In July, the Securities and Exchange Commission (SEC) charged View Inc.’s former chief financial officer Vidul Prakash for failing to tell investors about projected warranty-related liabilities. The failure to disclose information coincided with View going public in 2021 through a merger with CF Finance Acquisition Corp.
The SEC charged Prakash with violating negligence-based antifraud, proxy disclosure and books and records provisions of the federal securities laws. The commission seeks permanent injunctions, civil penalties and Prakash’s disbarment as an officer and director.
Prakash is urging SEC officials to dismiss the suit, claiming the facts listed in the charges fail to prove that he acted negligently. Prakash writes in court documents the SEC must plead facts showing that he failed to exercise due care. He says the SEC cannot, and as a result, the complaint must be dismissed.
The charges against Prakash were included in a settlement between the SEC and View. The company was sued after failing to disclose $28 million in projected warranty-related liabilities. According to the SEC, View reported warranty liabilities of $22 million to $25 million to the commission between December 2020 and May 2021. The liabilities pertained mostly to projected costs to manufacture replacements for certain defective windows.
However, SEC officials say View failed to include the additional cost of shipping and installing the new windows. View should have reported total warranty liabilities of $48-$53 million. The SEC ultimately did not impose civil penalties against View after the company self-reported its failure to disclose the liabilities.
Prakash argues that the SEC’s allegations that he did not tell investors about the liabilities fail to show that he acted negligently. The SEC alleges that Prakash gathered a team of finance and accounting personnel to determine the proper warranty accrual for costs associated with the defective windows. The accounting team advised View not to “accrue for and disclose the installation costs as part of the warranty liability because View’s written warranty did not obligate View to pay installation costs.”
Prakash’s motion to dismiss states that the complaint does not allege that he disregarded the accounting team’s advice and performed an erroneous analysis of the accrued warranty. He says the SEC’s allegations must show that he participated in deceptive acts, which he did not.
Prakash also writes that the SEC’s order to bar him from serving as an officer or director should be dismissed; he states that “the plaintiff’s failure to allege facts that would support a bar requires dismissal.”