In re JAMES F. BRITTAIN

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UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 98294 / September 6, 2023 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21613 
 
In the Matter of 
 
 JAMES F. BRITTAIN,  
 
Respondent. 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS, PURSUANT TO 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER  
   
I. 
 
 The Securities and Exchange Commission (“Commission” or “SEC”) deems it appropriate 
that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the 
Securities Exchange Act of 1934 (“Exchange Act”) against James F. Brittain (“Brittain” or 
“Respondent”).   
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings 
herein, except as to the Commission’s jurisdiction over the Respondent and the subject matter of 
these proceedings, which are admitted, and except as provided herein in Section V, Respondent 
consents to the entry of this Order Instituting Cease-and-Desist Proceedings, Pursuant to Section 
21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist 
Order (“Order”), as set forth below. 
 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that  
 
 
1
 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any 
other person or entity in this or any other proceeding.  

 2 
Summary 
 
1. This matter stems from Brittain’s involvement in Fluor Corporation’s (“Fluor”) 
percentage of completion (“POC”) accounting for a fixed-price construction project on which Fluor 
carried the risk of cost overruns with respect to work within the contract’s scope and not the 
customer.  The project required Fluor to design and build a Floating Production Storage and 
Offloading (“FPSO”) facility for delivery to the Penguins oil and gas field located in the North Sea 
(“Penguins” or the “Penguins Project”).  Immediately following the project’s contract award, Fluor 
experienced cost overruns that worsened over time. 
 
2. For the quarters ending June 30, 2018 and September 30, 2018 (the “Relevant 
Period”), Brittain, President of the Energy & Chemicals (“E&C”) segment of Fluor, was a cause of 
inaccurate project forecasts being generated that failed to include all anticipated costs, thus 
preventing the project from being reported at a loss.  Brittain thereby was a cause of Fluor’s failure 
to maintain a system of internal accounting controls sufficient to account for the Penguins Project in 
accordance with Generally Accepted Accounting Principles (“GAAP”).  These failings resulted in 
Fluor maintaining inaccurate books and records and ultimately in Fluor including materially 
misstated financial statements in periodic reports filed with the SEC for the quarters ending June 30, 
2018 and September 30, 2018.  Brittain was a cause of Fluor’s filing these materially inaccurate 
financial statements in its periodic reports with the SEC. 
 
3. In August 2019, Fluor announced $714 million in pre-tax charges stemming from an 
“operational and strategic review” of sixteen projects, including Penguins.  Prompted by the SEC 
staff’s investigation, Fluor undertook an internal investigation in 2020 that identified material 
weaknesses in its internal control over financial reporting and material errors in its financial 
statements, and resulted in Fluor restating its annual and quarterly financial statements for its fiscal 
year 2016 through the third quarter of 2019, as disclosed in its 2019 Form 10-K filed with the SEC 
on September 25, 2020 (the “Restatement”).  The material weaknesses and errors identified in the 
Restatement were attributable in part to control failures associated with the Penguins Project.  
Fluor’s delayed recognition of the loss on the Penguins Project for two quarters resulted in Fluor 
overstating its net earnings by $17 million (22%) in the second quarter of 2018.   
 
4. As a result of conduct detailed herein, Brittain was a cause of Fluor’s violations of 
Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 13a-13 and 12b-20 
thereunder. 
 
Respondent 
 
5. James F. Brittain, age 64, is a resident of Alberta, Canada.  He served as President 
of the E&C segment at Fluor from 2017 until he retired in May 2019.  He has never been registered 
with the Commission in any capacity. 
 
 
  

 3 
Relevant Entity 
 
6. Fluor Corporation is a Delaware corporation with its principal place of business in 
Irving, Texas.  Since registering its common stock with the SEC under Section 12(b) of the 
Exchange Act in 2000, Fluor has been required to file periodic reports on Forms 10-K and 10-Q 
with the SEC pursuant to Section 13(a) of the Exchange Act and related rules thereunder.  During 
the Relevant Period, the stock traded on the New York Stock Exchange under the ticker symbol 
“FLR.”  Fluor performs engineering, procurement, and construction services worldwide and 
operates through business segments, including E&C. 
 
Background 
 
7. Under GAAP, Fluor accounted for its fixed-price projects using the POC method, 
whereby it was required to periodically recognize the project’s costs as incurred and the revenue as 
a percentage of the work completed to date.  Under this method, each reporting period, a project 
team develops dependable estimates of expected total revenues, total costs, and total project gross 
margin (“PGM”) to arrive at a project’s financial forecast (known as the Estimate at Completion or 
“EAC”).  Upon a loss first being anticipated on a project, the project must immediately recognize 
the entire amount of the loss. 
 
8. To periodically record a project’s EAC, Fluor required use of the Project Margin 
Analysis Report (“PMAR”), which should document project management’s most likely current 
estimate of the project’s revenue, cost, and PGM forecast.  Fluor’s internal accounting controls 
required that Brittain, as President of E&C, along with two other segment officers, provide sub-
certifications to corporate-level management, with each signer representing that, “to the best of our 
knowledge and belief,” the project forecasts represent management’s best estimate, and are in 
compliance with the applicable GAAP and Fluor’s policies.   
 
Penguins Project 
 
9.   In December 2017, the E&C segment of Fluor won a contract for an FPSO project 
with a large international energy company (the “Customer”).  Fluor’s responsibilities under the 
Penguins contract included engineering, design, procurement, selection of subcontractors, 
construction management, fabrication, integration, commissioning, delivery, and handover of the 
FPSO.  Brittain approved the final bid for the Penguins Project.   
 
10. The contract totaled $491.7 million, with an as-sold margin of $33.9 million.  The 
bid was based on Fluor subcontracting fabrication of the FPSO to an offshore engineering, 
procurement, and construction company (“Fabrication Subcontractor”).  This subcontract was a 
significant portion of the Penguins Project, constituting at least 25% of the cost of the overall 
contract.  Although Fluor received a binding bid from the Fabrication Subcontractor for a 
subcontract agreement, it had expired prior to Fluor submitting its final bid to the Customer.  
Accordingly, Fluor had to finalize the subcontract with the Fabrication Subcontractor after Fluor 
signed its fixed-price Penguins contract. 
 

 4 
The Second Quarter 2018 Forecast Inaccurately Reported Penguins as Profitable 
 
11. In May 2018, Fluor personnel compiled forecasts reflecting the best, most likely, 
and worst case financial scenarios for the Penguins Project.  By the middle of the second quarter of 
2018, they concluded that the most likely scenario for the Penguins Project was that it “won’t be a 
break-even scenario, it will be a loss.”     
 
12. As the quarter progressed, the forecast did not improve.  In fact, toward the end of 
the second quarter of 2018, Fluor signed a subcontract with the Fabrication Subcontractor after 
months of negotiations.  The final subcontract terms were more expensive to Fluor than anticipated 
the quarter before and as had been budgeted for in Fluor’s contract bid with the Customer.  
Likewise, the cost of supplies, including steel, suggested the forecast could worsen from the 
project team’s then-current estimate that Penguins would be a loss.  Brittain was aware of these 
increased costs.   
 
13. Nevertheless, after quarter close, Fluor recorded the Penguin Project’s PGM in the 
second quarter of 2018 as $23.5 million.  This PGM was essentially unchanged from the prior 
quarter’s PGM despite changes in circumstances for the Penguins Project, most notably the 
subcontract price with the Fabrication Subcontractor.  That PGM was inaccurate.  Fluor later 
corrected the PGM for the second quarter of 2018 to negative $19.4 million in the Restatement.   
 
14. The exclusion of costs that were known or should have been known from the 
forecast for the Penguins Project led to misstated books and records, and ultimately resulted in 
materially misstated financial statements reported in Fluor’s Form 10-Q for the second quarter 
ended June 30, 2018.  Penguins was in a loss position in the second quarter of 2018, and, therefore, 
to be in accordance with GAAP, Fluor needed to recognize the full amount of the forecasted loss in 
its net earnings that quarter in addition to reversing previously recognized profits.  Since it did not, 
in the second quarter of 2018, Fluor overstated net earnings by $17 million ($20.6 million pre-tax) 
or 22% and overstated the E&C segment profit by 28%.  
 
15. In connection with Fluor’s filing of its financial statements for the second quarter of 
2018 in a Form 10-Q, Brittain , in his capacity as President of the E&C segment, along with two 
other segment officers, signed a sub-certification to Fluor’s Chief Executive Officer (“CEO”) and 
the Chief Financial Officer (“CFO”) certifying that the “[t]he June 30, 2018 forecasts and related 
PMARs for all projects were prepared by project management and each project forecast represents 
management’s best estimate (i.e., most probable outcome) of Fluor’s financial results.”  That 
certification was not accurate.  Brittain was aware of costs and potential costs in the second quarter 
of 2018 that he knew or should have known  reduced the Penguins Project’s reported PGM from 
the prior quarter. 
 
 
 
 
 
 

 5 
The Third Quarter 2018 Forecast Inaccurately Reported Penguins at a Breakeven 
PGM When It was a Loss 
 
16. In the third quarter of 2018, Fluor personnel again compiled forecasts reflecting the 
best, most likely, and worst case scenarios for the Penguins Project.  In August 2018, the project 
team presented a most likely forecast scenario for the Penguins Project of over a $20 million loss.   
 
17. Nevertheless, Fluor recorded the Penguin Project’s PGM in the third quarter of 
2018 as $0.8 million, a reduction of nearly $22 million, but still roughly a breakeven PGM.  Fluor 
continued to delay reporting the project’s loss this quarter, and the exclusion of costs that were 
known or should have been known from the forecasts for the Penguins Project led to misstated 
books and records in the third quarter of 2018.  The most likely forecast at the time showed a loss 
of $19.8 million, as Fluor subsequently amended its financial statements to reflect in the 
Restatement.  As in the second quarter of 2018, the failure to recognize the loss on the project in 
the third quarter was in violation of GAAP.  
 
18. Brittain, in his capacity as President of the E&C segment, along with two other 
segment officers, again signed the E&C segment sub-certification letter to Fluor’s CEO and CFO 
for the third quarter of 2018 containing the same certifications and representations as in the second 
quarter of 2018.  Those representations were not accurate.  Brittain knew or should have known 
that the reported Penguins PGM did not “represent[] management’s best estimate (i.e., most 
probable outcome) of Fluor’s financial results.”   
 
Violations 
 
19. As a result of the conduct described above, Brittain was a cause of Fluor’s 
violations of Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder.  Section 
13(a) of the Exchange Act requires issuers with a class of securities registered pursuant to Section 
12 of the Exchange Act to file such periodic and other reports as the Commission may prescribe 
and in conformity with such rules as the Commission may promulgate. Exchange Act Rule 13a-13 
requires the filing of quarterly reports.  The obligation to file such reports embodies the 
requirement that they be true and correct. See, e.g., SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1165 
(D.C. Cir. 1978), cert. denied, 440 U.S. 913 (1979).  In addition to the information expressly 
required to be included in such reports, Rule 12b-20 of the Exchange Act requires issuers to add 
such further material information, if any, as may be necessary to make the required statements, in 
the light of the circumstances under which they are made not misleading.  .   
 
20. As a result of the conduct described above, Brittain was a cause of Fluor’s 
violations of Section 13(b)(2)( A) of the Exchange Act, which requires an issuer of a security 
registered pursuant to Section 12 of the Exchange Act to make and keep books, records, and 
accounts which, in reasonable detail, accurately and fairly reflect the issuer’s transactions and 
disposition of assets.   
 
21. As a result of the conduct described above, Brittain was a cause of Fluor’s 
violations of Section 13(b)(2)(B) of the Exchange Act, which requires an issuer of a security 

 6 
registered pursuant to Section 12 of the Exchange Act to devise and maintain a system of internal 
accounting controls sufficient to provide reasonable assurances that: transactions are executed in 
accordance with management’s general and specific authorization; transactions are recorded as 
necessary to permit preparation of financial statements in conformity with GAAP or any other 
criteria applicable to such statements, and to maintain accountability for assets; access to assets is 
permitted only in accordance with management’s general or specific authorization; and the 
recorded accountability for assets is compared with the existing assets at reasonable intervals and 
appropriate action is taken with respect to any differences.   
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 
committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), and 
13(b)(2)(B) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder.   
 
B. Respondent shall, within 10 business days of the entry of this Order, pay a civil 
money penalty in the amount of $25,000 to the Securities and Exchange Commission.  If timely 
payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.   
 
Payment must be made in one of the following ways:   
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
James F. Brittain as a Respondent in these proceedings, and the file number of these proceedings; a 

 7 
copy of the cover letter and check or money order must be sent to Carolyn M. Welshhans, Division 
of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.   
 
 C.  Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is 
created for the penalties referenced in paragraph B above.  This Fair Fund may be combined with 
the Fair Fund created in In the Matter of Fluor Corporation, AP File No. 3-21610.  Amounts 
ordered to be paid as civil money penalties pursuant to this Order shall be treated as penalties paid 
to the government for all purposes, including all tax purposes.  To preserve the deterrent effect of 
the civil penalty, Respondent agrees that in any Related Investor Action, he shall not argue that he 
is entitled to, nor shall it benefit by, offset or reduction of any award of compensatory damages by 
the amount of any part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  
If the court in any Related Investor Action grants such a Penalty Offset, Respondent agrees that he 
shall, within 30 days after entry of a final order granting the Penalty Offset, notify the 
Commission’s counsel in this action and pay the amount of the Penalty Offset to the Securities and 
Exchange Commission.  Such a payment shall not be deemed an additional civil penalty and shall 
not be deemed to change the amount of the civil penalty imposed in this proceeding.  For purposes 
of this paragraph, a “Related Investor Action” means a private damages action brought against 
Respondent by or on behalf of one or more investors based on substantially the same facts as 
alleged in the Order instituted by the Commission in this proceeding. 
 
V. 
It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 
523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and admitted by 
Respondent, and further, any debt for disgorgement, prejudgment interest, civil penalty or other 
amounts due by Respondent under this Order or any other judgment, order, consent order, decree 
or settlement agreement entered in connection with this proceeding, is a debt for the violation by 
Respondent of the federal securities laws or any regulation or order issued under such laws, as set 
forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. §523(a)(19). 
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
Secretary 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 98294 / September 6, 2023 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-21613 

 

In the Matter of 

 

 JAMES F. BRITTAIN,  

 

Respondent. 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS, PURSUANT TO 

SECTION 21C OF THE SECURITIES 

EXCHANGE ACT OF 1934, MAKING 

FINDINGS, AND IMPOSING A CEASE-

AND-DESIST ORDER  

   

I. 

 

 The Securities and Exchange Commission (“Commission” or “SEC”) deems it appropriate 

that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the 

Securities Exchange Act of 1934 (“Exchange Act”) against James F. Brittain (“Brittain” or 

“Respondent”).   

 

II. 

 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over the Respondent and the subject matter of 

these proceedings, which are admitted, and except as provided herein in Section V, Respondent 

consents to the entry of this Order Instituting Cease-and-Desist Proceedings, Pursuant to Section 

21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist 

Order (“Order”), as set forth below. 

 

III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that  

 

 
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any 

other person or entity in this or any other proceeding.  



 2 

Summary 

 

1. This matter stems from Brittain’s involvement in Fluor Corporation’s (“Fluor”) 

percentage of completion (“POC”) accounting for a fixed-price construction project on which Fluor 

carried the risk of cost overruns with respect to work within the contract’s scope and not the 

customer.  The project required Fluor to design and build a Floating Production Storage and 

Offloading (“FPSO”) facility for delivery to the Penguins oil and gas field located in the North Sea 

(“Penguins” or the “Penguins Project”).  Immediately following the project’s contract award, Fluor 

experienced cost overruns that worsened over time. 

 

2. For the quarters ending June 30, 2018 and September 30, 2018 (the “Relevant 

Period”), Brittain, President of the Energy & Chemicals (“E&C”) segment of Fluor, was a cause of 

inaccurate project forecasts being generated that failed to include all anticipated costs, thus 

preventing the project from being reported at a loss.  Brittain thereby was a cause of Fluor’s failure 

to maintain a system of internal accounting controls sufficient to account for the Penguins Project in 

accordance with Generally Accepted Accounting Principles (“GAAP”).  These failings resulted in 

Fluor maintaining inaccurate books and records and ultimately in Fluor including materially 

misstated financial statements in periodic reports filed with the SEC for the quarters ending June 30, 

2018 and September 30, 2018.  Brittain was a cause of Fluor’s filing these materially inaccurate 

financial statements in its periodic reports with the SEC. 

 

3. In August 2019, Fluor announced $714 million in pre-tax charges stemming from an 

“operational and strategic review” of sixteen projects, including Penguins.  Prompted by the SEC 

staff’s investigation, Fluor undertook an internal investigation in 2020 that identified material 

weaknesses in its internal control over financial reporting and material errors in its financial 

statements, and resulted in Fluor restating its annual and quarterly financial statements for its fiscal 

year 2016 through the third quarter of 2019, as disclosed in its 2019 Form 10-K filed with the SEC 

on September 25, 2020 (the “Restatement”).  The material weaknesses and errors identified in the 

Restatement were attributable in part to control failures associated with the Penguins Project.  

Fluor’s delayed recognition of the loss on the Penguins Project for two quarters resulted in Fluor 

overstating its net earnings by $17 million (22%) in the second quarter of 2018.   

 

4. As a result of conduct detailed herein, Brittain was a cause of Fluor’s violations of 

Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 13a-13 and 12b-20 

thereunder. 

 

Respondent 

 

5. James F. Brittain, age 64, is a resident of Alberta, Canada.  He served as President 

of the E&C segment at Fluor from 2017 until he retired in May 2019.  He has never been registered 

with the Commission in any capacity. 

 

 

  



 3 

Relevant Entity 

 

6. Fluor Corporation is a Delaware corporation with its principal place of business in 

Irving, Texas.  Since registering its common stock with the SEC under Section 12(b) of the 

Exchange Act in 2000, Fluor has been required to file periodic reports on Forms 10-K and 10-Q 

with the SEC pursuant to Section 13(a) of the Exchange Act and related rules thereunder.  During 

the Relevant Period, the stock traded on the New York Stock Exchange under the ticker symbol 

“FLR.”  Fluor performs engineering, procurement, and construction services worldwide and 

operates through business segments, including E&C. 

 

Background 

 

7. Under GAAP, Fluor accounted for its fixed-price projects using the POC method, 

whereby it was required to periodically recognize the project’s costs as incurred and the revenue as 

a percentage of the work completed to date.  Under this method, each reporting period, a project 

team develops dependable estimates of expected total revenues, total costs, and total project gross 

margin (“PGM”) to arrive at a project’s financial forecast (known as the Estimate at Completion or 

“EAC”).  Upon a loss first being anticipated on a project, the project must immediately recognize 

the entire amount of the loss. 

 

8. To periodically record a project’s EAC, Fluor required use of the Project Margin 

Analysis Report (“PMAR”), which should document project management’s most likely current 

estimate of the project’s revenue, cost, and PGM forecast.  Fluor’s internal accounting controls 

required that Brittain, as President of E&C, along with two other segment officers, provide sub-

certifications to corporate-level management, with each signer representing that, “to the best of our 

knowledge and belief,” the project forecasts represent management’s best estimate, and are in 

compliance with the applicable GAAP and Fluor’s policies.   

 

Penguins Project 

 

9.   In December 2017, the E&C segment of Fluor won a contract for an FPSO project 

with a large international energy company (the “Customer”).  Fluor’s responsibilities under the 

Penguins contract included engineering, design, procurement, selection of subcontractors, 

construction management, fabrication, integration, commissioning, delivery, and handover of the 

FPSO.  Brittain approved the final bid for the Penguins Project.   

 

10. The contract totaled $491.7 million, with an as-sold margin of $33.9 million.  The 

bid was based on Fluor subcontracting fabrication of the FPSO to an offshore engineering, 

procurement, and construction company (“Fabrication Subcontractor”).  This subcontract was a 

significant portion of the Penguins Project, constituting at least 25% of the cost of the overall 

contract.  Although Fluor received a binding bid from the Fabrication Subcontractor for a 

subcontract agreement, it had expired prior to Fluor submitting its final bid to the Customer.  

Accordingly, Fluor had to finalize the subcontract with the Fabrication Subcontractor after Fluor 

signed its fixed-price Penguins contract. 

 



 4 

The Second Quarter 2018 Forecast Inaccurately Reported Penguins as Profitable 

 

11. In May 2018, Fluor personnel compiled forecasts reflecting the best, most likely, 

and worst case financial scenarios for the Penguins Project.  By the middle of the second quarter of 

2018, they concluded that the most likely scenario for the Penguins Project was that it “won’t be a 

break-even scenario, it will be a loss.”     

 

12. As the quarter progressed, the forecast did not improve.  In fact, toward the end of 

the second quarter of 2018, Fluor signed a subcontract with the Fabrication Subcontractor after 

months of negotiations.  The final subcontract terms were more expensive to Fluor than anticipated 

the quarter before and as had been budgeted for in Fluor’s contract bid with the Customer.  

Likewise, the cost of supplies, including steel, suggested the forecast could worsen from the 

project team’s then-current estimate that Penguins would be a loss.  Brittain was aware of these 

increased costs.   

 

13. Nevertheless, after quarter close, Fluor recorded the Penguin Project’s PGM in the 

second quarter of 2018 as $23.5 million.  This PGM was essentially unchanged from the prior 

quarter’s PGM despite changes in circumstances for the Penguins Project, most notably the 

subcontract price with the Fabrication Subcontractor.  That PGM was inaccurate.  Fluor later 

corrected the PGM for the second quarter of 2018 to negative $19.4 million in the Restatement.   

 

14. The exclusion of costs that were known or should have been known from the 

forecast for the Penguins Project led to misstated books and records, and ultimately resulted in 

materially misstated financial statements reported in Fluor’s Form 10-Q for the second quarter 

ended June 30, 2018.  Penguins was in a loss position in the second quarter of 2018, and, therefore, 

to be in accordance with GAAP, Fluor needed to recognize the full amount of the forecasted loss in 

its net earnings that quarter in addition to reversing previously recognized profits.  Since it did not, 

in the second quarter of 2018, Fluor overstated net earnings by $17 million ($20.6 million pre-tax) 

or 22% and overstated the E&C segment profit by 28%.  

 

15. In connection with Fluor’s filing of its financial statements for the second quarter of 

2018 in a Form 10-Q, Brittain , in his capacity as President of the E&C segment, along with two 

other segment officers, signed a sub-certification to Fluor’s Chief Executive Officer (“CEO”) and 

the Chief Financial Officer (“CFO”) certifying that the “[t]he June 30, 2018 forecasts and related 

PMARs for all projects were prepared by project management and each project forecast represents 

management’s best estimate (i.e., most probable outcome) of Fluor’s financial results.”  That 

certification was not accurate.  Brittain was aware of costs and potential costs in the second quarter 

of 2018 that he knew or should have known  reduced the Penguins Project’s reported PGM from 

the prior quarter. 

 

 

 

 

 

 



 5 

The Third Quarter 2018 Forecast Inaccurately Reported Penguins at a Breakeven 

PGM When It was a Loss 

 

16. In the third quarter of 2018, Fluor personnel again compiled forecasts reflecting the 

best, most likely, and worst case scenarios for the Penguins Project.  In August 2018, the project 

team presented a most likely forecast scenario for the Penguins Project of over a $20 million loss.   

 

17. Nevertheless, Fluor recorded the Penguin Project’s PGM in the third quarter of 

2018 as $0.8 million, a reduction of nearly $22 million, but still roughly a breakeven PGM.  Fluor 

continued to delay reporting the project’s loss this quarter, and the exclusion of costs that were 

known or should have been known from the forecasts for the Penguins Project led to misstated 

books and records in the third quarter of 2018.  The most likely forecast at the time showed a loss 

of $19.8 million, as Fluor subsequently amended its financial statements to reflect in the 

Restatement.  As in the second quarter of 2018, the failure to recognize the loss on the project in 

the third quarter was in violation of GAAP.  

 

18. Brittain, in his capacity as President of the E&C segment, along with two other 

segment officers, again signed the E&C segment sub-certification letter to Fluor’s CEO and CFO 

for the third quarter of 2018 containing the same certifications and representations as in the second 

quarter of 2018.  Those representations were not accurate.  Brittain knew or should have known 

that the reported Penguins PGM did not “represent[] management’s best estimate (i.e., most 

probable outcome) of Fluor’s financial results.”   

 

Violations 

 

19. As a result of the conduct described above, Brittain was a cause of Fluor’s 

violations of Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder.  Section 

13(a) of the Exchange Act requires issuers with a class of securities registered pursuant to Section 

12 of the Exchange Act to file such periodic and other reports as the Commission may prescribe 

and in conformity with such rules as the Commission may promulgate. Exchange Act Rule 13a-13 

requires the filing of quarterly reports.  The obligation to file such reports embodies the 

requirement that they be true and correct. See, e.g., SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1165 

(D.C. Cir. 1978), cert. denied, 440 U.S. 913 (1979).  In addition to the information expressly 

required to be included in such reports, Rule 12b-20 of the Exchange Act requires issuers to add 

such further material information, if any, as may be necessary to make the required statements, in 

the light of the circumstances under which they are made not misleading.  .   

 

20. As a result of the conduct described above, Brittain was a cause of Fluor’s 

violations of Section 13(b)(2)( A) of the Exchange Act, which requires an issuer of a security 

registered pursuant to Section 12 of the Exchange Act to make and keep books, records, and 

accounts which, in reasonable detail, accurately and fairly reflect the issuer’s transactions and 

disposition of assets.   

 

21. As a result of the conduct described above, Brittain was a cause of Fluor’s 

violations of Section 13(b)(2)(B) of the Exchange Act, which requires an issuer of a security 



 6 

registered pursuant to Section 12 of the Exchange Act to devise and maintain a system of internal 

accounting controls sufficient to provide reasonable assurances that: transactions are executed in 

accordance with management’s general and specific authorization; transactions are recorded as 

necessary to permit preparation of financial statements in conformity with GAAP or any other 

criteria applicable to such statements, and to maintain accountability for assets; access to assets is 

permitted only in accordance with management’s general or specific authorization; and the 

recorded accountability for assets is compared with the existing assets at reasonable intervals and 

appropriate action is taken with respect to any differences.   

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 

committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), and 

13(b)(2)(B) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder.   

 

B. Respondent shall, within 10 business days of the entry of this Order, pay a civil 

money penalty in the amount of $25,000 to the Securities and Exchange Commission.  If timely 

payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717.   

 

Payment must be made in one of the following ways:   

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

James F. Brittain as a Respondent in these proceedings, and the file number of these proceedings; a 

http://www.sec.gov/about/offices/ofm.htm


 7 

copy of the cover letter and check or money order must be sent to Carolyn M. Welshhans, Division 

of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.   

 

 C.  Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is 

created for the penalties referenced in paragraph B above.  This Fair Fund may be combined with 

the Fair Fund created in In the Matter of Fluor Corporation, AP File No. 3-21610.  Amounts 

ordered to be paid as civil money penalties pursuant to this Order shall be treated as penalties paid 

to the government for all purposes, including all tax purposes.  To preserve the deterrent effect of 

the civil penalty, Respondent agrees that in any Related Investor Action, he shall not argue that he 

is entitled to, nor shall it benefit by, offset or reduction of any award of compensatory damages by 

the amount of any part of Respondent’s payment of a civil penalty in this action (“Penalty Offset”).  

If the court in any Related Investor Action grants such a Penalty Offset, Respondent agrees that he 

shall, within 30 days after entry of a final order granting the Penalty Offset, notify the 

Commission’s counsel in this action and pay the amount of the Penalty Offset to the Securities and 

Exchange Commission.  Such a payment shall not be deemed an additional civil penalty and shall 

not be deemed to change the amount of the civil penalty imposed in this proceeding.  For purposes 

of this paragraph, a “Related Investor Action” means a private damages action brought against 

Respondent by or on behalf of one or more investors based on substantially the same facts as 

alleged in the Order instituted by the Commission in this proceeding. 

 

V. 

It is further Ordered that, solely for purposes of exceptions to discharge set forth in Section 

523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and admitted by 

Respondent, and further, any debt for disgorgement, prejudgment interest, civil penalty or other 

amounts due by Respondent under this Order or any other judgment, order, consent order, decree 

or settlement agreement entered in connection with this proceeding, is a debt for the violation by 

Respondent of the federal securities laws or any regulation or order issued under such laws, as set 

forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C. §523(a)(19). 

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

Secretary