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Archive for Friday, January 14, 2011

Olathe company executives settle with SEC over expense reporting

January 14, 2011

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The Securities and Exchange Commission has reached a settlement with a Lawrence man and other executives of an Olathe-based company amid accusations they failed to disclose more than $1.18 million in perks given to a former CEO.

Harry Herington, 50, of Lawrence, current CEO of NIC Inc., which manages government websites, has agreed as part of the settlement to pay a $200,000 penalty after the SEC alleged that as chief operating officer Herington was informed of problems with former CEO Jeffrey Fraser’s expense reporting and “failed to adequately address them,” according to the complaint in the case.

The complaint alleges that NIC’s public filing did not disclose perks that Fraser, his girlfriend and family received from 2002 to 2007. Fraser’s alleged perks outlined in the complaint included more than $4,000 a month to live in a Wyoming ski lodge, costs to commute by private aircraft from Wyoming to Olathe, and monthly cash payments for purported rent on a Kansas house “owned by an entity Fraser set up and controlled.”

“We have determined that it is in the best interests of the company to settle this matter so that we can continue to concentrate our full attention and energy on the bright future we see for NIC,” Herington said in a statement released by the company, which Forbes magazine has twice named one of the nation’s 100 best small companies.

Also as part of the settlement, according to the SEC, the company will pay $500,000. Fraser agreed to pay more than $2 million in penalties, and a former chief financial officer agreed to pay a $75,000 fine.

The SEC said its litigation against current CFO Stephen Kovzan, who is accused of authorizing payments of Fraser’s expenses and circumventing the companies internal controls, continues in federal court.

“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,” said Antonia Chion, associate director of the SEC’s division of enforcement.

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