Granite Construction Co. agreed to pay $12 million to settle fraud charges by the U.S. Securities and Exchange Commission related to the firm's alleged misrepresentation of its financial condition from 2017 to 2019 after having hit trouble on big fixed-price projects.

Granite's settlement, announced Aug. 25, does not cover SEC fraud charges against former Senior Vice President Dale Swanberg, who is also named as a defendant, with the agency claiming he manipulated and concealed firm profits from work on heavy civil construction projects.

Granite neither denied nor affirmed the charges against it, but an attorney for Swanberg told ConstructionDive that his client would contest the charges against him.

The attorney, William Michael Jr., is quoted as saying that Swanberg is "by profession" a builder "who is not trained" in accounting or financial disclosure rules. Swanberg's actions were all "fully transparent" to Granite, he claimed.

In tandem with the settlement, three former senior executives in a separate administrative proceeding agreed to collectively return to Granite more than $1.8 million in bonuses or incentive pay they received based on the company's performance.

Former CEO James H. Roberts and former CFOs Laurel Krzeminski and Jigisha Desai were not charged with misconduct.

Gurbir S. Grewal, SEC director of enforcement, said that executives should be aware that the agency views federal security law as providing "broad authority in seeking all forms of compensation that should be reimbursed to the company."

Granite had foreshadowed its pending legal jeopardy in early 2021, when after it informed the SEC of its investigation, the company reported that the agency had issued subpoenas related to the financial disclosure problems.

A Granite spokesman released a statement that the company had fully cooperated with the SEC and that it was "pleased to put this matter behind us as we move forward under new leadership." The statement noted numerous remedial actions and internal control enhancements that had been made.

The spokesman for Granite declined further comment about the case or in response to statements of Swanberg's attorney.

Profit 'Manipulation'

The SEC's charges related to Swanberg's role were detailed in commission charges brought in federal court in San Jose Calif.

Faced with the need to turn around what the SEC described as Granite's "flagging" large heavy civil construction projects, Swanberg schemed to defer recognizing costs and sought to "manipulate profit margins." More specifically, he directed subordinates to plug into the unit's general ledger "rosier" total expected costs. That led to the company materially overstating its revenue by $62 million in 2017 and 2018, and understating revenue in parts of 2018 and 2019, the SEC claims.

Prior to joining Granite as vice president in 2015 as deputy group manager for large projects, Swanberg had been COO of Flatiron Construction. He could not immediately be reached for comment.

Once the restatements were made, the Watsonville, Calif.-based contractor's stock (GCA-NYSE) "cratered" in late 2019 to early 2020, from a high of $35 to $12, the SEC said.

Under new leadership and a new approach to project risk, company shares have since rebounded to around $34.

Last month, Granite CEO Kyle Larkin spoke optimistically about a turnaround in which the company has worked through its old portfolio of profit-challenged projects.

"We’re close," Larkin said during a conference call for investment analysts. "These are getting completed and next year will be down to $50 million."