The US Securities and Exchange Commission (SEC) has charged shipping conglomerate Overseas Shipholding Group (OSG) and its former chief financial officer (CFO) Myles R. Itkin with failing to recognize around USD 512 million in tax liabilities in its financial statements.
According to the SEC’s order instituting settled cease-and-desist proceedings, OSG’s credit agreements from 2000 to the second quarter of 2012 contained a provision making OSG’s controlled foreign subsidiary Overseas International Group (OIN) and another subsidiary Overseas Bulk Ships (OBS) “jointly and severally” liable for OSG’s debt.
During this period, OSG and Itkin, who participated in the negotiation of the credit agreements and signed them, failed to recognize OSG’s tax liability despite “significant indicia” that the structure of its credit agreements in effect made OIN a guarantor under the agreements and could trigger tax consequences, according to the SEC.
OSG filed for bankruptcy protection in November 2012.
“In the resolution, OSG neither admits nor denies the SEC’s allegations that the company violated certain provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and related rules,” OSG said.
OSG agreed to pay a USD 5 million penalty, subject to bankruptcy court approval, and Itkin a USD 75,000 penalty.
The agreement with the SEC would also resolve the last remaining claim in the company’s bankruptcy case.
The company said it will file a motion requesting bankruptcy court approval of the resolution with the SEC and will simultaneously request an order closing its bankruptcy case.