Tag: related party transactions under GAAP

Misleading political spending disclosure alleged to run afoul of the securities laws

How did federal racketeering and conspiracy charges against a politician and a 501(c)(4) organization controlled by him lead to another company’s alleged securities law violations?   According to this SEC Order against American Electric Power Company, Inc., in July 2020, the former Speaker of the Ohio House of Representatives and Generation Now, Inc., a 501(c)(4) organization under his control, were “charged with federal racketeering and conspiracy related to a years-long bribery scheme.” (In March 2023, the Order states, the Speaker was convicted by a jury in a criminal proceeding and sentenced to a prison term of 20 years; Generation Now pleaded guilty to RICO charges.)  Soon after he was arrested, AEP, in response to media reports, issued a press release stating that it had made no contributions to Generation Now; however, the Order alleged, the press release was misleading because AEP had indeed made contributions to Generation Now—indirectly through a 501(c)(4) organization, Empowering Ohio’s Economy, Inc., that AEP established and funded. The SEC also charged that AEP “failed to disclose material related party transactions with respect to payments it made to Empowering Ohio in its 2019 Form 10-K,” failed to keep accurate books and records and failed to “devise and maintain a sufficient system of internal accounting controls with respect to the identification and disclosure of material related party transactions.” AEP agreed to pay a civil penalty of $19 million.