Chemours, a U.S.-based global chemical company, disclosed three executives, previously placed on administrative leave, have been found to have engaged in unethical financial practices. CFO Jonathan Lock, CEO Mark Newman, and controller and principal accounting officer Camela Wisel had previously been placed on leave pursuant to an internal investigation of financial reporting practices.
As a result of the internal review, conducted by the audit committee of the board of directors and independent outside counsel, it was determined there was a lack of transparency with Chemours’ board of directors by Lock, Newman, and Wisel and, in connection with these actions, the three executives violated the company’s code of ethics applicable to the CEO, CFO, and controller relating to “promot[ion of] full, fair, accurate, timely and understandable disclosure,” according to a company release.
The review concluded that the three executives delayed payments to certain vendors who were due to be paid in the fourth quarter of 2023 and instead paid them in the first quarter of 2024. Additionally, they accelerated the collection of receivables in the fourth quarter of 2023 that were not due to be received until the next quarter. The purpose, according to the audit committee, was 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 net result was an increase in cash flow in the fourth quarter, with a corresponding anticipated decrease in the first quarter of this year. Furthermore, the audit committee determined similar actions, albeit to a lesser degree, were undertaken in the fourth quarter of 2022, resulting in an increase in cash flow measures that quarter and a decrease in the first quarter in 2023.
Amid the three executives’ administrative leave, the company appointed Matthew Abbott as interim CFO and Denise Dignam as interim CEO, per an SEC 8-K filing.
According to the company release, the review was triggered by an anonymous report made to the Chemours’ ethics hotline, and the review encompassed the hotline procedures, concluding that it was not elevated to the general counsel or audit committee until it was connected to Chemours’ 2023 year-end external audit.
As a result of the review, Chemours is examining material weaknesses in its internal controls, including the effectiveness of the “tone at the top,” as well as the components of the COSO internal control framework.