Chemours has released the findings of an internal review which was undertaken in response to accounting irregularities by the company’s most senior executives.
Just last week president and CEO Mark Newman, CFO Jonathan Lock and principal accounting officer Camela Wisel were placed on administrative leave after an anonymous tip-off was made to the Chemours ethics hotline.
The investigation, which was undertaken by an audit committee with the support of independent outside counsel, found the executives violated the company’s code of ethics while also displaying a “lack of transparency” to the board.
Board chair Dawn Farrell said the Chemours Board of Directors take these issues very seriously.
She said the findings of the internal review do not affect the preliminary, unaudited estimates of operating results and other financial measures as of and for the year ended 31 December, 2023.
The Audit Committee found that the suspended executives engaged in efforts in the fourth quarter of 2023 to delay payments to certain vendors.
These vendors were due to be paid in the fourth quarter of 2023 but payment was delayed until the first quarter of 2024.
The executives also tried to accelerate the collection of receivables into the fourth quarter of 2023 that were originally not due to be received until the first quarter of 2024.
“The Audit Committee found that these individuals engaged in these efforts in part to meet free cash flow targets that the company had communicated publicly, and which also would be part of a key metric for determining incentive compensation applicable to executive officers,” the company said in a statement.
As of 31 December, 2023, the company’s cash and cash equivalents and restricted cash and restricted cash equivalents totalled approximately $1.8 billion, of which $1.2 billion was unrestricted.
Chemours said the Audit Committee has continued to work on assessing the net impact on cash flow.
The Audit Committee review also determined that similar actions, though to a lesser extent, were taken in the fourth quarter of 2022.
“The company is working diligently to complete its year-end reporting process, including its review of internal control over financial reporting as of 31 December, 2023, and to file its Annual Report on Form 10-K with the SEC as promptly as practicable,” the statement said.
Initially, the anonymous report made to the Chemours Ethics Hotline was not elevated to the General Counsel or the Audit Committee, until the matter was identified in connection with the company’s year-end 2023 external audit process.
“The Audit Committee determined that the failure resulted from inadequate controls and procedures regarding the evaluation and escalation of hotline reports and poor judgment by certain employees who handle the intake of such reports,” the statement said.
As a result, the company is evaluating one or more potential material weaknesses in its internal control over financial reporting including the effectiveness of the “tone at the top” set by certain members of senior management and the controls currently in place for the ethics hotline.
Remediation plans by Chemours will be included
in the upcoming Annual Report.