Chief Executive Gary Holdren and two other top executives are resigning from Chicago-based management consultancy Huron Consulting Group as the company announced Friday it is restating financial statements for three fiscal years.
Holdren’s resignation as CEO and chairman was effective Monday and he will leave Huron at the end of August, the company said in a statement. Chief Financial Officer Gary Burge is being replaced in that post but will serve as treasurer and stay through the end of the year. Chief Accounting Officer Wayne Lipski is also leaving the company. None of the departing executives will be paid severance, Huron said.
Huron will restate its financial results for 2006, 2007, 2008 and the first quarter of 2009. The accounting missteps relate to four businesses that Huron acquired between 2005 and 2007.
According to Huron’s statement and a filing with the Securities and Exchange Commission, the selling shareholders of the acquired businesses distributed some of their payments to Huron employees. They also redistributed portions of their earnings “in amounts that were not consistent with their ownership percentages” at the time of the acquisition, Huron said.
A Huron spokeswoman declined to give the number of shareholders and employees involved, saying the company was not commenting beyond its statement.
“I am greatly disappointed and saddened by the need to restate Huron’s earnings,” Holdren said in the statement. He acknowledged “incorrect” accounting.
Huron said the restatement’s total estimated impact on net income and earnings before interest, taxes, depreciation and amortization for the periods in question is $57 million.
“Because the issue arose on my watch, I believe that it is my responsibility and my obligation to step aside,” said Holdren.
Huron said the board’s audit committee had recently learned of an agreement between the selling shareholders to distribute some of their payments to a company employee. The committee then launched an inquiry into all of Huron’s prior acquisitions and discovered the involvement of more Huron employees.
Huron said it is reviewing its financial reporting procedures and expects to find “one or more material weaknesses” in the company’s internal controls. The amended financial statements will be filed “as soon as practicable,” Huron said.
James Roth, one of Huron’s founders, is replacing Holdren as CEO. Roth was previously vice president of Huron’s health and education consulting business, the company’s largest segment. George Massaro, Huron’s former chief operating officer who is the board of directors’ vice chairman, will succeed Holdren as chairman.
James Rojas, another Huron founder, is now the company’s CFO. Rojas was serving in a corporate development role. Huron did not announce a replacement for Lipski, the chief accounting officer.
The company’s shares sank more than 57 percent in after-hours trading. The stock had closed Friday at $44.35. Huron said it expects second-quarter revenues between $164 million and $166 million, up about 15 percent from the year-earlier quarter.
The company, founded by former partners at the Andersen accounting firm including Holdren, also said that it is conducting a separate inquiry into chargeable hours in response to an inquiry from the SEC.
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wawong@tribune.com
