United Rentals Pays $14 Million for Profits Fraud

     WASHINGTON D.C. (CN) – In a settlement with the Securities and Exchange Commission, the world’s largest equipment rental company paid $14 million this week after the company’s senior officers used “egregious, sophisticated frauds” to exaggerate profits.

     “This is a significant case involving a significant company, with egregious, sophisticated frauds carried out by senior personnel” says Kenneth Lench, the Assistant Director of the SEC’s Division of Enforcement.
     From early 2000 to 2002, the dealings were organized by the company’s then-Chief Financial Officer, Michael Nolan, and its then-Vice Chairman and Chief Acquisitions Officer, John Milne.
     Under the charges, United Rentals, a Connecticut based company, sold used equipment to a financing company, but leased it back. Once the lease expired, United Rentals arranged for a third party to buy the equipment from the financing company, ensuring the financing company that United Rentals would compensate for any losses in the resale. United Rentals also guaranteed the third-party against losses.
     Since the sale allowed the company to claim immediate profits, it inflated the company’s apparent revenue.
     The company again magnified its profits when it entered into a deal with suppliers, where it offered financial rewards to suppliers in exchange for selling to them over-priced equipment.
     Between 1997 and 2000, the rental company misrepresented the values of its assets, self-insurance reserves, income-tax, and rental revenues to overstate earnings.
     United Rentals said it has made many important changes since the SEC inquiry began in 2004, but neither denied nor admitted to the charges.
     Under the terms of the settlement, the company is barred from violating federal securities laws in the future, and will distribute the $14 million to injured investors.

%d bloggers like this: