Fraser was working for little or no compensation.”
NIC agreed to pay $500,000 in penalties and to hire an independent consultant to recommend possible policy changes related to handling of payments.
“The NIC Board of Directors is pleased that NIC has resolved this matter,” Art Burtscher, the firm’s independent lead director, said in an e-mail statement. “We have every confidence that Harry Herington and his executive team are the right people to lead the company into the future.”
To contact the reporter on this story: Joshua Gallu in Washington at email@example.com.