The Audit Committee of the Chemours Co.'s (CC) Board of Directors conducted an internal review, revealing a lack of transparency among senior management members placed on administrative leave last week due to suspicious accounting and compensation practices.
The Audit Committee concluded that the members of senior management who were placed on administrative leave last week violated the Company's Code of Ethics applicable to the Chief Executive Officer, the Chief Financial Officer, and the Controller relating to the "promot[ion of] full, fair, accurate, timely and understandable disclosure."
Chemours noted that the findings of the internal review do not affect the preliminary, unaudited estimates of operating results and other financial measures as of and for the year ended December 31, 2023.
The Audit Committee's determinations, based on the review conducted with the assistance of independent outside counsel, included, among other things, that the members of senior management who were placed on administrative leave last week engaged in efforts in the fourth quarter of 2023 to delay payments to certain vendors that were originally due to be paid in the fourth quarter of 2023 until the first quarter of 2024, and to accelerate the collection of receivables into the fourth quarter of 2023 that were originally not due to be received until the first quarter of 2024.
The Audit Committee found that the individuals engaged in the efforts in part to meet free cash flow targets that the Company had communicated publicly, and which also would be part of a key metric for determining incentive compensation applicable to executive officers. There was a lack of transparency with the Company's Board of Directors by the members of senior management who were placed on administrative leave with respect to the actions.
The Audit Committee review relates to an anonymous report made to the Chemours Ethics Hotline that was not elevated to the General Counsel or the Audit Committee, until the matter was identified in connection with the Company's year-end 2023 external audit process.
The Audit Committee determined that the failure resulted from inadequate controls and procedures regarding the evaluation and escalation of hotline reports and poor judgment by certain employees who handle the intake of such reports.
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