The SEC says...

.

SEC Names Former CEO and CFO in Settled Proceeding for Approving Loss Forecast Yielding Inaccurate Quarterly Report Concerning then NYSE: MDR’s $6.7 Billion-Dollar Cameron Project

ADMINISTRATIVE PROCEEDING
File No. 3-21491

June 16, 2023 – The Securities and Exchange Commission today announced settled charges against David Dickson (“Dickson”) and Stuart Spence (“Spence”), the former CEO and CFO of McDermott International Inc. (“McDermott”), arising out of their role in their approval of an estimate-at-completion (“EAC”) loss forecast by McDermott for its Cameron liquid natural gas project (“Cameron”) for the second quarter of 2018 and related disclosures concerning Cameron. According to the SEC’s order, during the relevant period McDermott was headquartered in Houston, Texas and its common stock traded on the NYSE under the trading symbol MDR. The SEC’s order states that on January 21, 2020, McDermott and certain of its affiliates filed voluntary petitions for bankruptcy relief under Chapter 11.

According to the SEC’s order, Cameron was a closely-watched $6.7 billion-dollar long-term, joint venture construction contract to build a liquefied natural gas export facility in Hackberry, Louisiana. The SEC’s order finds that a McDermott executive calculated a $490 million EAC loss forecast for Cameron outside of the routine cost-estimating process, using a methodology that was inconsistent with the regular process for a project of this complexity and magnitude. According to the SEC’s order, Dickson and Spence approved the $490 million loss for the Q2 2018 Cameron EAC even though they were aware it was developed outside of the regular process for EAC cost forecasts and the initial draft EAC loss was over $1.1 billion, thereby indirectly causing McDermott to maintain incorrect books and records and to file an inaccurate quarterly report. The SEC’s order finds that the related disclosures, in a Form 8-K press release, also did not fairly present the prospect that Cameron’s new execution strategy could result in higher losses and longer scheduling delays.

According to the SEC’s order, McDermott reported an additional $165 million EAC loss for Cameron in the notes to the financial statements and in the MD&A section filed with its Q2 2018 Form 10-Q. The SEC’s order finds that the Q2 2018 Form 10-Q included certain materially inaccurate Cameron Project specific information.
The SEC’s order finds that, as a result of their conduct, Dickson and Spence caused McDermott to violate Section 13(a) of the Exchange Act and Rules 13a-11, 13a-13 and 12b-20 thereunder; Section 13(b)(2)(A) of the Exchange Act; and Section 13(b)(2)(B) of the Exchange Act and Rule 13b2-1 thereunder. Without admitting or denying the findings in the SEC’s order, Dickson and Spence each consented to a cease-and-desist order and agreed to pay civil penalties of $100,000 and $40,000, respectively.

The SEC acknowledges the assistance of the United States Attorney for the Southern District of Texas and the Federal Bureau of Investigation.

The SEC’s investigation was conducted by Carolyn Kurr and Keith O’Donnell and supervised by C. Joshua Felker, Dwayne Brown, and Melissa Hodgman, with the assistance of trial counsel Patrick Costello.