The U.S. Securities and Exchange Commission (SEC) has asked a California judge to deny a “motion to dismiss” request issued by View Inc.’s former chief financial officer (CFO) Vidul Prakash. In September 2023, the former CFO urged a U.S. District Court judge from the Northern District of California to toss an SEC lawsuit alleging he knowingly underreported warranty liabilities.
The SEC’s suit claims Prakash failed to ensure View properly accrued for and disclosed more than $20 million in liabilities that it expected to incur to address a manufacturing defect with its “smart” windows.
The suit originates from the 2019 discovery of a defective sealing component in View’s “smart” windows. Court documents state that View’s warranty covered the replacement of the defective windows, but the warranty did not specify coverage of installation costs. However, View officials decided to cover the installation costs as the company sought to establish goodwill.
Prakash was tasked with determining the warranty accrual costs for the manufacturing defect. The SEC states Prakash gathered a finance and accounting personnel team to determine the proper warranty accrual for costs associated with the defective windows. After a review, the team advised View not to “disclose the installation costs as part of the warranty liability because View’s written warranty did not obligate View to pay installation costs.”
Court documents argue Prakash knew his team excluded costs associated with the installation costs and why they did it, but he did nothing to ensure his team considered all the facts or corrected their findings. In fact, Prakash, as the CFO, signed and submitted SEC filings that included the team’s findings, despite being made aware of information that undermined a key assumption of the analysis, the SEC writes. As a result, Jason Bussey, an attorney for the SEC, writes in the court documents that View repeatedly provided investors and the public with materially inaccurate financials.
The SEC sued View originally for 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. 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 decided not to impose civil penalties against View after the company self-reported its failure to disclose the liabilities. Instead, the SEC charged Prakash with violating negligence-based antifraud, proxy disclosure and books and records provisions of the federal securities laws. The SEC seeks permanent injunctions, civil penalties and Prakash’s disbarment as an officer and director.