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RBC Bearings Waits Year to Disclose Federal Fraud Probe
Second DOJ fraud inquiry in a year follows the manufacturer overstating Operating Income three consecutive years.
June 5, 2023
The federal fraud probe into RBC Bearings Corporation (RBC), a maker of bearings for the aerospace and industrial sectors, has now stretched into at least a second year. After going undisclosed for more than a year— the company received its first civil investigative (CID) demand March 9, 2022— RBC revealed it received a second CID March 21, 2023.
The U.S. Department of Justice (DOJ) is probing whether the company violated the False Claims Act (FCA) lied to the federal government to get money during the pandemic:
“The investigation concerns allegations that the Company submitted false claims in connection with (i) certifying that the Company’s employees were eligible for unemployment insurance benefits and pandemic relief and worked reduced hours and (ii) received grant proceeds in violation of the FCA.”
The company says the investigation is in its “early stages”.
RBC received the initial CID nearly three months before filing last year’s annual report but did not disclose it. Nor did the company disclose the matter, based on our search, in its subsequent quarterly reports.
Though the company did not say, it appears to us the second CID is what prompted RBC to disclose the probe in its latest annual report.
Last year, RBC filed an amendment to its annual report after discovering an accounting error involving stock based compensation (SBC) granted to its CEO and COO. The company did not accurately recognize SBC expense as rapidly as it should have which resulted in RBC:
—Overstating 2022 Operating Income by $8.9 million, or 7.35%
—Overstating 2021 Operating Income by $3.2 million, or 2.79%
—Overstating 2020 Operating Income by $7.4 million, or 4.95%
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