The Securities and Exchange Commission today filed a settled civil action in the U.S. District Court for the Northern District of Illinois against Akorn, Inc., a Lake Forest, Illinois pharmaceutical company, its former CFO, Timothy Dick, and its former Controller, David Hebeda, based on financial reporting, books and records, and internal accounting controls violations by Akorn (specifically violations of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder). Akorn, Dick and Hebeda agreed to settle the charges without admitting or denying the Commission's allegations.

According to the Commission's complaint, in May 2016, Akorn restated its financial statements for fiscal year 2014 acknowledging material weaknesses in its internal control over financial reporting related, in relevant part, to controls surrounding the company's gross-to-net reserve accounts and estimates. In its restatement, the company also disclosed that it overstated net revenue for 2014 by approximately 7 percent and income from continuing operations before income taxes for 2014 by approximately 136 percent. Akorn's material weaknesses persisted over multiple reporting periods and contributed to Akorn's materially inaccurate 2014 financial statements.

The complaint also alleges that in 2014, Dick, as CFO, and Hebeda, as Controller, had supervisory responsibilities for Akorn's internal accounting controls, gross-to-net revenue accounting and revenue recognition, and exercised control over these company functions. The Commission's complaint charges Dick and Hebeda with control person liability under Section 20(a) of the Exchange Act for Akorn's violations.

Akorn consented to the entry of an order permanently enjoining it from violations of the financial reporting, books and records, and internal accounting controls provisions of the Exchange Act. Dick and Hebeda consented to the entry of orders: (a) permanently enjoining each of them from controlling any person liable for violations of the financial reporting, books and records, and internal accounting controls provisions of the Exchange Act; and (b) imposing a $20,000 civil penalty against each of them.

The investigation was conducted by Michael Mueller and Timothy Tatman.