Item 1. Legal Proceedings
ITEM 1. LEGAL PROCEEDINGS
The information set forth in Note 18 to the Condensed Consolidated Financial Statements of Koppers Holdings Inc. included in Item 1 of Part I of this report is incorporated herein by reference.
Koppers Holdings Inc. (the “Company”) is cooperating with an investigation by the staff of the Division of Enforcement (the “Division”) of the U.S. Securities and Exchange Commission (“Commission”) into the Company’s public non-GAAP financial metrics disclosures regarding the Company’s debt reduction target and net leverage ratio for Fiscal Year 2019 and the related management of its accounts payable (the “Inquiry”). The Company and several of its current and former officers and employees, including Leroy M. Ball, the Company’s President and Chief Executive Officer and a director of the Company, received subpoenas for information and testimony (the “Subpoenas”), pursuant to a non-public formal order of investigation for the Inquiry dated February 14, 2021.
The Company understands that a former officer of the Company has received a “Wells Notice” from the Division setting forth a preliminary determination by the Division to recommend an enforcement action against the former officer. A Wells Notice is a notice of an intent on the part of the Division staff to recommend an enforcement action and not a finding of wrongdoing. Upon receipt of a Wells Notice, the recipient is afforded an opportunity to present its positions with respect to the Division staff’s recommendations prior to any decision by the Commission on whether enforcement proceedings will be authorized or any finding by the Commission with respect to any wrongdoing. Any enforcement action would need to be approved by the Commission before formally being brought. As of the date of this Quarterly Report on Form 10-Q, neither the Company nor, to the Company’s knowledge, any of its current officers and employees have received from the Division or otherwise a “Wells Notice” setting forth any preliminary determination by the Division to recommend any enforcement action to the Commission.
The Company maintains that the actions of the Company and its current and former officers and employees were appropriate and did not violate the federal securities laws. The Company and its current and former officers and employees are cooperating with the Division in connection with the Inquiry, and the Company’s counsel has engaged in discussions with the Division regarding a potential resolution of this matter. Further, the Company has made productions of information to the Division and made witnesses available for testimony pursuant to the Subpoenas. The Company will continue to comply with the requests of the Division in connection with the Inquiry.
The Company cannot predict the ultimate outcome of the Inquiry and any related legal and administrative proceedings which could include a variety of outcomes including the institution of administrative or civil injunctive proceedings involving the Company and/or current or former employees and/or officers, including the Company’s CEO, Mr. Ball, the imposition of fines and other penalties, remedies and/or sanctions, modifications to business practices and compliance programs, and/or referral to other governmental agencies for other actions. It is not possible to accurately predict at this time when matters relating to the Inquiry will be completed, what if any actions may be taken by the Commission or by other governmental agencies, or the effect that such actions may have on our business, prospects, operating results and financial condition, which could be material.
ITEM 1A. RISK FACTORS
There have been no material changes to the Risk Factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.
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