Sealed Air Corp. , under investigation by federal regulators for its financial practices and audit-firm selection process, is now facing a related Justice Department probe.
The Charlotte, N.C.-based maker of packaging products such as bubble wrap said in a regulatory filing Friday it received a grand jury subpoena seeking information related to the firing of its finance chief and the selection process of its independent audit firm beginning in fiscal year 2015.
Sealed Air in June said it fired Chief Financial Officer Bill Stiehl for cause after receiving subpoenas in 2018 and 2019 from the Securities and Exchange Commission. The regulator sought information related to how the company selected its audit firm as well as information on its accounting for income taxes, financial reporting and disclosures, according to regulatory filings.
Sealed Air switched auditors to Ernst & Young LLP in 2015, according to regulatory filings.
“EY performed its audit work with rigor, objectivity, impartiality and skepticism, in full compliance with all applicable professional standards. We stand by the quality of our work,” the firm said. “We are fully committed to the critical role we play as auditors in meeting the needs of the capital markets, protecting investors, and providing independent assurance with respect to our clients’ financial reporting.”
The subpoena from the U.S. Attorney’s Office for the Western District of North Carolina is the first indication Sealed Air could face criminal charges in addition to a civil enforcement action by the SEC.
Prosecutors convene a grand jury to collect evidence and to decide whether there is probable cause for an indictment. A spokeswoman for the U.S. attorney’s office in Charlotte declined to comment.
An attorney for Mr. Stiehl, Josh Van Kampen, said that Mr. Stiehl would contest the termination and denied there were any grounds, “let alone cause, justifying his abrupt termination.”
During an earnings call Friday, Lori Chaitman, Sealed Air’s head of investor relations, said “We take financial reporting controls and compliance very seriously and are fully cooperating with the regulatory authority.” She said the company wouldn’t comment beyond the filing, which listed the SEC and Justice Department investigations as risk factors.
Ms. Chaitman said the company wouldn’t comment beyond the securities filing, which listed the SEC and Justice Department investigations as risk factors.
In addition to potential legal costs, Sealed Air said that if the audit firm were found not to be independent, the company may have to re-audit past financial statements.
By Maria Armental and Dylan Tokar, The Wall Street Journal