W.R. Grace, Auditors Settle SEC Charges

W.R. Grace & Co. and two partners of its auditor, PricewaterhouseCoopers, on Wednesday agreed to settle Securities and Exchange Commission cases alleging that the chemical company used excess reserves to manipulate its earnings.

The SEC charged that Boca Raton, Fla.-based Grace used as much as $60 million in reserves to smooth reported earnings of its former National Medical Care Inc. dialysis unit between 1991 and 1995. The company sought to bring its reported earnings in line with its targets, the commission contended.

The watchdog agency also alleged that PricewaterhouseCoopers partners Thomas Scanlon and Eugene Gaughan were aware of Grace’s use of the reserves but failed to object.

While neither admitting nor denying the allegations, Grace and the two accountants agreed to be subject to stiffer sanctions for future violations of securities laws. The company also agreed to create a $1-million fund to improve education about financial statements and accounting principles.