Chemours probe finds accounting manipulation

An internal probe at the chemical maker Chemours has found that top executives, including CEO Mark Newman, gamed the firm’s accounting procedures to boost cash flow and thus possibly executive compensation.

On Feb. 28, Chemours’s Board of Directors announced it put Newman, Chief Financial Officer Jonathan Lock, and Principal Accounting Officer Camela Wisel on administrative leave pending an internal review of “potential material weaknesses in its internal control over financial reporting,” a press release states. The company had received an anonymous tip to its ethics hotline.

At the time, the board appointed an interim CEO, Denise Dignam, head of the firm’s titanium technology business and a more-than-30-year veteran of Chemours and its predecessor, DuPont.

The board’s Audit Committee, with the assistance of independent counsel, found that the senior managers who were placed on leave tried to delay vendor payments due in the fourth quarter of 2023 to the first quarter of 2024. At the same time, they tried to push up the collection of receivables due in the first quarter of 2024 to the fourth quarter of 2023.

“The Audit Committee found that these individuals engaged in these efforts in part 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 company says in a statement.

Chemours also says the executives whom it placed on leave violated the company’s code of ethics related to “full, fair, accurate, timely and understandable disclosure.”

The Audit Committee is still assessing the impact of the executives’ actions, but the company says the measures did inflate fourth-quarter cash flow. The committee is also examining similar accounting actions from the end of 2022.

Signs of accounting trouble emerged to the public Feb. 13, when Chemours disclosed that it would delay the publication of its 2023 financial results by 2 weeks. On Feb. 28, it released only preliminary results. The company expects a net loss of between $225 million and $235 million in 2023. It earned $578 million in 2022. It expects 2023 revenues to drop by 12%, to $6.0 billion.

Newman was appointed CEO in 2021, taking over from Mark Vergnano, who had been CEO since Chemours was spun off from DuPont in 2015. Newman had previously been Chemours’s chief operating officer. Jonathan Lock assumed the chief financial officer role last year.