SEC v. COMPLAINT

1

CHRISTOPHER BRUCKMANN
(SDNY Bar No. CB-7317)
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
100 F Street, N.E.
Washington, D.C. 20549
(202) 551-5986
[email protected]

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SECURITIES AND EXCHANGE COMMISSION,

                                                              Plaintiff,
v.
COMPLAINT

Civil Action No. 21-CV-10366

JURY TRIAL DEMANDED
AMERICAN RENAL ASSOCIATES HOLDINGS,
INC., JONATHAN L. WILCOX, JASON M.
BOUCHER, and KAREN J. SMITH,

Defendants.

 Plaintiff Securities and Exchange Commission (“SEC”), for its Complaint against
Defendants American Renal Associates Holdings, Inc. (“ARA”), Jonathan L. Wilcox
(“Wilcox”), Jason M. Boucher (“Boucher”) and Karen J. Smith (“Smith”) (collectively “the
Defendants”), alleges as follows:
O
VERVIEW

1. This is an accounting fraud case arising from a multimillion dollar scheme by three
former ARA finance executives—Wilcox, Boucher, and Smith—to improperly manipulate
certain revenue adjustments to make it appear that ARA’s financial performance was better than
it actually was.

2

2. The fraudulent scheme lasted from approximately January 1, 2017 through at least
November 9, 2018 (the “relevant period”). The scheme entailed entering a series of revenue
adjustments to make it appear that ARA had beat, met, or come close to meeting various
predetermined financial metrics, when in fact its financial performance was materially worse.
Wilcox, Boucher, and Smith intentionally, recklessly, and negligently engaged in acts, practices,
and courses of conduct related to those revenue adjustments that caused ARA to overstate its
revenue, net income, and other financial metrics throughout this period.
3. After ARA received an inquiry from the SEC, ARA undertook an internal
investigation that resulted in the company restating its financial statements for year-to-date 2018,
all of 2017, and earlier periods in a Form 10-K filed with the SEC on September 5, 2019 (the
“Restatement”). In the Restatement, ARA admitted that it had “concluded that our previously
issued consolidated financial statements and other financial data for the Restated Periods should
be restated and should no longer be relied upon.”
4. Among other things, the Restatement reflected that ARA had overstated its net
income for 2017 by more than $17 million and for the first three quarters of 2018 by more than
$22 million, which respectively represent overstatements of more than 30% and 200%.
5. The Restatement also acknowledged material weaknesses in ARA’s internal
controls regarding revenue, approval of journal entries, monitoring controls, and other areas.
6. Wilcox served as ARA’s Chief Financial Officer from 2011 through September
2018, when he resigned from ARA. Boucher served as ARA’s Chief Accounting Officer from
2011 through September 2018, when he was promoted to Chief Financial Officer. Smith served
as ARA’s Controller from 2007 to September 2018, when she was promoted to Vice President of
Finance. While working at ARA during the relevant period, Wilcox and Boucher were the

3

primary persons responsible for revenue recognition. Smith also had responsibility for revenue
recognition, including ensuring that ARA’s practices and SEC filings complied with required
rules.
7. ARA’s business model is to partner with doctors across the United States to
develop, own, and operate dialysis clinics as joint ventures. The joint ventures are structured
such that the doctor-partners handle all patient care, and ARA handles billings, collections,
revenue management, and dealing with patient insurance. A major component of ARA’s revenue
during the relevant period was insurance reimbursement for dialysis treatments.
8. Because ARA could not always be certain what rate different insurance companies
would pay for dialysis treatments, revenue recognition at ARA involved two critical steps: First,
ARA made an initial estimate of revenue that it would receive. ARA personnel referred to this
initial estimate as a “contractual allowance.” The second step was to update the initial estimate
after receiving information about the amount ARA was actually paid. These later updates, which
could be positive or negative, were called “topside adjustments” at ARA, and these topside
adjustments were at the center of the fraud perpetrated by Wilcox, Boucher, and Smith.
9. Accounting standards—and ARA’s own internal controls—called for ARA to base
its topside adjustments on patient-level payment information. Obtaining this patient-level detail
required making a comparison of the actual payments received for a particular patient’s course of
treatment to the prior estimates of what those payments would be.
10. Rather than base ARA’s topside adjustments on patient-level data, Wilcox,
Boucher, and Smith implemented a fraudulent scheme, in which Wilcox and Boucher agreed on
how much overall revenue they wanted ARA to have for a month or quarter, and then Boucher
and Smith had staff enter different topside adjustments at specific clinics until this predetermined

4

number was met. This decision by Wilcox to use a top-down approach to book the revenue he
wanted ARA to have, rather than building revenue up from actual patient-level data, was the
heart of the topside scheme.
11. Over the course of this topside scheme, Wilcox, Boucher, and Smith used different
metrics and different practices, but the overall scheme of manipulating topside adjustments to
achieve pre-determined results remained the same. When Wilcox left ARA in September 2018,
his involvement in the fraudulent scheme ceased, but Boucher and Smith were each promoted
and carried on with the topside scheme.
12. The financial metrics that Wilcox, Boucher, and Smith targeted included Days Sales
Outstanding (“DSO”), which is a measure of how quickly ARA was collecting payment for its
treatments, and Revenue Per Treatment (“RPT”).
13. Among the inherently deceptive practices that Wilcox, Boucher, and/or Smith
engaged in in furtherance of the topside scheme were:
a. Entering topside adjustments that were not based on any analysis of patient-
level detail, but instead were based on mathematical calculations to achieve a
pre-determined DSO figure;
b. Manipulating which patients’ payment histories were analyzed to make it
appear that ARA had more revenue than it did so it could appear to meet a
predetermined RPT figure;
c. Holding identified topside adjustment revenue in a “cookie-jar” called the
“Contractual Adjustments” spreadsheet and only recognizing the revenue when
needed;
d. Manufacturing false and misleading documents to provide to ARA’s external
auditors in an effort to conceal the ongoing topside scheme; and
e. Misstating or omitting descriptions of topside adjustments in discussions with
ARA’s CEO, Audit Committee and external auditors.

5

14. Wilcox, Boucher, and Smith each personally benefitted from the scheme by a)
receiving bonuses that were inflated by ARA’s misstated metrics, b) selling stock at inflated
prices, and/or c) receiving promotions to more senior positions at ARA.
15. Through the actions of Wilcox, Boucher, and/or Smith, as well as more junior
employees acting at the direction of Wilcox, Boucher, and/or Smith, ARA also engaged in this
fraudulent scheme.
J
URISDICTION AND VENUE
16. The SEC brings this action, and this Court has jurisdiction, pursuant to Sections 20
and 22 of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t and 77v], Sections 21
and 27 of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u and 78aa],
and 28 U.S.C. § 1331.
17. The Defendants directly or indirectly, singly or in concert with others, made use of
the means or instruments of transportation and communication in interstate commerce, or of the
mails, or of the facilities of a national securities exchange in connection with the acts,
transactions, and practices alleged in this Complaint.
18. During the period of the fraud, ARA was engaged in the offer and/or sale of
securities. This included offerings through stock options plans in which ARA employees
(including ARA employees who were not involved in the fraud alleged in this Complaint)
exercised options to purchase stock from ARA. At least some of these purchases occurred in the
third quarter of 2018, when many of the false statements described in this Complaint had already
been made in ARA’s filings with the SEC and elsewhere. Additionally, on July 18, 2017, ARA
filed a Form S-3 Registration with the SEC that stated it “relates to the possible resale, from time
to time, by the selling stockholders identified in this prospectus of up to 19,017,413 shares of our

6

common stock.” The selling stockholders identified in that Form S-3 included ARA’s majority
shareholder at the time. ARA’s stock was also offered and sold by the public on the New York
Stock Exchange throughout the period of the fraud.
19. During the period of the fraud, Smith was engaged in the offer and/or sale of
securities. On August 9, 2018, when many of the false statements described in this complaint had
already been made in ARA’s filings with the SEC and elsewhere, Smith sold over 8,200 shares
of ARA stock.
20. Venue is proper in this district pursuant to Securities Act Section 22(a) [15 U.S.C. §
77v(a)] and Exchange Act Section 27 [15 U.S.C. § 78aa] because certain of the acts, practices,
and courses of conduct constituting the violations alleged in this Complaint occurred in this
district, including that from April 21, 2016 until January 25, 2021 ARA’s common stock traded
on the New York Stock Exchange, which has its headquarters in this district, and the materially
false and misleading statements contained in ARA’s public filings and other investor materials
were communicated to persons located in this district.
D
EFENDANTS
21. American Renal Associates Holdings, Inc. is a national provider of dialysis
services, which is incorporated in Delaware and has its principal place of business in Beverly,
Massachusetts. ARA’s securities were registered pursuant to Section 12(b) of the Exchange Act
and traded on the New York Stock Exchange under the ticker “ARA” from April 21, 2016 until
January 25, 2021, when ARA was acquired by a private equity firm.
22. Jonathan L. Wilcox, age 48, resides in Reading, Massachusetts. He was a certified
public accountant (“CPA”) licensed in Massachusetts from February 17, 2000 until June 30,
2017. Wilcox was ARA’s Chief Financial Officer (“CFO”) from 2011 to September 2018. He is

7

currently the COO at a private hospital. During the SEC’s investigation, Wilcox provided sworn
testimony to the SEC staff.
23. Jason M. Boucher, age 49, resides in Boston, Massachusetts. He has been licensed
as a CPA in the state of Massachusetts for several periods between approximately 2000 and the
present. Boucher was ARA’s Vice President of Finance and Chief Accounting Officer (“CAO”)
from 2011 to September 2018. Boucher was ARA’s Vice President of Finance and CFO from
October 2018 to March 2019, when he resigned at ARA’s request in connection with the
company’s announcement of its planned restatement. He is currently the Controller at a private
IT infrastructure company. During the SEC’s investigation, Boucher provided sworn testimony
to the SEC staff.
24. Karen J. Smith, age 45, resides in Newburyport, Massachusetts. She has been a
CPA in Massachusetts since 2004. Smith was ARA’s Controller from 2007 to August 2018 and
promoted to serve as Vice President of Finance from September 2018 to April 2019, when she
resigned. She is currently the Controller at a private medical services company. While working at
ARA, Smith sometimes used her maiden name, Karen Veilleux, for professional purposes
including in her email address at ARA. During the SEC’s investigation, Smith provided sworn
testimony to the SEC staff.
25. While working at ARA during the relevant period, Wilcox, Boucher, and Smith
were Officers of ARA.
O
THER RELEVANT PERSONS
26. Former CEO. The Former CEO was Chief Executive Officer of ARA from
September 1999 to January 25, 2021. During the SEC’s investigation, the Former CEO provided
sworn testimony to the SEC staff.

8

27. Former COO. The Former COO was Chief Operating Officer of ARA from at
least 2011 until December 31, 2016. Prior to that, the Former COO served as ARA’s CFO.
Starting before 2011 and continuing until December 31, 2016, the Former COO was the primary
person responsible for revenue recognition and topside adjustments at ARA.
28. The Audit Firm. The Audit Firm is a PCAOB-registered accounting firm that
audited ARA’s financial statements both during the relevant period and for several years prior.
F
ACTUAL ALLEGATIONS
I. BACKGROUND
A. Governing Accounting Principles and Relevant Accounting Terminology
29. As a United States-based company with publicly traded stock from April 2016
through January 2021, ARA was required to conform with accounting principles generally
accepted in the United States, or “GAAP,” in compiling and filing its annual and interim
financial statements with the SEC.
30. GAAP is a series of authoritative standards set out by policy boards (including the
Financial Accounting Standards Board, or “FASB”), that standardizes and regulates the
definitions, assumptions, and methods used in accounting across industries, and seeks to ensure
that a company’s financial statements are complete, consistent, and comparable.
31. FASB’s Accounting Standards Codification (“ASC”) is the current source of
GAAP. The relevant ASCs here changed from 2017 to 2018, but ARA’s accounting did not
conform with either standard.
32. For 2017, ASC 954-605 (and its subsections) was the relevant governing source of
GAAP for revenue recognition. ASC 954-605-25-6 states that revenues should be estimated
when the service is performed even though actual amounts may not become known until a later
date, such as when payment is received.  Pursuant to ASC 954-605-35-1, revisions to these

9

estimated revenues based on this new information should be recorded in the period in which the
new information was obtained.
33. For 2018, ASC 606 (and its subsections) was the relevant governing source of
GAAP for revenue recognition. ASC 606-10-32-8 states that variable consideration shall be
estimated either based on the expected value or most likely amount, and updated faithfully based
on the circumstances at the end of each reporting period pursuant to ASC 606-10-32-14.
According to ASC 606-10-32-42, these circumstances include the resolution of uncertain events,
and such changes should be reflected in the period of change per ASC 606-10-32-43.
34. Days Sales Outstanding, or DSO, is a calculation that reflects how many days, on
average, it takes a company to collect payment after a service is rendered. As an illustration, a
DSO of 30 days would mean that it takes a company, on average, 30 days to collect payment for
a sale or service. DSO is a function of revenues and accounts receivable. The larger the accounts
receivable compared to a given amount of revenues, the greater the DSO, and a larger DSO is
often an indication that a larger portion of revenues has remained uncollected. Topside
adjustments that increase (or credit) revenue will therefore lower DSO but increase metrics
including net income, RPT, EBITDA, Adjusted EBITDA, and Adjusted EBITDA less Non-
Controlling Interests (“Adjusted EBITDA-NCI”).
35. “EBITDA” means Earnings Before Interest, Taxes, Depreciation and Amortization.
It is a measure of profitability that adds back the cost of capital investments, debt-related costs,
and taxes, and it is a common financial metric used by analysts to evaluate companies’ financial
performance. ARA also used two related financial metrics, “Adjusted EBITDA” and “Adjusted
EBITDA-NCI.” Adjusted EBITDA is a non-GAAP financial metric that adjusts the EBITDA
figure for stock-based compensation and certain other costs, as described in ARA’s Proxy

10

Statements filed with the SEC. Adjusted EBITDA-NCI is a non-GAAP financial metric that uses
the Adjusted EBITDA measurement and further backs out non-controlling interests, which is the
proportion of the company owned by minority shareholders in the business.
B. Background on American Renal Associates and its Financial Metrics
36. As discussed above, ARA’s business model centered on operating dialysis clinics
primarily through joint ventures.
37. While ARA was a public company, it made filings with the SEC, including annual
reports on Form 10-K and quarterly reports on Form 10-Q. ARA also disseminated other
information about the company and its financial performance to the public through investor
conference calls, investor presentations, and through its website.
38. ARA, analysts who followed ARA, and investors all used various financial metrics
to track ARA’s performance. Among the critical metrics for ARA were DSO, RPT, Adjusted
EBITDA-NCI, and the number of new clinics opened.
ARA Touted its Low DSO Figures During the Relevant Period
39. ARA calculated DSO by dividing the current net accounts receivable balance by the
average daily revenue for the preceding three months. ARA sometimes referred to DSO using
the phrase “accounts receivable, net of allowances, represented [number] days of revenue.”
40. DSO is a common metric in the dialysis services industry and was an important
metric for ARA. As the Former CEO explained, DSO was “important because it’s an indicator of
your performance with regard to billing and collections and cash flow.”
41.  From an investor perspective, a consistently low DSO indicates a company is
successfully collecting payment for its goods and services, while a high or increasing DSO could
indicate problems with the business in terms of cash flow or collections processes. Doctors who
were in partnership or considering partnering with ARA were also interested in DSO, because a

11

low DSO would indicate that ARA was effectively handling insurance collections and revenue
management, and getting doctors paid faster.
42. ARA included a discussion of DSO in its SEC filings, earnings calls, and other
materials to show it was outperforming its competitors. For example, in ARA’s Q2 2017
earnings call, Wilcox explained that ARA’s DSO for Q2 2017 was “38” and that it “remains
relatively stable.”
43. ARA also publicized and touted its low and stable DSO, including that its DSO was
consistently better than its two major competitors by wide margins of 25% to 45%. For example,
in investor presentations published on the company website, in a section entitled “Strong and
Consistent Cash Flow Generation,” ARA touted that its “[r]evenue cycle capabilities lead to low
DSOs.”
44. ARA also advertised its low DSO in marketing to potential physician partners. For
example, in a presentation shown to potential partners in early 2017, ARA favorably compared
its purported DSO of “39” to its two major competitors who had DSOs of “60” and “54”:

12

45. Thus, by claiming a low DSO, ARA had an advantage over its competitors when
marketing to potential partners. And, by gaining more doctor-partners, ARA could show growth
in the number of new clinics it operated, which was important to investors.
46. Boucher knew that ARA promoted its DSO as being lower than its competitors,
including to potential new doctor-partners, and that DSO was one of the key metrics that ARA
disclosed in SEC filings and investor materials. Boucher believed that ARA’s low DSO gave it a
competitive advantage as compared to its competitors because, as he stated during his
investigative testimony to the staff, “Doctors wanted to hear that the money is collected timely.”
47. Smith also knew that DSO was an important metric for ARA and was aware that
DSO was published in ARA’s SEC filings.
Consolidated DSO Versus Clinic DSO
48. ARA set up a system where clinic and consolidated DSO appeared to work at cross-
purposes. At a consolidated level, a topside adjustment that increased ARA’s revenue decreased
its overall DSO. At a clinic level, a topside adjustment that increased revenue should have
decreased that specific clinic’s DSO. However, because the revenue portion of topside
adjustments was excluded from the calculation of clinic-level DSO, those clinic-level
calculations would show that a topside adjustment to a particular clinic that increased that
clinic’s revenue (and increased ARA’s consolidated revenue) would increase the clinic’s DSO
but still would decrease the consolidated DSO.
RPT and Adjusted EBITDA-NCI Were Critical Metrics for ARA
49. Adjusted EBITDA-NCI was one of the most important financial metrics for ARA
during the relevant period, and was one of the key metrics tracked by investment analysts who
followed ARA’s stock.

13

50. RPT is another important financial metric in the dialysis services industry,
measuring a company’s revenue on a per-patient, per-treatment basis. Investors, market analysts,
and doctor-partners closely monitored ARA’s RPT. Analysts considered it a key metric in
understanding the financial health and success of health care companies like ARA.
51. During his investigative testimony with the SEC staff, Wilcox identified RPT and
Adjusted EBITDA-NCI as some of the most important metrics for ARA’s investors.
52. In addition to its externally reported RPT, ARA closely tracked an internal core
RPT, which excluded certain items, and was often referred to as “RPT w/o S&P.” Wilcox,
Boucher, and Smith were all involved in checking whether RPT w/o S&P was achieving internal
budget predictions, and directed or caused revenue adjustments designed solely to make RPT
w/o S&P equal the budgeted number. Even if RPT w/o S&P was not publicly reported, revenue
adjustments made solely to achieve this internal number affected other publicly reported
numbers, including Net Income and Adjusted EBITDA-NCI, as well as the publicly-reported,
overall RPT.
C. Background on Wilcox, Boucher, and Smith and Their Responsibilities at
ARA
53. Wilcox was ARA’s CFO from April 2011 to September 2018. From January 1,
2017 through his resignation in September 2018, he was the ARA employee in charge of revenue
recognition and topside adjustment decisions.
54. As ARA’s CFO, Wilcox was responsible during the relevant period for ensuring
that revenue was reported accurately, that ARA’s SEC filings were accurate and complete, that
the accounting procedures were in accordance with GAAP, that ARA’s books and records were
accurate, and that internal accounting controls were operating effectively. Wilcox signed and
certified many of the materially false and misleading periodic reports filed with the SEC.

14

55. Boucher was ARA’s Vice President of Finance from May 2011 to September 2018.
He concurrently served as ARA’s Chief Accounting Officer from May 2015 until March 2019,
and he was ARA’s CFO from October 2018 until March 2019, when he resigned at ARA’s
request. From January 1, 2017 through September 2018, Boucher had a senior decision-making
role at ARA with respect to revenue recognition and topside adjustments, and he directed other
employees to make accounting journal entries regarding these issues. In October and November
2018, Boucher was the ARA employee in charge of revenue recognition and topside adjustments
decisions. Boucher signed at least two materially false and misleading SEC filings.
56. As Chief Accounting Officer and later CFO, Boucher was responsible during the
relevant period for overseeing accounting procedures, making sure that ARA’s books and
records followed GAAP, ensuring that the SEC filings were accurate and complete, and making
sure that the accounting procedures were consistent with the procedures laid out in the
company’s internal controls.
57. Smith was ARA’s Controller from August 2009 until September 2018. She was
then promoted to be ARA’s Vice President of Finance from October 2018 to April 2019. During
the relevant period, Smith had a managerial and decision-making role with respect to revenue
recognition and topside adjustment decisions, and she directed other employees to make
materially false and misleading accounting journal entries regarding these issues.
58. As Controller and Vice-President of Finance, Smith’s responsibilities during the
relevant period included management of the general ledger, SEC financial reporting, revenue,
and other accounting functions at ARA. She had oversight of the preparation of SEC documents
and accuracy of reporting information and was responsible for accounting policies and the

15

application of GAAP to revenue recognition. She was responsible for ensuring that ARA’s
financial reporting was in compliance with GAAP.
D. Background on ARA’s Topside Accounting
ARA’s Stated Topside Accounting Methodology
59. As with other companies in the healthcare service industry, the people to whom
ARA provides a service are very rarely the parties paying for the service. ARA’s payors include
Medicare, Medicaid, insurance companies, and other commercial payors. As these payors
generally do not pay the clinic’s full billing rate for dialysis treatments, ARA is required to
record different amounts of revenue for each treatment. For Medicare, Medicaid, and insurance
companies with which ARA had a contract, this was a straightforward process, as there was a
pre-determined rate that ARA would receive for each treatment, and ARA could book revenue at
this known rate.
60. For some commercial insurers, however, ARA did not have a contract and did not,
therefore, have an agreed upon rate. For these non-contracted commercial insurers, ARA used a
two-step process of initial revenue estimates (i.e., “contractual allowances”) and subsequent
adjustments (i.e., “topside adjustments” or, colloquially, “topsides”).
61. ARA’s stated methodology was to bill non-contracted commercial insurers at its
usual and customary rate, and then book the full amount of that rate as revenue.  ARA would
then simultaneously book an offsetting contractual allowance to reduce that revenue down to
what ARA estimated it would actually collect. This initial estimate was based primarily on
ARA’s history with the insurance company, but could include other factors.

16

62. Once ARA actually collected from the insurer, if the actual payment did not match
the initial estimate, ARA’s processes (and GAAP) called for it to make a revenue adjustment to
true up the initial estimate to the amount actually collected.
63. ARA’s official stated methodology for determining topside adjustments, as
described in the company’s internal accounting controls, was based on a detailed patient-level
analysis. ARA documented its internal accounting controls related to topside adjustments in a
process narrative for revenue that was adopted in July 2016 (the “Revenue Controls”). As CFO,
Wilcox was responsible for the adoption and implementation of these controls, and Boucher was
a named process owner. As a process owner, Boucher reviewed the Revenue Controls for the
purpose of verifying their accuracy. In her role as Controller, Smith was also responsible for
ARA’s accounting policies and the application of GAAP to revenue recognition.
64. The Revenue Controls refer to topside adjustments as “True Ups” and read, in
relevant part:

65. Under the Revenue Controls, ARA accounting personnel were to first examine
DSO on a clinic-by-clinic basis and determine which clinics had DSOs that were unusually high
or low compared to ARA’s claimed typical DSO of “40.” These “outlier” DSOs were not a sole
reason to make topside adjustments, but were instead an indication of which clinics ARA should

17

examine on the patient-level, as they were more likely to need topside adjustments based on
patient-level collection information. ARA’s revenue group were to then perform a detailed
analysis of patient-level collections (called a “waterfall”) at these outlier clinics. The waterfall
entailed looking at the payment history for each patient with a non-contracted commercial
insurer and analyzing any over- or under-payments. If the patient-level data showed that a clinic
had collected more (or less) cash than the revenue initially booked, this represented a potential
positive (or negative) revenue adjustment, which ARA was to book as a topside adjustment
through a journal entry in its general ledger. ARA’s written policies did not provide that topside
adjustments should be made based on DSO alone.
66. Moreover, ARA’s internal controls stated that “[a]ll journal entries require
supporting documentation. Support for recurring and general journal entries resides on the
Finance drive.” Accordingly, all topside adjustments should have had supporting documentation
that was maintained by ARA.
ARA’s Actual Topside Process Prior to 2017
67.   Prior to 2017, the Former COO was primarily responsible for revenue recognition,
including making the initial contractual allowances and then determining whether any topside
adjustments were necessary. The Former COO worked with ARA’s accounts receivable
department to analyze historical payments for the non-contracted insurers in order to determine
the initial estimate for each treatment. This action does not allege fraudulent conduct during the
period prior to the Former COO’s resignation from ARA on December 31, 2016, though ARA’s
failure to devise and maintain a system of internal accounting controls, and the individual
defendant’s aiding and abetting of that, extend back to at least July 2016, if not earlier.
68. ARA had a monthly closing process to determine final entries on its books and
records for each month. At ARA, this typically took place in the first few weeks of the following

18

month (so the January close would take place in early to mid-February). Topside adjustments
were typically made as part of the closing process. Prior to 2017, during the closing process, the
Former COO would conduct a review to determine whether ARA should record topside
adjustment for its clinics. The results of this review were only documented in the form of
handwritten notes of what the topside adjustments should be, and did not include any supporting
documentation of the analysis he performed that went into determining each topside adjustment.
No one at ARA reviewed the Former COO’s topside adjustments.
69. The Former COO resigned from ARA on December 31, 2016, but he agreed to
serve as a consultant to ARA for up to six months. For the topside adjustments for December
2016, Boucher emailed the Former COO on January 23, 2017 with a list of proposed topside
adjustments (increasing total revenue by $3.15 million) that Boucher planned to book. The
attached list of proposed topside adjustments included only positive topside adjustments, with a
note for each that “Dso is below 40 days.” This note indicated that Boucher based the revenue
increases solely on DSO.
70. For the topside adjustments for January 2017, Wilcox and Boucher asked the
Former COO to propose topside adjustments, and he did so in a manner similar to what he had
done previously—proposed handwritten topside adjustments that were emailed to Boucher on
February 27, 2017.
71. No one at ARA knew how the Former COO had determined topside adjustments or
took sufficient efforts to determine this. Even during the later restatement process, ARA was
unable to determine the specific details of how the Former COO had determined topside
adjustments in 2016 and earlier.

19

72. Throughout 2016, 2017, and 2018, Wilcox, Boucher, and Smith did not know how
the Former COO had determined the topside adjustments when he was responsible for those
adjustments.
II. The Topside Scheme in 2017 and 2018

A. Under Wilcox, Boucher, and Smith, ARA Manipulated Its Revenue to Hit a
Predetermined Target for DSO
73. Following the Former COO’s resignation, Wilcox and Boucher took over primary
responsibility for revenue recognition. Smith also became involved in the revenue recognition
process and revenue recognition decisions at this time, and she had responsibility for supervising
the revenue recognition manager hired by ARA a few months later.
Wilcox, Boucher, and Smith Did Not Know How
Topside Adjustments Had Been Handled Previously
74. Wilcox and Boucher developed their own method and process for revenue
recognition and topside adjustments. As Boucher explained in his sworn investigative testimony:
Q:    Is it fair to say you kind of came up with your own method, but it was based on
the materials you saw [the Former COO] asking for?
A:    Yeah. It took me a period of time, but I developed my own process.
Q:    And you’re not aware of whether the process that you used is the process that
[the Former COO] used?
A:    Correct . . .
75. Similarly, as Wilcox admitted to the SEC staff during the investigation, he also did
not know how the Former COO determined the topside adjustments to input:
Q:    And so [the Former COO] was responsible for determining the amount of the
top-side adjustments?

A:    Yes.

Q:    How would he determine the amount of the top-side adjustments?

20

A:    I don’t know.

Q:    Did DSO play a role in determining the amount of the top-side adjustments?

A:    For what period?

Q:    For [the Former COO]. Under [the Former COO].

A:    I don’t know.

Q:    Was DSO one of the things that he looked at in determining the amount of top-
side adjustments for a clinic?

A:    I don’t know what [the Former COO] looked at.
76. Wilcox and Boucher could have but did not sufficiently consult with the Former
COO regarding this issue.
Wilcox and Boucher Developed an Improper “Top-Down” System
for Topside Adjustments
77. Instead, Wilcox and Boucher developed their own system for topside adjustments,
and their system was little more than a fraudulent scheme wherein Wilcox, Boucher, and Smith
booked millions of dollars in topside adjustments that were not based on patient-level detail, but
instead booked to meet predetermined financial metrics.
78. The topside scheme developed by Wilcox and Boucher had three steps, which were
undertaken on a monthly basis. First, Boucher made some initial topside adjustments on his own.
79. Second, Wilcox and Boucher met and determined the “correct” amount of topside
revenue to take for the company on a consolidated basis. This determination was made by
“triangulating” between various metrics and deciding how much they should adjust revenue
upward or downward. This “top-down” or “top consolidated” approach was not based on patient-
level detail. There was no written explanation of this process, written support for the method, or
documentation of the monthly determination. In his investigative testimony to the SEC staff,
Wilcox explained these first two steps as follows:

21

So, Jason [Boucher] would make an estimate based on what I believe to be prior
month’s run rates or experience and so, he would already book topsides on his
own. And then, when it came to me, Jason [Boucher] and I would book or
calculate or figure out what the correct revenue was, we needed to book those
topsides for.
80. Third, Boucher, after deciding with Wilcox what the “correct” revenue figure was,
then allocated the consolidated topside adjustment amount among ARA’s various clinics by
having Smith and junior personnel acting at her direction enter topside adjustments to equal what
Wilcox and Boucher had determined ARA’s revenue should be. In allocating the topside
adjustments, Boucher and Smith examined the clinics’ DSO, and if they were significantly
higher or lower than “40,” they assigned a revenue amount to those clinics to get their DSO
closer to that target.
81. According to Boucher’s sworn testimony, Wilcox knew that Boucher was making
DSO-based entries that did not have patient-level support. While not admitting that he knew
Boucher’s topside adjustments lacked patient-level support, even Wilcox has conceded that he
did not know the basis, if any, for Boucher’s entries. Wilcox was, therefore, at least reckless
and/or negligent in failing to ascertain the bases for these adjustments to revenue.
82. Wilcox and Boucher hid the fact that they were using this top-down approach from
the Former CEO, who was not aware that Wilcox and Boucher used this approach until during
the investigation that led to the Restatement.
83. Wilcox and Boucher’s decision to use this top-down approach, not based on any
patient-level detail, was highly unreasonable and represented an extreme departure from the
standards of ordinary care. The danger of misstating a company’s financials when revenue is
based only on consolidated-level analytics, rather than on actual patient-level information, was
either known to them or so obvious that they must have been aware of it.

22

84.  Wilcox and Boucher failed to review or check information such as waterfall
analyses containing actual patient-level detail that they had a duty to monitor. They also engaged
in practices that contained obvious signs of fraud, as described above and below. Wilcox and
Boucher knew, or were reckless or negligent in not knowing that this top-down approach would
cause ARA to misstate its DSO, Net Income, Operating Income, Adjusted EBITDA-NCI and/or
other important financial metrics in filings with the SEC and other statements to investors.
B. Wilcox, Boucher, and Smith Booked Topside Adjustments to Make it Appear
ARA Had a DSO Near 40 and Did Not Base them on Patient-Level Support
Wilcox, Boucher, and Smith All Directed Unsupported,
Round-Number, Topside Adjustments
85. Throughout the relevant period, Wilcox, Boucher, and Smith made an effort to
make it appear that ARA had a DSO at or near “40,” at both the consolidated and clinic level.
This target DSO number was the basis for many topside adjustments in 2017 and 2018.
86. A significant number of topside adjustments in 2017 were made in round dollar
amounts—typically in increments of $25,000—based solely on efforts to manipulate each
clinics’ DSO; they were not based upon examinations of actual collections or patient-level detail.
The only support for many of these entries at the time that they were made was an entry in a
spreadsheet noting that they were based on “DSO.” This violated ARA’s internal control that
required supporting documentation for each journal entry.
87. On October 27, 2017, an ARA employee sent Smith an updated version of ARA’s
monthly close process noting that as part of the monthly close, this employee would “do DSO
Adjustments [and] [s]end to Jason [Boucher]/Karen [Smith] for review” (emphasis in original).
The “DSO Adjustments” described in the monthly close process that were sent to Boucher and
Smith to be reviewed were topside adjustments based solely on achieving a DSO near “40.”

23

Smith also directed people who worked for her at ARA to make topside adjustments solely based
on achieving this desired DSO, on both the clinic level and the consolidated level.
88. As discussed above, ARA set up a system where clinic and consolidated DSO
appeared to work at cross-purposes, because a topside adjustment to increase revenue
simultaneously decreased consolidated DSO but made it appear that the relevant, affected
clinic’s DSO had increased. Nevertheless, Wilcox, Boucher, and Smith attempted to keep both
consolidated DSO and individual clinic DSO near “40.” This resulted in the Defendants taking
unusual steps to perpetrate the topside scheme.
89. For example, according to ARA’s Revenue Controls, a clinic with a DSO
significantly different from “40” should be examined to see if there were topside adjustments
that should be taken. Logically, a clinic with a high DSO has many more days of unrecognized
revenue than expected, and the payments to the clinic should be examined to see if additional
revenue should be recognized. In contrast, a clinic with a low DSO has fewer days of
unrecognized revenue than expected, and the revenue recorded should be examined to see
whether it should be decreased.
90. ARA’s revenue recognition manager, at times, attempted to follow this procedure.
For example, on April 11, 2018 he emailed Smith and suggested nine topside adjustments. Four
of the adjustments called for recognizing additional revenue at clinics with DSOs higher than
“40”; five of the adjustments called for reducing revenue at clinics with DSOs lower than “40.”
All of these adjustments were based on patient-level detail. In response, Smith countermanded
his topside adjustments, instructing that two of the revenue increases should be eliminated saying
“I would not book anything – why increase DSO,” since the DSO was already above 40. She
also ordered him to reduce two other positive topside adjustments at clinics with DSOs higher

24

than “40.” For each of the five revenue decreases, Smith instructed “I would not book anything –
why decrease DSO,” since each clinic already had a DSO below “40.” Smith ignored the patient-
level detail that called for these adjustments. Below is an excerpt of a portion of the spreadsheet
attached to the email showing Smith directing the revenue recognition manager not to take the
identified adjustments:

91. In his investigative testimony, while denying that ARA made accounting
adjustments in order to achieve a specific DSO number, Wilcox admitted that targeting a specific
DSO was wrong:
Q:    Mr. Wilcox, would it have been incorrect to target DSO of 40?
A:    It would have incorrect to have any targets. The business did what it did.
Q:    Explain why that is.
A:    The revenue and cash -- because DSO is an end result. DSO is AR divided
revenue in days. So, if the AR and revenue is what it is, then the DSO is what it
is. So, if the AR is correct and the revenue is correct, then the DSO is what it is.
92. Wilcox also admitted in his testimony that making an entry to target a specific
metric violated ARA’s internal controls: “If someone was making a target and making an entry
to get to a target versus understanding the business and making those entries then, yes. It would
have been a violation of the controls. Internal controls.”

25

93. But targeting DSO is what Defendants did, as Smith admitted to the SEC staff:
Q:    And so you continued to use a target of DSO at 40 in looking for topsides?
A:    Yes.
94. Wilcox knew it was wrong to base a topside solely on the DSO of a clinic, but
Smith admitted that is precisely what ARA did.
95. At times in 2017, Boucher asked members of the finance group to create patient-
level analyses—called “waterfalls”—to support some of the topside adjustments that had already
been made to achieve certain DSO targets. Boucher, however, did nothing to verify that such
post-hoc waterfalls were actually created or that any such reconciliation of the waterfalls’ results
were undertaken. Many, if not most, of the topside adjustments recognized in 2017 did not have
any patient-level waterfall support, either when they were made or after the fact. Thus, not only
did Boucher fail to adhere to the proper system of basing topside adjustments on patient-level
detail, he also failed to even verify the entries with patient-level detail after the fact. And he
violated ARA’s internal control requiring supporting documentation for journal entries.
96. From January 2017 to July 2017, ARA regularly made significant amounts of
round-dollar adjustments to revenue based on their DSO target and other financial metrics. In
each month, the net effect of these round-dollar adjustments was to increase revenue by more
than $1,000,000, and sometimes more than $2,700,000. Across this seven-month period, these
adjustments increased ARA’s reported revenue by more than $9,500,000.
97. Boucher was aware of the continued use of round-dollar adjustments: on September
15, 2017, Boucher sent an email to Smith and others attaching a spreadsheet that included
numerous round-dollar adjustments.
98. Wilcox personally directed specific topside adjustments in order to achieve certain
DSO targets. For example, on June 27, 2017, he emailed Smith and another ARA employee and

26

directed “Please book a $200,000 top-side to [the] Hazleton [clinic] and $125,000 top-side to
[the] Lakewood [clinic]. DSO is too low there.”  Smith knew that Wilcox’s request was a
violation of ARA’s internal controls, but she did not do anything to correct or address that
violation.
The Topside Adjustments Targeted a DSO of “40,”
but “40” Was Not ARA’s Average Historical DSO
99. Contrary to the statement in the Revenue Controls, ARA did not have a historical
average DSO of 40. ARA’s S-1 and Amended S-1s, filed with the SEC in connection with its
April 2016 Initial Public Offering, show that ARA’s historical DSO was not “40,” but in fact
fluctuated between “40” and “48” from 2012 to 2015. Wilcox, Boucher, and Smith knew, or
were reckless or negligent in not knowing, that ARA’s historical DSO was not “40.”
C. The Defendants Adopted Other Improper Practices in the Topside Scheme
100. In addition to recognizing topside adjustments discussed above, ARA, Wilcox,
Boucher, and Smith employed a number of other improper accounting practices as part of this
topside scheme. This included a) banking identified topside adjustments for use in future
quarters, b) spreading out topside adjustments across multiple months, including across different
quarters, and c) finding and/or creating offsetting topside adjustments between clinics in order to
have a net zero effect on overall revenue and DSO.
101. During the SEC’s investigation, Smith admitted that there were occasions in which
identified topside adjustments were not taken in the month identified. On at least one occasion,
Wilcox asked Smith not to record identified revenue without providing a reason, and Smith did
as instructed.
102. There was also a practice at ARA of booking a topside adjustment at one clinic and
then booking an offsetting adjustment for another clinic. For example, on June 2, 2017, Boucher

27

emailed an ARA employee and directed: “Can you please book $50k a month for the next 4
months for each clinic (North Main and Central Columbia) one increase one decrease.”
103. In another example, on June 14, 2017, an ARA employee informed Boucher that
there was $1.4 million in identified topside adjustments at one clinic, but Boucher instructed that
ARA should only book $500,000 of it.
104. Wilcox, as CFO and a CPA, knew, or was reckless or negligent in not knowing that
the practices described above were improper.
105. Boucher understood that revenue must be timely recorded in the period it is
identified. Thus, Boucher knew, or was reckless or negligent in not knowing, that the practices
described above were improper.
106. Smith also understood that revenue must be timely recorded in the period it is
identified. Thus, Smith also knew, or was reckless or negligent in not knowing that the practices
described above were improper.
D. The Topside Scheme Expands to Include a Revenue “Cookie Jar”
107. Over the course of 2017-2018, ARA’s topside adjustment process evolved, but
improper accounting practices persisted. In the spring of 2017, ARA hired a revenue recognition
manager. The revenue recognition manager reported to Smith, who reported to Boucher. For
some matters, the revenue recognition manager worked directly with Boucher and was trained by
Boucher on the process of booking topside adjustments based upon targeting DSO.
The “Contractual Adjustments” Spreadsheet
108. Under the revenue recognition manager, the revenue group began to prepare more
patient-level waterfall analyses, and some topside adjustments were based on specific patient
over- or under-payments identified by such analyses.

28

109. However, ARA continued to target a DSO near “40” and typically only booked
enough topside adjustments to get DSO close to target both on a company-wide basis and for
individual clinics. Thus, over- and under-payments were identified by the revenue recognition
manager in the waterfall process, but they were not recorded as topside adjustments.
Additionally, Boucher and Smith also continued to instruct the revenue recognition manager to
book topside adjustments, again in $25,000 increments, that were not based upon any actual
patient-level analysis in order to achieve the target DSO for the given clinic.
110. In the fall of 2017, in an effort to more efficiently identify over and under-
collections across all clinics and to respond to Boucher and Smith’s requests to identify topside
adjustments in order to achieve the target DSO for the company, the revenue recognition
manager created an Excel spreadsheet called “Contractual Adjustments.” The Contractual
Adjustments spreadsheet was used to track all patient-level over- and under-collections that had
been identified (and confirmed as appropriate for recognition), as well as whether they had or
had not yet been booked by ARA as topside adjustments.
111. Over time, the amount of over- and under-collections identified but not yet booked
continued to increase, and the spreadsheet acted as a “cookie jar” from which ARA could find
topside revenue when needed. As of July 2018, ARA had identified $35.7 million in net over-
collections related to services performed in Q2 2018 or earlier, but had only recorded $29.6
million by the end of Q2 2018. The remaining $6.1 million, comprised of $10.2 million in un-
booked over-collections and $4.1 million in un-booked under-collections, was carried forward
into future quarters by means of the cookie jar Contractual Adjustments spreadsheet.

29

Boucher and Smith Directed Which Topside Adjustments
ARA Should Book from the Cookie Jar
112. On a monthly basis, the revenue recognition manager reviewed patient cash
collections and added the significant over- and under-collections to the cookie jar spreadsheet.
He then reached out to ARA’s accounts receivable department to determine whether ARA
expected to be able to keep the overpayments and whether ARA expected to be able to collect
any more cash for the underpayments—i.e., whether each over- or under-payment should be
recorded as a topside. However, in accordance with the instruction to target a particular DSO, the
revenue recognition manager would propose to Smith and Boucher that ARA book only
particular adjustments from the cookie jar that aligned with that goal.
113. Smith or Boucher reviewed these proposals and made the final decisions as to
which adjustments to book. These topside adjustments were then marked off in the cookie jar
spreadsheet as booked, leaving an ongoing list of unbooked over- and under-collections for
future use. Boucher also continued to request, at times, that additional topside adjustments be
booked, which were not tied to particular patient payments and were typically in $25,000
increments, in order to bring DSO closer to “40.’ These ad hoc adjustments were also tracked on
the cookie jar spreadsheet.
114. ARA, by and through Boucher and Smith, continued to use the Contractual
Adjustments spreadsheet to spread identified revenue across multiple months. For example in
November 2017, the revenue recognition manager highlighted to Smith that “You can tell the
adjustment is spread over 3 months because the ‘Month Booked’ column (column J) has 10, 11,
12,” referring to the fact that a particular topside adjustment was spread over October, November
and December.

30

115. The April 11, 2018 email exchange between the revenue recognition manager and
Smith, discussed above, is indicative of the way ARA improperly used the cookie jar. The
revenue recognition manager suggested nine topside adjustments based on patient-level detail. In
response, Smith explained that after reviewing the revenue adjustments proposed from the
cookie jar, she wanted certain of the adjustments reversed out--i.e., not booked but instead held
for future use, because of the negative effect booking the adjustments would have on DSO.
116. In another example, an August 18, 2018 email between Smith, Boucher and another
ARA employee regarding closing out the books for July 2018 discusses topside adjustments that
had been identified for a particular clinic but not taken. The other ARA employee wrote: “All but
25K of it was taken in April. I'm suggesting to not take the 25K this month, and I can look into it
for August and see if I can take the full adjustment then. Are you okay with this, rather than
having adjustments span multiple months?” Boucher and Smith agreed, and ARA spread the
identified revenue across two quarters.
117. In that same August 18, 2018 email chain, Boucher instructed Smith and the other
ARA employee to hold off on booking identified topside adjustments as revenue. As Smith
explained in her sworn testimony during the SEC’s investigation, this instruction violated
GAAP:
Q:    So Jason Boucher was asking for the proposed amount of topside to be
decreased because of the effect that it would have on DSO?
A:    That’s what it looks like from what I see here.
Q:    And this was after revenue had already been identified and confirmed and
proposed at topside that should be taken?
A:    I believe so.
Q:    Do you believe that that’s compliant with GAAP?
A:   No.

31

Q:    What would happen to the revenue in the yellow -- what would happen to the
revenue remaining that had been identified here but was not taken at Jason
[Boucher]’s request?
A:    I don’t recall.
Q:    Wouldn’t that revenue be treated as unbooked revenue that could be taken at a
later time?
A:    Yeah, it could.
118. All of these practices with respect to the cookie jar violated ARA’s then-existing
internal controls, as described in the Revenue Controls. The use of a cookie jar to take or hold
back revenue is at odds with the Revenue Controls’ required procedures.
E. The Topside Scheme Expands Again to Include Targeting RPT
119. Beginning in the spring of 2018, ARA, Wilcox, Boucher, and Smith used ARA’s
improper topside process not just to target DSO, but also to achieve a specific target for
consolidated RPT.
120. Like many companies, ARA had a budget that established various goals for
different financial metrics for each quarter and year.
121. During the relevant period, Wilcox was primarily responsible for developing the
budget, which was then approved by other ARA senior leadership and ARA’s Board of
Directors.
122. ARA’s budget included a budget for RPT in both 2017 and 2018. This RPT budget
was based in part of actual performance for the prior year and in part on other factors.
123. Wilcox tracked ARA’s performance versus budget, including its RPT budget.
124. Shifts in ARA’s patient base over time resulted in a larger percentage of ARA’s
patient base using lower-paying in-network and managed care coverage, as opposed to higher-

32

paying out-of-network commercial coverage. As a result, by 2018, ARA’s management was
particularly concerned about ARA’s RPT dropping.
125. Also in or around 2018, Medicare and Medicaid changed how they paid for two
medications used in connection with dialysis treatments, which also affected ARA’s RPT.
Because of this change, personnel at ARA often focused the internal core RPT figure, which
excluded those two drugs, sometimes referring to this metric as “RPT w/o S&P” (“S&P”
referring to the names of the drugs).
126. As Smith testified during the SEC’s investigation, ARA used the budget RPT as the
basis for making certain topside adjustments:
Q:    And did you also continue to target budget RPT in determining topsides to take
as well?
A:    I believe so, yes.
127. And, in an email to another ARA employee on October 17, 2018, regarding revenue
comments from Boucher, Smith complained that Boucher “changed the story on me a few times
over this year, so it’s been frustrating.....first it was trying to meet budget RPT w/o S&P (he will
not admit this) along with DSO.”
Boucher and Smith Direct ARA Employees to “Find” More Revenue
128. Boucher knew that ARA used RPT, or RPT w/o S&P, as a targeted metric in the
topside adjustment process in May 2018. In mid-May 2018, Boucher instructed Smith to find
enough revenue in topside adjustments to achieve ARA’s budgeted RPT w/o S&P, which Smith
calculated would require finding $3 million in topside adjustments. On the afternoon of May 10,
2018, the revenue recognition manager emailed Smith that he had identified $1.8 million in
topside adjustments under their standard DSO targeting approach. In response, Smith emailed the
revenue recognition manager, “Can you please find another $1-1.2m in topside?”

33

129. Smith knew that to “find” this additional revenue, the revenue recognition manager
would have to conduct a manipulated review where he examined payments at clinics that were
likely to show revenue increases and ignored payments at clinics that were likely to show
revenue decreases.
130. Alarmed at the request to find a specific amount of additional revenue without any
accounting basis, the revenue recognition manager asked Smith to confirm that he correctly
understood her request. Smith expressed anger about the revenue recognition manager’s
questioning her directive and his reluctance to fulfill the request. Fearful for his job, the revenue
recognition manager used the Contractual Adjustment cookie jar to find another $1.2 million in
revenue through topside adjustments.
131. Later that night, Smith informed Boucher by email that they had the $3.0 million in
topside needed to reach ARA’s budgeted RPT w/o S&P, and noted that they “could backoff
$0.2m if you wanted” while still achieving this metric. ARA’s financial records show that
Boucher and Smith did, in fact, “back-off” approximately $95,000, thereby meeting the budget
RPT w/o S&P goal with an extra approximately $100,000 in revenue remaining in the cookie jar
for future use.
132. Eight days after questioning the request to “find” more revenue, the revenue
recognition manager was fired.
133.  After the revenue recognition manager was fired, and through at least August 2018,
the finance group continued, at Boucher and Smith’s direction, and under Wilcox’s watch, to
search for revenue to book as topside adjustments in order to achieve a target DSO and budget
RPT w/o S&P.

34

134. By July and August 2018, ARA had patient-level information to support its revenue
adjustments and reported this in its SEC filing for the third quarter of 2018. Nevertheless, ARA,
principally through Boucher and Smith continued to take a “top-down” approach by using a
target RPT w/o S&P to determine the amount topside adjustments to make. Boucher knew, or
was reckless or negligent in not knowing that, this approach violated GAAP and would result in
ARA reporting inaccurate and misleading financial numbers in its SEC filings and elsewhere.
135. Smith never questioned the process of targeting budget RPT w/o S&P for topside
adjustments, nor asked why the practice was being adopted. Over time, Smith found it difficult to
identify as much revenue through topside adjustments as was required to meet the target RPT
w/o S&P, and became frustrated by the adjustments needed to find revenue—in some months
totaling several million dollars in additional revenue. Still, she never questioned the decision to
target RPT w/o S&P. Smith knew, or was reckless or negligent in not knowing that, this
approach violated GAAP and would result in ARA reporting inaccurate and misleading financial
numbers in its SEC filings and elsewhere.
136. Although RPT w/o S&P was not publicly reported by ARA, overall RPT was
reported. The Restatement shows that the scheme to manage RPT w/o S&P affected overall RPT,
as the Restatement included new figures for ARA’s RPT in Q2 2018, decreasing from $379 to
$359, a 5.6% decrease, and Q3 2018 decreasing from $364 to $355, a 2.5% decrease.
Wilcox, Boucher, and Smith Drove a Radical Increase
in ARA’s Use of Topside Adjustments
137. Although ARA had used topside adjustments for many years (and GAAP required
the use of some topside adjustments), the net amount of topside adjustments, both as a total and
as a percentage of ARA’s Net Income, greatly increased when Wilcox, Boucher, and Smith took
over responsibility for topside adjustments in 2017, and again in 2018.

35

138. As the chart below shows, as a percentage of Net Income, ARA’s topside
adjustments in 2017 were more than double the highest figure from the preceding three years,
and more than triple the historical average over that same period. The 2018 topside adjustments
were larger still. Moreover, the topside adjustments in 2017 and 2018 were not just larger than
the preceding years as a percentage of Net Income, they were also larger as raw totals. For
example, the average total topside adjustments for 2014 through 2016 was approximately $7.6
million. The 2018 topside adjustments were $31,609,292, more than four times that amount—
and only represented the three quarters of adjustments before ARA began to investigate and halt
this practice following an inquiry from the SEC.

Total Net
Topside
Adjustment
Net Topside Adjustment as
% of ARA’s Reported Net
Income
Net Topside Adjustment as
% of ARA’s Restated Net
Income
2014 $6,290,000                      7.63%                       7.61%
2015 $2,550,000                      2.74%                       2.66%
2016 $14,011,429                     15.89%                     13.78%
2017 $25,141,210                     33.22%                     43.25%
Q1-Q3 2018 $31,609,292                     92.20%                   279.90%
Wilcox and Boucher Failed to Correct a Significant Deficiency
Related to the Topside Scheme
139. Additionally, although ARA publicly touted its competitively low DSO and its
effective revenue cycle management, billing, and collection, in actuality ARA had a significant
number of old uncollected receivables for years, reflecting failures in its billing, collection, and
revenue cycle management. The Audit Firm had identified ARA’s failure to resolve this large
amount of older receivables as a significant internal control deficiency since at least 2011 and
continued to identify it as a deficiency every year through 2018. The Audit Firm also warned
ARA every year that the volume and value of these uncollected old receivables increased the risk
of misstating revenue. Wilcox and Boucher were aware of this deficiency and that it remained

36

unremediated through 2018. Their failure to remediate this deficiency is further evidence of their
intent, recklessness and/or negligence with respect to misstating ARA’s financial information.
F. Wilcox, Boucher, and Smith Concealed the Topside Scheme from the Audit
Firm.
140. In order to prevent discovery of ARA’s improper accounting practices, Wilcox,
Boucher, and Smith misled the Audit Firm regarding the topside scheme.
Wilcox, Boucher, and Smith Failed to Disclose Their
Topside Adjustment Practices to the Audit Firm
141. ARA, Wilcox, Boucher, and Smith never disclosed to the Audit Firm the process by
which Wilcox and Boucher determined a consolidated topside amount and then allocated topside
adjustments to individual clinics based on their DSO target. Instead, ARA finance department
personnel represented to the Audit Firm that ARA performed a detailed patient- or payor-level
analysis of cash collections before making a topside adjustment. Wilcox, Boucher, and Smith
took no efforts to ensure that the Audit Firm had a proper understanding of ARA’s topside
process; in fact, they actively concealed it.
142. ARA represented in its internal documents and to the Audit Firm that DSO was
only used in the topside adjustment process to determine clinics for which it would conduct a
further detailed cash collections analysis and that the topside adjustments were based solely on
the results of this detailed analysis. Smith knew that ARA provided the Audit Firm with the
Revenue Controls procedure, but Smith also knew that the Revenue Controls did not accurately
describe the actual method that ARA used for topside adjustments, at least for the large portion
of topside adjustments in 2017 that were designed to manage DSO and had no patient support.
Similarly, Boucher never told the Audit Firm that ARA was using a process for topside entries
that was not based on patient-level information, and despite being the process owner for the
Revenue Controls procedure, he did not take sufficient steps to ensure it was accurate. Also,

37

Wilcox never told the Audit Firm about his top-down method of determining ARA’s topside
adjustments, and did not take sufficient efforts to ensure that his top-down method was reflected
in the Revenue Controls or any other documents provided to the Audit Firm.
143. Likewise, ARA, Wilcox, Boucher, and Smith never disclosed to the Audit Firm the
practices of targeting budget RPT in making topside adjustments, banking revenue in a cookie
jar spreadsheet, spreading out revenue over months or quarters, or finding or creating offsetting
topside entries.
Boucher and Smith Manufactured False and Misleading Supporting Documents
in Response to an Audit Request About Topside Adjustments
144. Additionally, when the Audit Firm conducted testing of topside journal entries as
part of its 2017 audit, ARA, principally through Boucher and Smith, created false and misleading
support for many of these journal entries in order to mislead the Audit Firm that there was, in
fact, patient-level support for every adjustment.
145. As part of its audit of ARA’s 2017 financial statements, in January 2018, the Audit
Firm sent to Smith and the revenue recognition manager a list of topside adjustments that they
wanted to “test.” The Audit Firm intended to examine the contemporaneous documentary
support that ARA had for these topside adjustments. This audit request consisted of a list of 37
“credit” (or revenue increase) topside adjustments ranging in amounts from $25,000 to $700,000
and 17 “debit” (or revenue decrease) topside adjustments ranging in amounts from $2,717 to
$750,000. Boucher understood that the Audit Firm was looking for detailed support including
patient-level information and/or information with patient dates of service.
146. Smith and Boucher instructed the revenue recognition manager and his team to
locate the support for each of the selected journal entries. However, for many of the selected
entries, the topside adjustment had been made in order to hit the DSO target, and thus the only

38

supporting documents were handwritten notes or lists, which merely documented the topside
adjustment to book but provided no details or information supporting the topside adjustment.
Smith and Boucher instructed their staff to withhold from the Audit Firm these handwritten notes
and lists of topside adjustment amounts and to instead manufacture patient-level support for the
topside adjustments. Smith and Boucher knew that the patient-level support they asked their staff
to create did not exist at the time that the topside adjustments were made. Smith and Boucher
also knew that the handwritten notes and other withheld documents were the actual,
contemporaneous support for the topside adjustments.
147. At least two of the “credit” selections and one of the “debit” selections related to the
January 2017 close and were supported only by the handwritten notes of the Former COO.
148. The handwritten notes should have been turned over, as Wilcox admitted during the
SEC’s investigation: “If I were to assume that was the only support that was provided for the
entry at the time the entry was booked, then that is -- that handwritten entry is what had -- is
what should be, at a minimum, provided to the auditors.”
The Support Was Not Only Post Hoc, But Fake
149. Smith and Boucher did not tell the Audit Firm that they ordered ARA employees to
create support for journal entries that did not exist when the Audit Firm made the request.
150. Worse still, as explained in detail below, the support that Boucher and Smith had
the revenue recognition manager and his team create was not just after-the-fact; in many
instances they had no way of knowing whether the patient-level detail being provided was
actually what the topside adjustments had been based on. Stated another way, Boucher and Smith
directed their staff to manufacture fake support to make it appear that ARA had based certain

39

topside adjustments on patient-level data when, in fact, that data had not been the basis for those
topside adjustments.
151. After identifying all the selected journal entries for which ARA lacked support,
Smith and Boucher directed their staff to prepare retroactive waterfalls for each clinic. These
backward-looking waterfalls identified patient-level under- and over- payments at the time the
journal entry was made. However, in many instances, the identified patient-level over- and
under-payments did not add up to the journal entry that had been recorded. Thus, Smith and
Boucher instructed their staff to cherry-pick a sub-set of the identified patient-level over- or
under-payments to get as close as possible to the amount of the journal entry that had been
recorded months earlier.
152. After reviewing the adjustments for which the Audit Firm wanted support, the
revenue recognition manager noted the difficulties ARA would have in providing support for
some of them. He emailed Smith on February 1, 2018, and listed the following problems,
identifying the selections by their numbering on the audit request:

153. Thus, for the Audit Firm’s sixth request, which was a March 2017 topside
adjustment that increased revenue by $25,000, the topside adjustment was based solely on DSO
at the time it was made. ARA did subsequently look for patient-level detail in June (which was in
the following quarter), but that patient-level detail did not actually support the topside adjustment
that had been made. Accordingly, Smith and Boucher directed the revenue recognition manager

40

to create fake support for this topside adjustment to conceal the topside scheme from the Audit
Firm, the Former CEO, ARA’s Board of Directors, ARA’s Audit Committee, and investors.
154. Similarly, the Audit Firm’s seventh request was a March 2017 topside adjustment
that increased revenue by $25,000 and was based solely on DSO. While ARA, principally
directed by Smith and Boucher, compiled patient-level detail at the time, that detail did not
support the topside adjustment. Accordingly, Smith and Boucher directed the revenue
recognition manager to create fake support for this topside adjustment to conceal the topside
scheme from the Audit Firm, the Former CEO, ARA’s Board of Directors, ARA’s Audit
Committee, and investors.
155. For the 11
th
 and 16
th
 selections, which were $225,000 and $175,000 increases to
revenue, there was simply no support to be found. So Smith and Boucher directed the revenue
recognition manager to create fake support that could be provided to the Audit Firm.
156. Boucher and Smith did not care whether or not the patient-level support
subsequently located by the revenue recognition manager was the actual basis for the selected
topside adjustments, as long as the amounts added up to be close enough that they could
convince the Audit Firm that it was the support. In fact, many of the entries were originally made
by Boucher, and he was well aware there was no patient-level support at the time of the entry.
For other entries, which were suggested by the Former COO when Boucher and Wilcox
consulted with him in early 2017, Smith has admitted that she and Boucher simply speculated
about the possible basis for the entries:
Q:    So when the support is being created for [the Audit Firm], it’s not just being
created after the fact. People are just taking guesses at what [the Former COO]
might have looked like; is that fair?

A:    Yeah, we were taking a shot at like he may have been looking at this.

41

157. When compiling the fake support, the revenue recognition manager (and other
junior ARA employees working at his direction) were instructed to cherry-pick patient data until
they were able to come up with a total that came as close to the DSO-based number as possible.
Since they could not actually equal the round-number DSO-based adjustments, even when using
the cherry-picked data, they described any differences as “various immaterial amounts” to
conceal from the Audit Firm the fact that this support was created after the fact and based on
cherry-picked data.
158. After Boucher and Smith reviewed and finalized the purported support, Boucher
asked Smith to do a final review of the support and send it to the Audit Firm. Smith sent the
information in Excel spreadsheets to the Audit Firm. Boucher and Smith did not inform the
Audit Firm that the purported support did not exist at the time the journal entries were made and
was manufactured in response to the Audit Firm’s requests. Importantly, this was not just an
after-the-fact cover-up. The topside scheme was still ongoing, and the manufacture of these fake
documents was a critical part of enabling the scheme to continue on a going-forward basis.
159. Boucher has admitted that he understood that the Audit Firm would have wanted to
know that they were creating documents that did not exist in order to provide support for the
audit. Indeed, compiling after-the-fact support based on cherry-picked data and providing it to
auditors as though it were the actual, contemporaneous support for accounting decisions hampers
auditors’ ability to perform a meaningful audit.
160. The manufactured support provided to the Audit Firm included the statement
“Originally based on analytics - built better processes through out [sic] the year and add patient
details.” This confusing and oblique statement, if intended to alert the Audit Firm that the
document and support in it were manufactured in response to their audit request, was utterly

42

insufficient to do so. And it failed to do so. This language failed to inform the senior manager
from the Audit Firm or any other persons working on the audit of ARA that the documents had
been created in the manner described above. Rather, the Audit Firm personnel understood during
the relevant period, based on the Revenue Controls (and explanations provided to them in walk-
throughs that were consistent with the Revenue Controls), that ARA based topside adjustments
on patient-level detail.
161. Even if Smith or Boucher had specifically told the Audit Firm how they had created
the support, it still would have been improper for Boucher and Smith to provide this fake
support. One of the purposes of an audit is to assure investors that a company’s financials are
sound. Executives at a company agreeing or conspiring with an auditor to use fake support in
place of the insufficient actual support results in an audit that cannot properly give such
assurances to investors.
162. Smith admitted in her sworn testimony that it is not correct for a company to create
fake support in response to a request from its auditors, and further admitted:
Q:    Yeah. Even if [the Audit Firm] knew about the handwritten spreadsheets from
[the Former COO], don’t you think that ARA investors would want to know that in
response to a request from its auditors, ARA had to create support that didn't exist?
A:    I guess so.
Wilcox, Boucher, and Smith Misled the Audit Firm
in Management Representation Letters
163. For every quarterly review and annual audit that the Audit Firm performed for
ARA, ARA submitted a management representation letter. The purpose of these letters was for
management to affirm certain representations made by ARA to the Audit Firm. The Audit Firm
relied on the accuracy of these management representation letters as part of its audit
responsibilities for ARA.

43

164. ARA management submitted management representation letters to the Audit Firm
on March 8, 2017, May 9, 2017, August 8, 2017, November 14, 2017, March 6, 2018, May 8,
2018, August 7, 2018, and November 9, 2018.
165. Boucher signed each of these letters. Wilcox also signed each of these letters except
the November 9, 2018 letter, which Smith signed.
166. Each of these letters represented that ARA management had provided the Audit
Firm with “access to all information of which we are aware that is relevant to the preparation and
fair presentation of the consolidated financial statements, including all financial records and
related data, documentation of internal control over financial reporting, and related information.”
167. This representation was false because ARA, by and through the individual
defendants, did not inform the Audit Firm about their actual method for determining topside
adjustments, described above. This representation was also false as to the 2018 letters because, in
connection with the 2017 year-end audit in early 2018, Boucher and Smith did not provide the
actual (albeit insufficient) support for topside entries and did not inform the Audit Firm that they
had directed accounting personnel to manufacture support for the entries after the fact. Boucher
and Smith knew the representation was false, because they understood ARA’s actual topside
adjustment process and that they had not provided the Audit Firm with access to the actual
topside support but had, instead, commissioned its creation after the fact.
168.  Each of these letters also falsely represented that “there are no material transactions
that have not been properly recorded in the accounting records underlying the consolidated
financial statements.”
169. Again, the topside scheme described above led to transactions not being properly
recorded, which had a material impact on ARA’s financial statements. Wilcox, Boucher, and

44

Smith knew this representation was false because they knew that ARA’s methodology led to
transactions being improperly recorded in ARA’s accounting records—indeed, that was the
entire point of their scheme.
170. Each of these letters also falsely represented that the “methods and significant
assumptions used in making accounting estimates, including those measured at fair value, are
reasonable, consistently applied, and result in a measurement appropriate for financial statement
and disclosure purposes.”
171. The methods and assumptions for determining topside adjustments were not
reasonable, consistently applied or appropriate, as described above. Wilcox, Boucher, and Smith
knew this representation was false because they knew the methods and assumptions they were
using, including targeting specific DSO and, later, RPT numbers, were not based on any analysis
of whether those targets were reasonable or appropriate.
III. The Impact of the Topside Scheme

A. ARA’s Restatement and Financial Impact of the Topside Scheme
172. In October 2018, ARA’s Audit Committee commenced an internal investigation
into its revenue recognition methodology and related accounting matters. The company delayed
the filing of its 2018 10-K, and on March 27, 2019, it announced that its financial statements and
other financial data for 2014-September 2018 were not prepared in accordance with GAAP and
“should be restated and should no longer be relied upon.”  It also announced the resignation of
Boucher and the appointment of an interim CFO. Shortly thereafter, Smith also resigned.
173. On September 5, 2019, ARA filed its 2018 10-K and restated financial information
showing material changes in almost every financial metric, including DSO, revenues, income
and Adjusted EBIDTA-NCI. On that same date, ARA also filed a Form 8-K with the SEC, which
attached a press release announcing that ARA had restated its financials.

45

174. The Restatement admitted that ARA had not followed GAAP with respect to
topside adjustments: “in recording revenue based on expected payments from third-party payors
during the Restated Periods, we did not appropriately reconcile contractual allowance estimates
for discounts and price concessions with cash subsequently received in respect of prior period
patient claims.”
175. The Restatement further admitted that ARA had not based topside adjustments on
patient-level details: “Our methodology for reserving for contractual allowances did not
reconcile revenue and accounts receivable to our collection experience and actual cash
collections.”
176. The Restatement also admitted that ARA had material weaknesses in its internal
controls, and explained that there were internal control failures regarding revenue recognition:
We did not maintain an effective control environment in connection with the
revenue recognition process . . . and review and approval of journal entries. As
our Company grew, this was evidenced by our failure to: (i)(a) invest in, prioritize
and support an adequate environment of controls, (b) establish and support
adequate controls relating to compliance with appropriate accounting policies and
procedures, and (c) implement controls that were adequately designed and
operating effectively, thereby enabling our preparation of financial statements to
be in accordance with GAAP; and (ii) employ personnel with an appropriate level
of accounting knowledge, experience and training in the application of GAAP
commensurate with the increasing size of the entity and nature and complexity of
our financial reporting requirements.
177. The Restatement also admitted material weaknesses in internal controls regarding
journal entry support:
We did not maintain effective internal control over the review and approval of
journal entries. Specifically, our internal controls over journal entries were not
operating effectively to ensure that journal entries included appropriate
underlying supporting documentation to ensure the validity, accuracy, and
completeness of recorded amounts.
178. And the Restatement admitted material weaknesses in internal controls regarding
monitoring controls and compliance:

46

We did not design and maintain effective monitoring controls over compliance
with established accounting policies, procedures and controls related to: revenue
recognition (including accounting for accounts receivable and related reserves and
amounts due to payors);
179. ARA’s restated DSO numbers were uniformly higher than originally reported and
much closer in line with, or worse than, its competitors for the time period 2017-2018:

ARA DSO
as Reported
ARA DSO
as Restated
Percent
Understated
[Competitor 1]
DSO
[Competitor 2]
DSO
2017 Q1 39 64 39.06% 54 60
2017 Q2 38 60 36.67% 56 50
2017 Q3 39 59 33.90% 60 52
2017 Q4 37 55 32.73% 57 59
2018 Q1 40 53 24.53% 59 73
2018 Q2 38 46 17.39% 59 66
2018 Q3 40 44 9.09% 61  60
180. The Restatement included new figures for ARA’s RPT in Q2 2018, decreasing from
$379 to $359 (a 5.6% decrease), and Q3 2018 decreasing from $364 to $355 (a 2.5% decrease).
181. The Restatement also included new annual figures for operating income, net income
and Adjusted EBIDTA-NCI, among other, that were materially worse than previously reported:
(in thousands)
Reported Restated
Percent
Overstated
2017 Operating Income
$106,458  $90,208  18.01%
2017 Net Income
$75,683  $58,136  30.18%
2017 Adjusted EBITDA - NCI
$105,531  $98,126  7.55%

YTD Sept-2018 Operating Income
$58,901  $32,373  81.94%
YTD Sept-2018 Net Income
$34,284  $11,293  203.59%
YTD Sept-2018 Adjusted EBITDA - NCI
$80,877  $65,312  23.83%

47

182. The Restatement also included new quarterly figures for operating income, net
income and Adjusted EBIDTA-NCI, among other, that were materially worse than previously
reported, and shown in the charts below:
(in
thousands)
 Operating Income as
Reported
Operating Income as
Restated
Percent Overstated
(Understated)
Q1 2017
 $     12,470   $     11,674  7%
Q2 2017
 $     27,156   $     18,277  49%
Q3 2017
 $     32,901   $     33,224  (1%)
Q4 2017
 $     33,931   $     27,033  26%
Q1 2018
 $     21,399   $     12,573  70%
Q2 2018
 $       7,453   $      (4,310) 273%
Q3 2018
 $     30,049   $     24,110  25%

(in
thousands)
 Net Income as
Reported
Net Income as
Restated
Percent Overstated
Q1 2017
 $     12,902   $     11,762  10%
Q2 2017
 $     16,391   $       9,759  68%
Q3 2017
 $     26,672   $     25,791  3%
Q4 2017
 $     19,718   $     10,824  82%
Q1 2018
 $     13,713   $       7,164  91%
Q2 2018
 $       2,277   $      (8,383) 127%
Q3 2018
 $     18,294   $     12,512  46%

(in
thousands)
 Adjusted EBITDA -
NCI as Reported
Adjusted EBITDA -
NCI as Restated
Percent Overstated
(Understated)
Q1 2017
 $     21,415   $     20,954  2%
Q2 2017
 $     27,403   $     22,543  22%
Q3 2017
 $     28,149   $     28,644  (2%)
Q4 2017
 $     28,564   $     25,985  10%
Q1 2018
 $     22,738   $     17,308  31%
Q2 2018
 $     31,508   $     24,754  27%
Q3 2018
 $     26,631   $     23,250  15%

48

183. On March 8, 2019, ARA announced a delay in filing its 2018 10-K, related to the
revenue recognition issues described above, which resulted in a drop in ARA’s stock price of
more than 16%, and ARA’s stock price continued to decline the next trading day. On March 27,
2019, ARA announced its intent to restate its financials and the resignation of CFO Boucher,
which resulted in a 38% drop in ARA’s stock price.
B. ARA, Wilcox, Boucher, and Smith Received Benefits from the Topside
Scheme
184. As a result of the scheme orchestrated by Wilcox, Boucher and Smith, ARA
received a corporate benefit through awarding share-based compensation at improperly inflated
prices (as described above). ARA also received a corporate benefit from marketing false
financial and operating results, including that it purportedly had a lower DSO than its
competitors, in sales pitches to doctors that may have resulted in ARA getting an increased
number of clinic joint venture partners.
185. Wilcox, Boucher, and Smith also personally benefited from the topside scheme in
the form of inflated bonuses and stock sales. Both Wilcox and Boucher received bonuses that
were based, at least in part, on the company’s Adjusted EBITDA for 2017, and Boucher received
a bonus that was based, at least in part, on the company’s Adjusted EBITDA for 2018. As
discussed above, these metrics were materially overstated.
186. Both Wilcox and Boucher had employment agreements that indicated that they
would receive bonuses based, at least in part, on ARA reaching certain EBITDA or Adjusted
EBITDA targets. Had ARA not used Wilcox’s top-down approach to falsely report inflated
Adjusted EBITDA figures for 2017 and 2018, Wilcox and Boucher would not have received
bonuses as large as they did, if they received bonuses at all.

49

187. The topside scheme had a significant impact on the 2017 and 2018 bonuses for
ARA’s Former CEO and another ARA senior executive, as shown in the chart below:
(in
millions)
Budget
Adjusted
EBITDA
As
Reported
Adjusted
EBITDA
As
Reported
Adjusted
EBITDA
as % of
Budget
Resulting
% of
target
bonus
potential
Restated
Adjusted
EBITDA
Restated
Adjusted
EBITDA
as % of
Budget
Resulting
% of
target
bonus
potential
2017            $185.6            $176.4            94%            70%            $160.9            87%            0%
2018            $186.4            $168.05            90%            50%            $141.3            75%            0%
188. Based on this, Wilcox and Boucher’s bonuses—which were based at least in part on
the same metric—were also inflated by the topside scheme.
189. In connection with the Restatement, the Former CEO repaid the company $880,223,
representing amount of his overpaid bonuses that were attributable to the inaccurately stated
financials. The returned money included the full amounts of bonuses paid to the Former CEO
with respect to fiscal years 2017 and 2018.
190. Wilcox and Boucher did not return any money to ARA as a result of the
Restatement.
191. In August 2018, during the fraud period, Smith sold over 8,200 shares of ARA at
stock prices that were inflated due to the fraud described above. Smith received a total of
$172,577 in sale proceeds and the profitable gain from this stock sale was $161,958. A
significant portion of those gains were due to the inflated stock price.
192. In addition, in the fall of 2018, during the period of their fraudulent scheme,
Boucher and Smith received promotions. Boucher was promoted to CFO to replace Wilcox when
he left at the end of September 2018, and Smith was promoted to Vice President of Finance to
replace Boucher.

50

C. ARA’s Financial Statements and Disclosures Were Materially False and
Misleading.
193. During the relevant period, ARA made the following periodic filings with the SEC,
each of which was also disseminated through ARA’s website and through other means, and
which contained materially false and misleading financial information:
Form type Period / ending date Date filed Defendant who signed the
filing as CFO
10-Q Q1 2017 / Mar. 31, 2017 May 9, 2017 Wilcox
10-Q Q2 2017 / Jun. 30, 2017 Aug. 8, 2017 Wilcox
10-Q Q3 2017 / Sept. 30, 2017 Nov. 14, 2017 Wilcox
10-K FY 2017 / Dec. 31, 2017 Mar. 6, 2018 Wilcox
10-Q Q1 2018 / Mar. 31, 2018 May 8, 2018 Wilcox
10-Q Q2 2018 / Jun. 30, 2018 Aug. 7, 2018 Wilcox
10-Q Q3 2018 / Sept. 30, 2018 Nov. 9, 2018 Boucher
194. Also during the same time period, ARA filed the following current reports on Form
8-K attaching press releases regarding earnings announcements, each of which were also
disseminated through ARA’s website and through other means, and which contained materially
false and misleading financial information:
Form type Period / ending date Date filed Defendant who signed the
filing as CFO
8-K Q1 2017 / Mar. 31, 2017 May 9, 2017 Wilcox
8-K Q2 2017 / Jun. 30, 2017 Aug. 8, 2017 Wilcox
8-K Q3 2017 / Sept. 30, 2017 Nov. 14, 2017 Wilcox
8-K FY 2017 / Dec. 31, 2017 Mar. 6, 2018 Wilcox
8-K Q1 2018 / Mar. 31, 2018 May 8, 2018 Wilcox
8-K Q2 2018 / Jun. 30, 2018 Aug. 7, 2018 Wilcox
8-K Q3 2018 / Sept. 30, 2018 Nov. 8, 2018 Boucher
195. The financial statements in these Forms 10-Q, 10-K, and 8-K filed with the SEC
were materially false and misleading, because, as discussed above (and shown by the
Restatement), they did not accurately represent ARA’s financial information at the time, but
instead reported figures that were materially different than what ARA’s actual financial
statements would have been if they had reported them in compliance with GAAP.

51

196. Each of the Forms 10-Q and K listed above included a certification by the signer
listed above, as required by Section 302 of the Sarbanes-Oxley Act of 2002 [15 U.S.C. 7241],
certifying the accuracy and completeness of the report. These certifications were false for the
same reasons that the financial statements in those documents were false.
197. Wilcox and Boucher knew, or were reckless or negligent in not knowing that these
financial statements, and certifications regarding them, were materially false and misleading
because Wilcox and Boucher had each actively participated in the scheme described herein.
198. Each of the Forms 10-Q and K included a certification by the signer listed above, as
required by Section 302 of the Sarbanes-Oxley Act of 2002 [15 U.S.C. 7241], certifying the
effectiveness of ARA’s internal accounting controls. These certifications were false because
ARA failed to devise and maintain a system of internal accounting controls sufficient to prevent
Wilcox, Boucher, and Smith from carrying out the topside scheme.
199. Wilcox and Boucher knew, or were reckless or negligent in not knowing that these
certifications regarding internal controls were false because the way in which Wilcox and
Boucher booked topside adjustments was inconsistent with the Revenue Controls and/or they had
caused ARA to book journal entries without supporting documentation.
200. In addition to the misstated financial results, ARA’s SEC filings listed above also
contained other material misstatements and omissions in light of the topside scheme. For
example, ARA listed its DSO in the filings described above, but failed to disclose that those
DSO figures had been achieved through the processes described above.
201. ARA’s Forms 10-Q for the first three quarters of 2017 were disseminated by ARA
through its website and other means, and contained the following statement:
Contractual allowances, along with provisions for uncollectible amounts, are
estimated based upon contractual terms, regulatory compliance and historical

52

collection experience. Net revenue recognition and allowances for uncollectible
billings require the use of estimates of the amounts that will actually be realized.
Changes in estimates are reflected in the then-current financial statements based
on on-going actual experience trends, or subsequent settlements and realizations
depending on the nature and predictability of the estimates and contingencies.
202. This statement is materially false and misleading because, as described above,
“changes in estimates” (meaning topside adjustments) were not based on “on-going actual
experience trends, or subsequent settlements and realizations” but instead were based on efforts
to meet predetermined targets. Wilcox knew, or was reckless or negligent in not knowing, that
this statement was false because of his participation in the scheme described above.
203. ARA’s Forms 10-Q for the first three quarters of 2018, signed and filed as
described above, each contained the following statement:
Patient service operating revenues may be subject to adjustment of the estimated
transaction price as a result of (i) new information obtained, such as actual
payment receipt, (ii) examinations of the Company, or Medicare or Medicaid
Managed Care programs that the Company serves, by government agencies or
contractors, for which the resolution of any matters raised may take extended
periods of time to finalize; (iii) differing interpretations of government regulations
by different fiscal intermediaries or regulatory authorities; (iv) differing opinions
regarding a patient’s medical diagnosis or the medical necessity of service
provided; (v) retroactive applications or interpretations of governmental
requirements; and (vi) claims for refund from private payors, including as the
result of government actions.
204. This statement is materially false and misleading because Wilcox and Boucher in
fact simply implemented the top-down system described above and booked topside entries to
meet predetermined targets. Wilcox and Boucher each knew, or were reckless or negligent in not
knowing, that this statement was false because of their participation in the scheme described
above.
205. Wilcox repeated and disseminated many of the false DSO figures on earnings calls
that ARA held which were open to the public, including analysts and investors, on May 10,
2017, August 9, 2017, November 15, 2018, March 7, 2018, May 9, 2018 and August 8, 2018.

53

Boucher repeated and disseminated the false DSO figures for September 2017 and 2018 in an
earnings call on November 9, 2018.
206. ARA’s Form 10-K for 2017, filed and signed as described above, contained the
following statement:
Based on our experience in the dialysis services industry, we will continue to
follow a disciplined approach to enhancing performance in key areas such as:
revenue cycle management; patient registration; facilitation and verification of
insurance; payor interaction and arrangements; and billing and collection. We
believe this has positively impacted our revenue per treatment and allowed us to
maintain low levels of days’ sales outstanding and bad debt expense.
207. This statement was materially false and misleading because it attributes ARA’s
“low levels of days’ sales outstanding” to its “disciplined approach” in certain “key areas” of its
business, including revenue cycle management and billing and collection. In fact, as described
above, ARA’s low DSO was a result of a manipulated and undisclosed revenue methodology.
208. Wilcox knew, or was reckless or negligent in not knowing, that the quote above
from the 2017 Form 10-K was false because of his participation in the scheme described above.
209. ARA’s Form 10-K for 2017, filed and signed as described above, contained the
following statement:
Changes in estimates are reflected in the then current financial statements based
on on-going actual experience trends, or subsequent settlements and realizations
depending on the nature and predictability of the estimates and contingencies.
210. This statement was materially false and misleading because, as discussed above,
Wilcox and Boucher’s undocumented and undefined methodology for topside adjustments was
not based on “actual experience.”
211. In addition, ARA’s practices of spreading out topside across quarters or banking
topside adjustments for use in future quarters meant that changes in estimates were not reflected
in the “then current financial statements.”

54

212. Wilcox knew, or was reckless or negligent in not knowing, that this statement was
false because of his participation in the scheme described above.
213. ARA’s Form 10-K for 2017, filed and signed as described above, contained the
following statement: “The accompanying consolidated financial statements have been prepared
in accordance with U.S. generally accepted accounting principles.”
214. This statement was false and misleading because ARA’s financial statements were
not prepared in accordance with GAAP, as described above.
215.  Wilcox knew, or was reckless or negligent in not knowing, that this statement was
false because of his participation in the scheme described above.
ARA Made False Statements in Investor Presentations
216. For each quarterly period in 2017 and 2018, ARA, by and through individuals
including Wilcox and Boucher, created and disseminated a PowerPoint Presentation entitled
“ARA Investor Presentation.” ARA posted these presentations to the investor relations section of
the company’s website for purposes of making them available to investors and potential
investors. As CFO, Wilcox (and later Boucher) was responsible for the accuracy of these
presentations. The presentations were materially false and misleading because they repeated the
incorrect DSO values described above and omitted the manipulation ARA engaged in to reach
those values. Wilcox and Boucher knew, or were negligent or reckless in not knowing, that these
statements were false by virtue of their participation in the topside scheme as described above.
The False and Misleading Statements Were Part of the Overall Scheme

217. All of the misstatements described above were part of the topside scheme, which
also included the dissemination of the misstatements and the inherently deceptive conduct
described above.

55

218. ARA (prior to the announcement of the Restatement), Wilcox, and Boucher failed
to correct the misstatements described above once they had been made.
D. The Topside Scheme Resulted in Inaccurate Books and Records and Violated
GAAP

219. As a result of the topside scheme, and as shown by the Restatement, ARA’s internal
accounting records reflected incorrectly stated revenue. This is because the practices employed
as part of the topside scheme were not in accordance with GAAP.
220. The topside scheme practices were not in accordance with ASC 954-605-35-1,
because ARA failed to revise initial revenue estimates based on actual amounts (subsequent
payments) obtained and include adjustments to revenue in the period that new information was
obtained.
221. Additionally, the topside scheme practices were not in accordance with the relevant
provisions of ASC 606-10-32-42&43, adopted in January 2018, because ARA failed to record
revenue adjustments in the period in which the resolution of uncertain events occurred (when
ARA received the actual patient payments).
E. ARA’s Topside Process Violated its Internal Accounting Controls From July
2016 Through 2018

222. ARA failed to devise and maintain a system of internal accounting controls
sufficient to provide reasonable assurances that transactions were recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain the accountability
of assets.
223. The topside scheme from 2017 to 2018, as described above, was inconsistent with
ARA’s internal accounting controls, as documented in the July 2016 Revenue Controls quoted
above.

56

224. Additionally, prior to the topside scheme, ARA, Wilcox, Boucher, and Smith all
failed to ensure that sufficient supporting documentation was maintained for the journal entries
for the Former COO’s topside adjustments during 2016. This was a violation of ARA’s internal
control requiring all journal entries to be supported by documentation.
F. Cooperation and Remediation
225.  ARA cooperated with the SEC staff in connection with the SEC staff’s
investigation.  ARA also implemented significant remedial measures, such as changes in
management, corporate governance, and the remediation of internal controls deficiencies.
FIRST CLAIM
Violations of Securities Act Section 17(a)
(All Defendants)

226. All of the foregoing paragraphs are incorporated by reference herein.
227. By engaging in the conduct described above, Defendants ARA, Wilcox, Boucher,
and Smith, in the offer or sale of securities, and by the use of means or instruments of
transportation or communication in interstate commerce or by use of the mails, directly or
indirectly:
(a) while acting knowingly or recklessly, employed devices, schemes, and artifices to
defraud;
(b) while acting knowingly, recklessly, or negligently, obtained money or property by
means of untrue statements of a material fact or by omitting to state a material fact
necessary in order to make the statements made, in light of the circumstances under
which they were made, not misleading; and

57

(c) while acting knowingly, recklessly, or negligently, engaged in transactions, practices,
or courses of business which operated or would operate as a fraud or deceit upon the
purchasers of ARA stock.
228. By engaging in the foregoing conduct, Defendants ARA, Wilcox, Boucher, and
Smith violated Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
SECOND CLAIM
Aiding and Abetting Violations of Securities Act Section 17(a)
(Against Defendants Wilcox, Boucher, and Smith)
229. All of the foregoing paragraphs are incorporated by reference herein.
230. As alleged above, Defendant ARA violated Securities Act Section 17(a) [15 U.S.C.
§ 77q(a)].
231. Through their improper revenue practices, violations of internal controls, false
statements to the Audit Firm, and other means alleged above, Defendants Wilcox, Boucher, and
Smith knowingly provided substantial assistance to, and thereby aided and abetted, ARA’s
violations of the securities laws.
232. By engaging in the foregoing conduct, pursuant to Securities Act Section 15(b) [15
U.S.C. § 77o(b)], Defendants Wilcox, Smith, and Boucher violated Securities Act Section 17(a)
[15 U.S.C. § 77q(a)].
THIRD CLAIM
Violations of Exchange Act Section 10(b) and Rule 10b-5(a) and (c) Thereunder
(Against all Defendants)

233. All of the foregoing paragraphs are incorporated by reference herein.
234. By engaging in the foregoing conduct, Defendants ARA, Wilcox, Boucher, and
Smith, directly or indirectly, in connection with the purchase or sale of a security, by the use of
means or instrumentalities or interstate commerce, of the mails, or of the facilities of a national
securities exchange, with scienter:

58

(a) employed devices, schemes, or artifices to defraud; and
 (c) engaged in acts, practices or courses of business which operated or would operate as
a fraud or deceit upon the purchasers of ARA stock, and other persons.
235. By engaging in the foregoing conduct, Defendants ARA, Wilcox, Boucher, and
Smith violated, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(a) and
(c) thereunder [17 C.F.R. § 240.10b-5].
FOURTH CLAIM
Violations of Exchange Act Section 10(b) and Rule 10b-5(b) Thereunder
(Against ARA, Wilcox, and Boucher)

236. All of the foregoing paragraphs are incorporated by reference herein.
237. By engaging in the foregoing conduct, Defendants ARA, Wilcox, and Boucher,
directly or indirectly, in connection with the purchase or sale of a security, by the use of means
or instrumentalities or interstate commerce, of the mails, or of the facilities of a national
securities exchange, with scienter:
(b) made untrue statements of a material fact or omitted to state a material fact necessary
in order to make the statements made, in the light of the circumstances under which they
were made, not misleading;
238. By engaging in the foregoing conduct, Defendants ARA, Wilcox, and Boucher,
violated, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(b) thereunder
[17 C.F.R. § 240.10b-5].
FIFTH CLAIM
Aiding and Abetting Violations of Exchange Act 10(b) and Rule 10b-5 Thereunder
(Against Defendants Wilcox, Boucher, and Smith)

239. All of the foregoing paragraphs are incorporated by reference herein.

59

240. As alleged above, Defendant ARA violated Exchange Act Section 10(b) [15 U.S.C.
§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
241. Through their improper revenue practices, violations of internal controls, false
statements to the Audit Firm, and other means alleged above, Defendants Wilcox, Boucher, and
Smith knowingly provided substantial assistance to, and thereby aided and abetted, ARA’s
violations of the securities laws.
242. By engaging in the foregoing conduct, pursuant to Exchange Act Section 20(e) [15
U.S.C. § 78t(e)], Defendants Wilcox, Boucher, and Smith violated Exchange Act Section 10(b)
[15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
SIXTH CLAIM
Violations of Exchange Act Section 13(a) and
Exchange Act Rules 12b-20, 13a-1, 13a-11, and 13a-13
(Against ARA)

243. All of the foregoing paragraphs are incorporated by reference herein.
244. Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 13a-1, 13a-11,
and 13a-13 thereunder [17 C.F.R. §§ 240.13a-1, 240.13a-11, and 240.13a-13] require issuers of
registered securities to file with the SEC factually accurate annual reports (on Form 10-K),
quarterly reports (on Form 10-Q), and current reports (on Form 8-K). Exchange Act Rule 12b-20
[17 C.F.R. § 240.12b-20] provides that, in addition to the information expressly required to be
included in a statement or report, there shall be added such further material information, if any,
as may be necessary to make the required statements, in light of the circumstances under which
they were made, not misleading.
245. By engaging in the foregoing conduct, Defendant ARA violated Section 13(a) of
the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder
[17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-11, and 240.13a-13].

60

SEVENTH CLAIM
Aiding and Abetting Violations of Exchange Act Section 13(a) and
Rules 13a-1, 13a-11, 13a-13 and 12b-20
(Against Wilcox, Boucher, and Smith)

246. All of the foregoing paragraphs are incorporated by reference herein.
247. As alleged above, Defendant ARA violated Exchange Act Section 13(a) and Rules
13a-1, 13a-11, 13a-13 and 12b-20.
248.  Through their improper revenue practices and other means alleged above,
Defendants Wilcox, Boucher, and Smith knowingly provided substantial assistance to, and
thereby aided and abetted, ARA’s violations of the securities laws.
249. By engaging in the foregoing conduct, pursuant to Exchange Act Section 20(e) [15
U.S.C. § 78t], Defendants Wilcox, Boucher, and Smith violated Exchange Act Section 13(a) [15
U.S.C. § 78m(a)] and Rules 12b-20, 13a-1, 13a-11, and 13a-13 [17 C.F.R. §§ 240.12b-20,
240.13a-1, 240.13a-11, and 240.13a-13].
EIGHTH CLAIM
Violations of Exchange Act Section 13(b)(2)(A)
(Against ARA)

250. All of the foregoing paragraphs are incorporated by reference herein.
251. Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)] requires
issuers to make and keep books, records, and accounts, which, in reasonable detail, accurately
and fairly reflect the transactions of the company and dispositions of its assets.
252. By engaging in the foregoing conduct, Defendant ARA violated Section
13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)].
NINTH CLAIM
Aiding and Abetting Violations of Exchange Act Section 13(b)(2)(A)
(Against Wilcox, Boucher, and Smith)
253. All of the foregoing paragraphs are incorporated by reference herein.

61

254. As alleged above, Defendant ARA violated Exchange Act Section 13(b)(2)(A).
255.  Through their improper revenue practices and other means alleged above,
Defendants Wilcox, Boucher, and Smith knowingly provided substantial assistance to, and
thereby aided and abetted, ARA’s violations of the securities laws.
256. By engaging in the foregoing conduct, pursuant to Exchange Act Section 20(e) [15
U.S.C. § 78t], Defendants Wilcox, Boucher, and Smith violated Exchange Act Section
13(b)(2)(A).
TENTH CLAIM
Violations of Exchange Act Rule 13b2-1
(Against Wilcox, Boucher, and Smith)

257. All of the foregoing paragraphs are incorporated by reference herein.
258. Rule 13b2-1 under the Exchange Act [17 C.F.R. § 240.13b2-1] provides that no
person shall, directly or indirectly, falsify or cause to be falsified, any book, record or account
subject to section 13(b)(2)(A) of the Exchange Act.
259. By engaging in the foregoing conduct, Defendants Wilcox, Boucher, and Smith
violated Rule 13b2-1 under the Exchange Act [17 C.F.R. § 240.13b2-1].
ELEVENTH CLAIM
Violations of Exchange Act Section 13(b)(2)(B)
(Against ARA)

260. All of the foregoing paragraphs are incorporated by reference herein.
261. Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] requires
issuers to devise and maintain a system of internal accounting controls sufficient to provide
reasonable assurances that transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain the accountability of assets.

62

262. By engaging in the foregoing conduct, Defendant ARA violated Section
13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)].
TWELFTH CLAIM
Aiding and Abetting Violations of Exchange Act Section 13(b)(2)(B)
(Against Wilcox, Boucher, and Smith)

263. All of the foregoing paragraphs are incorporated by reference herein.
264. As alleged above, Defendant ARA violated Exchange Act Section 13(b)(2)(B) [15
U.S.C. § 78m(b)(2)(B)].
265. Through their improper revenue practices and other means alleged above,
Defendants Wilcox, Boucher, and Smith knowingly provided substantial assistance to, and
thereby aided and abetted, ARA’s violations of the securities laws.
266. By engaging in the foregoing conduct, pursuant to Exchange Act Section 20(e) [15
U.S.C. § 78t], Defendants Wilcox, Boucher, and Smith violated Exchange Act Section
13(b)(2)(B) [15 U.S.C. § 78m(b)(2)(B)].
THIRTEENTH CLAIM
Violations of Exchange Act Section 13(b)(5)
(Against Wilcox, Boucher, and Smith)

267. All of the foregoing paragraphs are incorporated by reference herein.
268. Exchange Act Section 13(b)(5) [15 U.S.C. § 78m(b)(5)] provides that
no person shall knowingly circumvent or knowingly fail to implement a system of internal
accounting controls.
269. By engaging in the foregoing conduct, Defendants Wilcox, Boucher, and Smith
violated Exchange Act Section 13(b)(5) [15 U.S.C. § 78m(b)(5)].

63

FOURTEENTH CLAIM
Violations of Exchange Act Rule 13b2-2(a)
(Against Wilcox, Boucher, and Smith)

270. All of the foregoing paragraphs are incorporated by reference herein.
271. Rule 13b2-2(a) [17 C.F.R. § 240.13b2-2(a)] provides that no director or officer of
an issuer shall, directly or indirectly, make or cause to be made a materially false or misleading
statement to an accountant or omit to state, or cause another person to omit to state, any material
fact necessary in order to make statements made, in light of the circumstances under which such
statements were made, not misleading, to an accountant in connection with any audit, review, or
examination of the financial statements of the issuer or the preparation or filing of any document
or report required to be filed with the SEC.
272. By engaging in the foregoing conduct, Defendants Wilcox, Boucher, and Smith
violated Rule 13b2-2(a) under the Exchange Act [17 C.F.R. § 240.13b2-2(a)].
FIFTEENTH CLAIM
Aiding and Abetting Violations of Exchange Act Rule 13b2-2(a)
(Against Wilcox)

273. All of the foregoing paragraphs are incorporated by reference herein.
274. As set forth above, defendants Boucher and Smith violated Exchange Act Rule
13b2-2(a) [17 C.F.R. § 240.13b2-2(a)].
275. Through his supervisory role, signing of false and misleading management
representation letters given to the Audit Firm, and other means alleged above, Defendant Wilcox
knowingly provided substantial assistance to, and thereby aided and abetted, Boucher and
Smith’s violations of the securities laws.

64

276. By engaging in the foregoing conduct, pursuant to Exchange Act Section 20(e) [15
U.S.C. § 78t], Defendant Wilcox violated Exchange Act Rule 13b2-2(a) [17 C.F.R. § 240.13b2-
2(a)].
SIXTEENTH CLAIM
Violations of Exchange Act Rule 13a-14
(Against Wilcox and Boucher)

277. All of the foregoing paragraphs are incorporated by reference herein.
278. Exchange Act Rule 13a-14 [17 C.F.R. § 240.13a-14] provides that each principal
executive and principal financial officer of a public company must sign a certification at the time
that the company files its Forms 10-Q and 10-K certifying that the report does not contain any
untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements made, in light of the circumstances under which such statements were made, not
misleading.
279. By engaging in the foregoing conduct, Defendants Wilcox and Boucher violated
Exchange Act Rule 13a-14 [17 C.F.R. § 240.13a-14].
SEVENTEENTH CLAIM
Violations of Sarbanes Oxley Act Section 304(a)
(Against Wilcox and Boucher)

280. All of the foregoing paragraphs are incorporated by reference herein.
281. ARA, by engaging in the conduct described above, filed Forms 10-K for fiscal year
2017 and Forms 10-Q for each of the first three quarters of fiscal years 2017 and 2018 that were
in material non-compliance with its financial reporting requirements under the securities laws.
282. ARA’s material non-compliance with its financial reporting requirements under the
securities laws was the result of its misconduct described above.

65

283. Due to ARA’s material non-compliance with its financial reporting requirements
under the securities laws, and as a result of its misconduct, ARA was required to prepare an
accounting restatement for fiscal year 2017 and the first three quarters of 2018.
284. Wilcox and Boucher received or obtained, during the statutory time periods
established by the Sarbanes-Oxley Act of 2002, bonuses, incentives and/or equity-based
compensation or profits from their sale of ARA stock, which they have failed to reimburse ARA.
285. The Commission has not exempted Wilcox or Boucher, pursuant to Section 304(b)
of the Act, 15 U.S.C. § 7243(b), from the application of Section 304(a) of the Act, 15 U.S.C. §
7243(a).
286. By engaging in the conduct described above, Wilcox and Boucher violated Section
304(a) of the Sarbanes Oxley Act [15 U.S.C. § 7243(a)].
PRAYER FOR RELIEF
Accordingly, the SEC respectfully requests that the Court enter a final judgment:
A. Finding that Defendants ARA, Wilcox, Boucher, and Smith violated the federal
securities laws as alleged above.
B. Permanently enjoining ARA from further violations of Section 17(a) of the
Securities Act, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and
Rules Rule 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder [15 U.S.C. §§ 77q(a); 15 U.S.C.
§§ 78j(b); § 78m(a); 78m(b)(2)(A); and 78m(b)(2)(B); 17 C.F.R. §§ 240.10b-5; 240.12b-20;
240.13a-1, 240.13a-11, and 240.13a-13];
C. Permanently enjoining Wilcox from further violations of Section 17(a) of the
Securities Act; Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange
Act, Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13b2-1, 13b2-2(a), and 13a-14 thereunder, and

66

Section 304(a) of the Sarbanes Oxley Act [15 U.S.C. §§ 77q(a); 15 U.S.C. §§ 78j(b); § 78m(a);
78m(b)(2)(A); 78m(b)(2)(B); and 78m(b)(5); 17 C.F.R. §§ 240.10b-5; 240.12b-20; 240.13a-1,
240.13a-11, 240.13a-13; 240.13b2-1; 240.13b2-2(a); and 240.13a-14; and 15 U.S.C. § 7243(a)];
D. Permanently enjoining Boucher from further violations of Section 17(a) of the
Securities Act; Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange
Act, Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13b2-1, 13b2-2(a), and 13a-14 thereunder, and
Section 304(a) of the Sarbanes Oxley Act [15 U.S.C. §§ 77q(a); 15 U.S.C. §§ 78j(b); § 78m(a);
78m(b)(2)(A); 78m(b)(2)(B); and 78m(b)(5); 17 C.F.R. §§ 240.10b-5; 240.12b-20; 240.13a-1,
240.13a-11, 240.13a-13; 240.13b2-1; 240.13b2-2(a); and 240.13a-14; and 15 U.S.C. § 7243(a)];
E. Permanently enjoining Smith from further violations of Section 17(a) of the
Securities Act; Sections 10(b), 13(b)(2)(B), and 13(b)(5) of the Exchange Act, and Rules 10b-5,
12b-20, 13a-1, 13a-11, 13a-13, 13b2-1, and 13b2-2(a) thereunder [15 U.S.C. §§ 77q(a); 15
U.S.C. §§ 78j(b); § 78m(a); 78m(b)(2)(A); 78m(b)(2)(B); and 78m(b)(5); 17 C.F.R. §§ 240.10b-
5; 240.12b-20; 240.13a-1, 240.13a-11, 240.13a-13; 240.13b2-1; and 240.13b2-2(a)];
F. Ordering ARA, Wilcox, Boucher, and Smith to disgorge their ill-gotten gains as a
result of the conduct alleged in this Complaint, plus prejudgment interest thereon;
G. Ordering ARA, Wilcox, Boucher, and Smith to pay civil money penalties
pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the
Exchange Act [15 U.S.C. § 78u(d)(3)];
H. Ordering that Defendants Wilcox, Boucher, and Smith be barred from acting as
officers or directors of any public company pursuant to Section 20(e) of the Securities Act  [15
U.S.C. § 77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)];

67

I. Ordering that Defendants Wilcox and Boucher reimburse ARA for all bonuses,
incentive-based and equity-based compensation, and/or profits realized from their sale of ARA
stock pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 [15 U.S.C. § 7243(a)]; and
J. Granting such other and further relief as the Court deems appropriate.
JURY DEMAND
Pursuant to Federal Rule of Civil Procedure 38, the SEC demands a trial by jury on all
issues so triable.

Dated:  December 6, 2021 Respectfully submitted,

 /s/ Christopher M. Bruckmann
                                                                                             Christopher                                                                                             M.                                                                                             Bruckmann
 (SDNY Bar No. CB-7317)
 Pei Yuan Chung
 (pro hac vice motion forthcoming)
                                                                                             Jonathan                                                                                             Austin
 (SDNY Bar No. JA-2073)
 Securities and Exchange Commission
 100 F Street, NE
 Washington, D.C. 20549
                                                                                             202-551-5986                                                                                             (Bruckmann)
                                                                                             202-551-7713                                                                                             (Chung)
                                                                                             202-551-3786                                                                                             (Austin)
                                                                                             [email protected]
                                                                                             [email protected]
                                                                                             [email protected]

Attorneys for Plaintiff Securities and
Exchange Commission

1 
 

CHRISTOPHER BRUCKMANN 
(SDNY Bar No. CB-7317) 
Attorney for Plaintiff  
SECURITIES AND EXCHANGE COMMISSION  
100 F Street, N.E. 
Washington, D.C. 20549 
(202) 551-5986 
[email protected] 

 
 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 

SECURITIES AND EXCHANGE COMMISSION, 
 

 

                                                              Plaintiff,  

v. 

COMPLAINT 
 
Civil Action No. 21-CV-10366 
 
JURY TRIAL DEMANDED 

AMERICAN RENAL ASSOCIATES HOLDINGS, 
INC., JONATHAN L. WILCOX, JASON M. 
BOUCHER, and KAREN J. SMITH,  

 
 

Defendants.  

 
 Plaintiff Securities and Exchange Commission (“SEC”), for its Complaint against 

Defendants American Renal Associates Holdings, Inc. (“ARA”), Jonathan L. Wilcox 

(“Wilcox”), Jason M. Boucher (“Boucher”) and Karen J. Smith (“Smith”) (collectively “the 

Defendants”), alleges as follows: 

OVERVIEW 
 

1. This is an accounting fraud case arising from a multimillion dollar scheme by three 

former ARA finance executives—Wilcox, Boucher, and Smith—to improperly manipulate 

certain revenue adjustments to make it appear that ARA’s financial performance was better than 

it actually was. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 1 of 67



 

2 
 

2. The fraudulent scheme lasted from approximately January 1, 2017 through at least 

November 9, 2018 (the “relevant period”). The scheme entailed entering a series of revenue 

adjustments to make it appear that ARA had beat, met, or come close to meeting various 

predetermined financial metrics, when in fact its financial performance was materially worse. 

Wilcox, Boucher, and Smith intentionally, recklessly, and negligently engaged in acts, practices, 

and courses of conduct related to those revenue adjustments that caused ARA to overstate its 

revenue, net income, and other financial metrics throughout this period. 

3. After ARA received an inquiry from the SEC, ARA undertook an internal 

investigation that resulted in the company restating its financial statements for year-to-date 2018, 

all of 2017, and earlier periods in a Form 10-K filed with the SEC on September 5, 2019 (the 

“Restatement”). In the Restatement, ARA admitted that it had “concluded that our previously 

issued consolidated financial statements and other financial data for the Restated Periods should 

be restated and should no longer be relied upon.”  

4. Among other things, the Restatement reflected that ARA had overstated its net 

income for 2017 by more than $17 million and for the first three quarters of 2018 by more than 

$22 million, which respectively represent overstatements of more than 30% and 200%. 

5. The Restatement also acknowledged material weaknesses in ARA’s internal 

controls regarding revenue, approval of journal entries, monitoring controls, and other areas. 

6. Wilcox served as ARA’s Chief Financial Officer from 2011 through September 

2018, when he resigned from ARA. Boucher served as ARA’s Chief Accounting Officer from 

2011 through September 2018, when he was promoted to Chief Financial Officer. Smith served 

as ARA’s Controller from 2007 to September 2018, when she was promoted to Vice President of 

Finance. While working at ARA during the relevant period, Wilcox and Boucher were the 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 2 of 67



 

3 
 

primary persons responsible for revenue recognition. Smith also had responsibility for revenue 

recognition, including ensuring that ARA’s practices and SEC filings complied with required 

rules. 

7. ARA’s business model is to partner with doctors across the United States to 

develop, own, and operate dialysis clinics as joint ventures. The joint ventures are structured 

such that the doctor-partners handle all patient care, and ARA handles billings, collections, 

revenue management, and dealing with patient insurance. A major component of ARA’s revenue 

during the relevant period was insurance reimbursement for dialysis treatments. 

8. Because ARA could not always be certain what rate different insurance companies 

would pay for dialysis treatments, revenue recognition at ARA involved two critical steps: First, 

ARA made an initial estimate of revenue that it would receive. ARA personnel referred to this 

initial estimate as a “contractual allowance.” The second step was to update the initial estimate 

after receiving information about the amount ARA was actually paid. These later updates, which 

could be positive or negative, were called “topside adjustments” at ARA, and these topside 

adjustments were at the center of the fraud perpetrated by Wilcox, Boucher, and Smith. 

9. Accounting standards—and ARA’s own internal controls—called for ARA to base 

its topside adjustments on patient-level payment information. Obtaining this patient-level detail 

required making a comparison of the actual payments received for a particular patient’s course of 

treatment to the prior estimates of what those payments would be.  

10. Rather than base ARA’s topside adjustments on patient-level data, Wilcox, 

Boucher, and Smith implemented a fraudulent scheme, in which Wilcox and Boucher agreed on 

how much overall revenue they wanted ARA to have for a month or quarter, and then Boucher 

and Smith had staff enter different topside adjustments at specific clinics until this predetermined 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 3 of 67



 

4 
 

number was met. This decision by Wilcox to use a top-down approach to book the revenue he 

wanted ARA to have, rather than building revenue up from actual patient-level data, was the 

heart of the topside scheme.  

11. Over the course of this topside scheme, Wilcox, Boucher, and Smith used different 

metrics and different practices, but the overall scheme of manipulating topside adjustments to 

achieve pre-determined results remained the same. When Wilcox left ARA in September 2018, 

his involvement in the fraudulent scheme ceased, but Boucher and Smith were each promoted 

and carried on with the topside scheme.  

12. The financial metrics that Wilcox, Boucher, and Smith targeted included Days Sales 

Outstanding (“DSO”), which is a measure of how quickly ARA was collecting payment for its 

treatments, and Revenue Per Treatment (“RPT”). 

13. Among the inherently deceptive practices that Wilcox, Boucher, and/or Smith 

engaged in in furtherance of the topside scheme were: 

a. Entering topside adjustments that were not based on any analysis of patient-
level detail, but instead were based on mathematical calculations to achieve a 
pre-determined DSO figure; 

b. Manipulating which patients’ payment histories were analyzed to make it 
appear that ARA had more revenue than it did so it could appear to meet a 
predetermined RPT figure; 

c. Holding identified topside adjustment revenue in a “cookie-jar” called the 
“Contractual Adjustments” spreadsheet and only recognizing the revenue when 
needed; 

d. Manufacturing false and misleading documents to provide to ARA’s external 
auditors in an effort to conceal the ongoing topside scheme; and 

e. Misstating or omitting descriptions of topside adjustments in discussions with 
ARA’s CEO, Audit Committee and external auditors. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 4 of 67



 

5 
 

14. Wilcox, Boucher, and Smith each personally benefitted from the scheme by a) 

receiving bonuses that were inflated by ARA’s misstated metrics, b) selling stock at inflated 

prices, and/or c) receiving promotions to more senior positions at ARA. 

15. Through the actions of Wilcox, Boucher, and/or Smith, as well as more junior 

employees acting at the direction of Wilcox, Boucher, and/or Smith, ARA also engaged in this 

fraudulent scheme.  

JURISDICTION AND VENUE 

16. The SEC brings this action, and this Court has jurisdiction, pursuant to Sections 20 

and 22 of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77t and 77v], Sections 21 

and 27 of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u and 78aa], 

and 28 U.S.C. § 1331. 

17. The Defendants directly or indirectly, singly or in concert with others, made use of 

the means or instruments of transportation and communication in interstate commerce, or of the 

mails, or of the facilities of a national securities exchange in connection with the acts, 

transactions, and practices alleged in this Complaint. 

18. During the period of the fraud, ARA was engaged in the offer and/or sale of 

securities. This included offerings through stock options plans in which ARA employees 

(including ARA employees who were not involved in the fraud alleged in this Complaint) 

exercised options to purchase stock from ARA. At least some of these purchases occurred in the 

third quarter of 2018, when many of the false statements described in this Complaint had already 

been made in ARA’s filings with the SEC and elsewhere. Additionally, on July 18, 2017, ARA 

filed a Form S-3 Registration with the SEC that stated it “relates to the possible resale, from time 

to time, by the selling stockholders identified in this prospectus of up to 19,017,413 shares of our 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 5 of 67



 

6 
 

common stock.” The selling stockholders identified in that Form S-3 included ARA’s majority 

shareholder at the time. ARA’s stock was also offered and sold by the public on the New York 

Stock Exchange throughout the period of the fraud. 

19. During the period of the fraud, Smith was engaged in the offer and/or sale of 

securities. On August 9, 2018, when many of the false statements described in this complaint had 

already been made in ARA’s filings with the SEC and elsewhere, Smith sold over 8,200 shares 

of ARA stock.  

20. Venue is proper in this district pursuant to Securities Act Section 22(a) [15 U.S.C. § 

77v(a)] and Exchange Act Section 27 [15 U.S.C. § 78aa] because certain of the acts, practices, 

and courses of conduct constituting the violations alleged in this Complaint occurred in this 

district, including that from April 21, 2016 until January 25, 2021 ARA’s common stock traded 

on the New York Stock Exchange, which has its headquarters in this district, and the materially 

false and misleading statements contained in ARA’s public filings and other investor materials 

were communicated to persons located in this district. 

DEFENDANTS 

21. American Renal Associates Holdings, Inc. is a national provider of dialysis 

services, which is incorporated in Delaware and has its principal place of business in Beverly, 

Massachusetts. ARA’s securities were registered pursuant to Section 12(b) of the Exchange Act 

and traded on the New York Stock Exchange under the ticker “ARA” from April 21, 2016 until 

January 25, 2021, when ARA was acquired by a private equity firm. 

22. Jonathan L. Wilcox, age 48, resides in Reading, Massachusetts. He was a certified 

public accountant (“CPA”) licensed in Massachusetts from February 17, 2000 until June 30, 

2017. Wilcox was ARA’s Chief Financial Officer (“CFO”) from 2011 to September 2018. He is 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 6 of 67



 

7 
 

currently the COO at a private hospital. During the SEC’s investigation, Wilcox provided sworn 

testimony to the SEC staff. 

23. Jason M. Boucher, age 49, resides in Boston, Massachusetts. He has been licensed 

as a CPA in the state of Massachusetts for several periods between approximately 2000 and the 

present. Boucher was ARA’s Vice President of Finance and Chief Accounting Officer (“CAO”) 

from 2011 to September 2018. Boucher was ARA’s Vice President of Finance and CFO from 

October 2018 to March 2019, when he resigned at ARA’s request in connection with the 

company’s announcement of its planned restatement. He is currently the Controller at a private 

IT infrastructure company. During the SEC’s investigation, Boucher provided sworn testimony 

to the SEC staff. 

24. Karen J. Smith, age 45, resides in Newburyport, Massachusetts. She has been a 

CPA in Massachusetts since 2004. Smith was ARA’s Controller from 2007 to August 2018 and 

promoted to serve as Vice President of Finance from September 2018 to April 2019, when she 

resigned. She is currently the Controller at a private medical services company. While working at 

ARA, Smith sometimes used her maiden name, Karen Veilleux, for professional purposes 

including in her email address at ARA. During the SEC’s investigation, Smith provided sworn 

testimony to the SEC staff. 

25. While working at ARA during the relevant period, Wilcox, Boucher, and Smith 

were Officers of ARA. 

OTHER RELEVANT PERSONS 

26. Former CEO. The Former CEO was Chief Executive Officer of ARA from 

September 1999 to January 25, 2021. During the SEC’s investigation, the Former CEO provided 

sworn testimony to the SEC staff. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 7 of 67



 

8 
 

27. Former COO. The Former COO was Chief Operating Officer of ARA from at 

least 2011 until December 31, 2016. Prior to that, the Former COO served as ARA’s CFO. 

Starting before 2011 and continuing until December 31, 2016, the Former COO was the primary 

person responsible for revenue recognition and topside adjustments at ARA. 

28. The Audit Firm. The Audit Firm is a PCAOB-registered accounting firm that 

audited ARA’s financial statements both during the relevant period and for several years prior. 

FACTUAL ALLEGATIONS 

I. BACKGROUND  

A. Governing Accounting Principles and Relevant Accounting Terminology 

29. As a United States-based company with publicly traded stock from April 2016 

through January 2021, ARA was required to conform with accounting principles generally 

accepted in the United States, or “GAAP,” in compiling and filing its annual and interim 

financial statements with the SEC. 

30. GAAP is a series of authoritative standards set out by policy boards (including the 

Financial Accounting Standards Board, or “FASB”), that standardizes and regulates the 

definitions, assumptions, and methods used in accounting across industries, and seeks to ensure 

that a company’s financial statements are complete, consistent, and comparable.  

31. FASB’s Accounting Standards Codification (“ASC”) is the current source of 

GAAP. The relevant ASCs here changed from 2017 to 2018, but ARA’s accounting did not 

conform with either standard. 

32. For 2017, ASC 954-605 (and its subsections) was the relevant governing source of 

GAAP for revenue recognition. ASC 954-605-25-6 states that revenues should be estimated 

when the service is performed even though actual amounts may not become known until a later 

date, such as when payment is received.  Pursuant to ASC 954-605-35-1, revisions to these 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 8 of 67



 

9 
 

estimated revenues based on this new information should be recorded in the period in which the 

new information was obtained.  

33. For 2018, ASC 606 (and its subsections) was the relevant governing source of 

GAAP for revenue recognition. ASC 606-10-32-8 states that variable consideration shall be 

estimated either based on the expected value or most likely amount, and updated faithfully based 

on the circumstances at the end of each reporting period pursuant to ASC 606-10-32-14. 

According to ASC 606-10-32-42, these circumstances include the resolution of uncertain events, 

and such changes should be reflected in the period of change per ASC 606-10-32-43. 

34. Days Sales Outstanding, or DSO, is a calculation that reflects how many days, on 

average, it takes a company to collect payment after a service is rendered. As an illustration, a 

DSO of 30 days would mean that it takes a company, on average, 30 days to collect payment for 

a sale or service. DSO is a function of revenues and accounts receivable. The larger the accounts 

receivable compared to a given amount of revenues, the greater the DSO, and a larger DSO is 

often an indication that a larger portion of revenues has remained uncollected. Topside 

adjustments that increase (or credit) revenue will therefore lower DSO but increase metrics 

including net income, RPT, EBITDA, Adjusted EBITDA, and Adjusted EBITDA less Non-

Controlling Interests (“Adjusted EBITDA-NCI”). 

35. “EBITDA” means Earnings Before Interest, Taxes, Depreciation and Amortization. 

It is a measure of profitability that adds back the cost of capital investments, debt-related costs, 

and taxes, and it is a common financial metric used by analysts to evaluate companies’ financial 

performance. ARA also used two related financial metrics, “Adjusted EBITDA” and “Adjusted 

EBITDA-NCI.” Adjusted EBITDA is a non-GAAP financial metric that adjusts the EBITDA 

figure for stock-based compensation and certain other costs, as described in ARA’s Proxy 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 9 of 67



 

10 
 

Statements filed with the SEC. Adjusted EBITDA-NCI is a non-GAAP financial metric that uses 

the Adjusted EBITDA measurement and further backs out non-controlling interests, which is the 

proportion of the company owned by minority shareholders in the business.      

B. Background on American Renal Associates and its Financial Metrics 

36. As discussed above, ARA’s business model centered on operating dialysis clinics 

primarily through joint ventures.  

37. While ARA was a public company, it made filings with the SEC, including annual 

reports on Form 10-K and quarterly reports on Form 10-Q. ARA also disseminated other 

information about the company and its financial performance to the public through investor 

conference calls, investor presentations, and through its website.   

38. ARA, analysts who followed ARA, and investors all used various financial metrics 

to track ARA’s performance. Among the critical metrics for ARA were DSO, RPT, Adjusted 

EBITDA-NCI, and the number of new clinics opened. 

ARA Touted its Low DSO Figures During the Relevant Period 

39. ARA calculated DSO by dividing the current net accounts receivable balance by the 

average daily revenue for the preceding three months. ARA sometimes referred to DSO using 

the phrase “accounts receivable, net of allowances, represented [number] days of revenue.” 

40. DSO is a common metric in the dialysis services industry and was an important 

metric for ARA. As the Former CEO explained, DSO was “important because it’s an indicator of 

your performance with regard to billing and collections and cash flow.” 

41.  From an investor perspective, a consistently low DSO indicates a company is 

successfully collecting payment for its goods and services, while a high or increasing DSO could 

indicate problems with the business in terms of cash flow or collections processes. Doctors who 

were in partnership or considering partnering with ARA were also interested in DSO, because a 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 10 of 67



 

11 
 

low DSO would indicate that ARA was effectively handling insurance collections and revenue 

management, and getting doctors paid faster.  

42. ARA included a discussion of DSO in its SEC filings, earnings calls, and other 

materials to show it was outperforming its competitors. For example, in ARA’s Q2 2017 

earnings call, Wilcox explained that ARA’s DSO for Q2 2017 was “38” and that it “remains 

relatively stable.” 

43. ARA also publicized and touted its low and stable DSO, including that its DSO was 

consistently better than its two major competitors by wide margins of 25% to 45%. For example, 

in investor presentations published on the company website, in a section entitled “Strong and 

Consistent Cash Flow Generation,” ARA touted that its “[r]evenue cycle capabilities lead to low 

DSOs.”   

44. ARA also advertised its low DSO in marketing to potential physician partners. For 

example, in a presentation shown to potential partners in early 2017, ARA favorably compared 

its purported DSO of “39” to its two major competitors who had DSOs of “60” and “54”:  

 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 11 of 67



 

12 
 

45. Thus, by claiming a low DSO, ARA had an advantage over its competitors when 

marketing to potential partners. And, by gaining more doctor-partners, ARA could show growth 

in the number of new clinics it operated, which was important to investors.  

46. Boucher knew that ARA promoted its DSO as being lower than its competitors, 

including to potential new doctor-partners, and that DSO was one of the key metrics that ARA 

disclosed in SEC filings and investor materials. Boucher believed that ARA’s low DSO gave it a 

competitive advantage as compared to its competitors because, as he stated during his 

investigative testimony to the staff, “Doctors wanted to hear that the money is collected timely.”   

47. Smith also knew that DSO was an important metric for ARA and was aware that 

DSO was published in ARA’s SEC filings. 

Consolidated DSO Versus Clinic DSO 

48. ARA set up a system where clinic and consolidated DSO appeared to work at cross-

purposes. At a consolidated level, a topside adjustment that increased ARA’s revenue decreased 

its overall DSO. At a clinic level, a topside adjustment that increased revenue should have 

decreased that specific clinic’s DSO. However, because the revenue portion of topside 

adjustments was excluded from the calculation of clinic-level DSO, those clinic-level 

calculations would show that a topside adjustment to a particular clinic that increased that 

clinic’s revenue (and increased ARA’s consolidated revenue) would increase the clinic’s DSO 

but still would decrease the consolidated DSO.  

RPT and Adjusted EBITDA-NCI Were Critical Metrics for ARA 

49. Adjusted EBITDA-NCI was one of the most important financial metrics for ARA 

during the relevant period, and was one of the key metrics tracked by investment analysts who 

followed ARA’s stock.  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 12 of 67



 

13 
 

50. RPT is another important financial metric in the dialysis services industry, 

measuring a company’s revenue on a per-patient, per-treatment basis. Investors, market analysts, 

and doctor-partners closely monitored ARA’s RPT. Analysts considered it a key metric in 

understanding the financial health and success of health care companies like ARA. 

51. During his investigative testimony with the SEC staff, Wilcox identified RPT and 

Adjusted EBITDA-NCI as some of the most important metrics for ARA’s investors. 

52. In addition to its externally reported RPT, ARA closely tracked an internal core 

RPT, which excluded certain items, and was often referred to as “RPT w/o S&P.” Wilcox, 

Boucher, and Smith were all involved in checking whether RPT w/o S&P was achieving internal 

budget predictions, and directed or caused revenue adjustments designed solely to make RPT 

w/o S&P equal the budgeted number. Even if RPT w/o S&P was not publicly reported, revenue 

adjustments made solely to achieve this internal number affected other publicly reported 

numbers, including Net Income and Adjusted EBITDA-NCI, as well as the publicly-reported, 

overall RPT.  

C. Background on Wilcox, Boucher, and Smith and Their Responsibilities at 
ARA 

53. Wilcox was ARA’s CFO from April 2011 to September 2018. From January 1, 

2017 through his resignation in September 2018, he was the ARA employee in charge of revenue 

recognition and topside adjustment decisions. 

54. As ARA’s CFO, Wilcox was responsible during the relevant period for ensuring 

that revenue was reported accurately, that ARA’s SEC filings were accurate and complete, that 

the accounting procedures were in accordance with GAAP, that ARA’s books and records were 

accurate, and that internal accounting controls were operating effectively. Wilcox signed and 

certified many of the materially false and misleading periodic reports filed with the SEC. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 13 of 67



 

14 
 

55. Boucher was ARA’s Vice President of Finance from May 2011 to September 2018. 

He concurrently served as ARA’s Chief Accounting Officer from May 2015 until March 2019, 

and he was ARA’s CFO from October 2018 until March 2019, when he resigned at ARA’s 

request. From January 1, 2017 through September 2018, Boucher had a senior decision-making 

role at ARA with respect to revenue recognition and topside adjustments, and he directed other 

employees to make accounting journal entries regarding these issues. In October and November 

2018, Boucher was the ARA employee in charge of revenue recognition and topside adjustments 

decisions. Boucher signed at least two materially false and misleading SEC filings. 

56. As Chief Accounting Officer and later CFO, Boucher was responsible during the 

relevant period for overseeing accounting procedures, making sure that ARA’s books and 

records followed GAAP, ensuring that the SEC filings were accurate and complete, and making 

sure that the accounting procedures were consistent with the procedures laid out in the 

company’s internal controls. 

57. Smith was ARA’s Controller from August 2009 until September 2018. She was 

then promoted to be ARA’s Vice President of Finance from October 2018 to April 2019. During 

the relevant period, Smith had a managerial and decision-making role with respect to revenue 

recognition and topside adjustment decisions, and she directed other employees to make 

materially false and misleading accounting journal entries regarding these issues.  

58. As Controller and Vice-President of Finance, Smith’s responsibilities during the 

relevant period included management of the general ledger, SEC financial reporting, revenue, 

and other accounting functions at ARA. She had oversight of the preparation of SEC documents 

and accuracy of reporting information and was responsible for accounting policies and the 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 14 of 67



 

15 
 

application of GAAP to revenue recognition. She was responsible for ensuring that ARA’s 

financial reporting was in compliance with GAAP. 

D. Background on ARA’s Topside Accounting  

ARA’s Stated Topside Accounting Methodology 

59. As with other companies in the healthcare service industry, the people to whom 

ARA provides a service are very rarely the parties paying for the service. ARA’s payors include 

Medicare, Medicaid, insurance companies, and other commercial payors. As these payors 

generally do not pay the clinic’s full billing rate for dialysis treatments, ARA is required to 

record different amounts of revenue for each treatment. For Medicare, Medicaid, and insurance 

companies with which ARA had a contract, this was a straightforward process, as there was a 

pre-determined rate that ARA would receive for each treatment, and ARA could book revenue at 

this known rate. 

60. For some commercial insurers, however, ARA did not have a contract and did not, 

therefore, have an agreed upon rate. For these non-contracted commercial insurers, ARA used a 

two-step process of initial revenue estimates (i.e., “contractual allowances”) and subsequent 

adjustments (i.e., “topside adjustments” or, colloquially, “topsides”).  

61. ARA’s stated methodology was to bill non-contracted commercial insurers at its 

usual and customary rate, and then book the full amount of that rate as revenue.  ARA would 

then simultaneously book an offsetting contractual allowance to reduce that revenue down to 

what ARA estimated it would actually collect. This initial estimate was based primarily on 

ARA’s history with the insurance company, but could include other factors.  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 15 of 67



 

16 
 

62. Once ARA actually collected from the insurer, if the actual payment did not match 

the initial estimate, ARA’s processes (and GAAP) called for it to make a revenue adjustment to 

true up the initial estimate to the amount actually collected.  

63. ARA’s official stated methodology for determining topside adjustments, as 

described in the company’s internal accounting controls, was based on a detailed patient-level 

analysis. ARA documented its internal accounting controls related to topside adjustments in a 

process narrative for revenue that was adopted in July 2016 (the “Revenue Controls”). As CFO, 

Wilcox was responsible for the adoption and implementation of these controls, and Boucher was 

a named process owner. As a process owner, Boucher reviewed the Revenue Controls for the 

purpose of verifying their accuracy. In her role as Controller, Smith was also responsible for 

ARA’s accounting policies and the application of GAAP to revenue recognition. 

64. The Revenue Controls refer to topside adjustments as “True Ups” and read, in 

relevant part: 

 

65. Under the Revenue Controls, ARA accounting personnel were to first examine 

DSO on a clinic-by-clinic basis and determine which clinics had DSOs that were unusually high 

or low compared to ARA’s claimed typical DSO of “40.” These “outlier” DSOs were not a sole 

reason to make topside adjustments, but were instead an indication of which clinics ARA should 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 16 of 67



 

17 
 

examine on the patient-level, as they were more likely to need topside adjustments based on 

patient-level collection information. ARA’s revenue group were to then perform a detailed 

analysis of patient-level collections (called a “waterfall”) at these outlier clinics. The waterfall 

entailed looking at the payment history for each patient with a non-contracted commercial 

insurer and analyzing any over- or under-payments. If the patient-level data showed that a clinic 

had collected more (or less) cash than the revenue initially booked, this represented a potential 

positive (or negative) revenue adjustment, which ARA was to book as a topside adjustment 

through a journal entry in its general ledger. ARA’s written policies did not provide that topside 

adjustments should be made based on DSO alone. 

66. Moreover, ARA’s internal controls stated that “[a]ll journal entries require 

supporting documentation. Support for recurring and general journal entries resides on the 

Finance drive.” Accordingly, all topside adjustments should have had supporting documentation 

that was maintained by ARA. 

ARA’s Actual Topside Process Prior to 2017 

67.   Prior to 2017, the Former COO was primarily responsible for revenue recognition, 

including making the initial contractual allowances and then determining whether any topside 

adjustments were necessary. The Former COO worked with ARA’s accounts receivable 

department to analyze historical payments for the non-contracted insurers in order to determine 

the initial estimate for each treatment. This action does not allege fraudulent conduct during the 

period prior to the Former COO’s resignation from ARA on December 31, 2016, though ARA’s 

failure to devise and maintain a system of internal accounting controls, and the individual 

defendant’s aiding and abetting of that, extend back to at least July 2016, if not earlier. 

68. ARA had a monthly closing process to determine final entries on its books and 

records for each month. At ARA, this typically took place in the first few weeks of the following 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 17 of 67



 

18 
 

month (so the January close would take place in early to mid-February). Topside adjustments 

were typically made as part of the closing process. Prior to 2017, during the closing process, the 

Former COO would conduct a review to determine whether ARA should record topside 

adjustment for its clinics. The results of this review were only documented in the form of 

handwritten notes of what the topside adjustments should be, and did not include any supporting 

documentation of the analysis he performed that went into determining each topside adjustment. 

No one at ARA reviewed the Former COO’s topside adjustments. 

69. The Former COO resigned from ARA on December 31, 2016, but he agreed to 

serve as a consultant to ARA for up to six months. For the topside adjustments for December 

2016, Boucher emailed the Former COO on January 23, 2017 with a list of proposed topside 

adjustments (increasing total revenue by $3.15 million) that Boucher planned to book. The 

attached list of proposed topside adjustments included only positive topside adjustments, with a 

note for each that “Dso is below 40 days.” This note indicated that Boucher based the revenue 

increases solely on DSO. 

70. For the topside adjustments for January 2017, Wilcox and Boucher asked the 

Former COO to propose topside adjustments, and he did so in a manner similar to what he had 

done previously—proposed handwritten topside adjustments that were emailed to Boucher on 

February 27, 2017.  

71. No one at ARA knew how the Former COO had determined topside adjustments or 

took sufficient efforts to determine this. Even during the later restatement process, ARA was 

unable to determine the specific details of how the Former COO had determined topside 

adjustments in 2016 and earlier.  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 18 of 67



 

19 
 

72. Throughout 2016, 2017, and 2018, Wilcox, Boucher, and Smith did not know how 

the Former COO had determined the topside adjustments when he was responsible for those 

adjustments. 

II. The Topside Scheme in 2017 and 2018 
 

A. Under Wilcox, Boucher, and Smith, ARA Manipulated Its Revenue to Hit a 
Predetermined Target for DSO 

73. Following the Former COO’s resignation, Wilcox and Boucher took over primary 

responsibility for revenue recognition. Smith also became involved in the revenue recognition 

process and revenue recognition decisions at this time, and she had responsibility for supervising 

the revenue recognition manager hired by ARA a few months later. 

Wilcox, Boucher, and Smith Did Not Know How  
Topside Adjustments Had Been Handled Previously 

74. Wilcox and Boucher developed their own method and process for revenue 

recognition and topside adjustments. As Boucher explained in his sworn investigative testimony: 

Q:    Is it fair to say you kind of came up with your own method, but it was based on 
the materials you saw [the Former COO] asking for? 

A:    Yeah. It took me a period of time, but I developed my own process. 

Q:    And you’re not aware of whether the process that you used is the process that 
[the Former COO] used? 

A:    Correct . . .  

75. Similarly, as Wilcox admitted to the SEC staff during the investigation, he also did 

not know how the Former COO determined the topside adjustments to input: 

Q:    And so [the Former COO] was responsible for determining the amount of the 
top-side adjustments? 
 
A:    Yes. 
 
Q:    How would he determine the amount of the top-side adjustments? 
 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 19 of 67



 

20 
 

A:    I don’t know. 
  
Q:    Did DSO play a role in determining the amount of the top-side adjustments? 
 
A:    For what period? 
 
Q:    For [the Former COO]. Under [the Former COO]. 
 
A:    I don’t know. 
 
Q:    Was DSO one of the things that he looked at in determining the amount of top-
side adjustments for a clinic? 
 
A:    I don’t know what [the Former COO] looked at. 

76. Wilcox and Boucher could have but did not sufficiently consult with the Former 

COO regarding this issue. 

Wilcox and Boucher Developed an Improper “Top-Down” System  
for Topside Adjustments 

77. Instead, Wilcox and Boucher developed their own system for topside adjustments, 

and their system was little more than a fraudulent scheme wherein Wilcox, Boucher, and Smith 

booked millions of dollars in topside adjustments that were not based on patient-level detail, but 

instead booked to meet predetermined financial metrics.  

78. The topside scheme developed by Wilcox and Boucher had three steps, which were 

undertaken on a monthly basis. First, Boucher made some initial topside adjustments on his own.  

79. Second, Wilcox and Boucher met and determined the “correct” amount of topside 

revenue to take for the company on a consolidated basis. This determination was made by 

“triangulating” between various metrics and deciding how much they should adjust revenue 

upward or downward. This “top-down” or “top consolidated” approach was not based on patient-

level detail. There was no written explanation of this process, written support for the method, or 

documentation of the monthly determination. In his investigative testimony to the SEC staff, 

Wilcox explained these first two steps as follows:  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 20 of 67



 

21 
 

So, Jason [Boucher] would make an estimate based on what I believe to be prior 
month’s run rates or experience and so, he would already book topsides on his 
own. And then, when it came to me, Jason [Boucher] and I would book or 
calculate or figure out what the correct revenue was, we needed to book those 
topsides for. 

80. Third, Boucher, after deciding with Wilcox what the “correct” revenue figure was, 

then allocated the consolidated topside adjustment amount among ARA’s various clinics by 

having Smith and junior personnel acting at her direction enter topside adjustments to equal what 

Wilcox and Boucher had determined ARA’s revenue should be. In allocating the topside 

adjustments, Boucher and Smith examined the clinics’ DSO, and if they were significantly 

higher or lower than “40,” they assigned a revenue amount to those clinics to get their DSO 

closer to that target.  

81. According to Boucher’s sworn testimony, Wilcox knew that Boucher was making 

DSO-based entries that did not have patient-level support. While not admitting that he knew 

Boucher’s topside adjustments lacked patient-level support, even Wilcox has conceded that he 

did not know the basis, if any, for Boucher’s entries. Wilcox was, therefore, at least reckless 

and/or negligent in failing to ascertain the bases for these adjustments to revenue. 

82. Wilcox and Boucher hid the fact that they were using this top-down approach from 

the Former CEO, who was not aware that Wilcox and Boucher used this approach until during 

the investigation that led to the Restatement.  

83. Wilcox and Boucher’s decision to use this top-down approach, not based on any 

patient-level detail, was highly unreasonable and represented an extreme departure from the 

standards of ordinary care. The danger of misstating a company’s financials when revenue is 

based only on consolidated-level analytics, rather than on actual patient-level information, was 

either known to them or so obvious that they must have been aware of it.  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 21 of 67



 

22 
 

84.  Wilcox and Boucher failed to review or check information such as waterfall 

analyses containing actual patient-level detail that they had a duty to monitor. They also engaged 

in practices that contained obvious signs of fraud, as described above and below. Wilcox and 

Boucher knew, or were reckless or negligent in not knowing that this top-down approach would 

cause ARA to misstate its DSO, Net Income, Operating Income, Adjusted EBITDA-NCI and/or 

other important financial metrics in filings with the SEC and other statements to investors.  

B. Wilcox, Boucher, and Smith Booked Topside Adjustments to Make it Appear 
ARA Had a DSO Near 40 and Did Not Base them on Patient-Level Support 

Wilcox, Boucher, and Smith All Directed Unsupported,  
Round-Number, Topside Adjustments 

85. Throughout the relevant period, Wilcox, Boucher, and Smith made an effort to 

make it appear that ARA had a DSO at or near “40,” at both the consolidated and clinic level. 

This target DSO number was the basis for many topside adjustments in 2017 and 2018. 

86. A significant number of topside adjustments in 2017 were made in round dollar 

amounts—typically in increments of $25,000—based solely on efforts to manipulate each 

clinics’ DSO; they were not based upon examinations of actual collections or patient-level detail. 

The only support for many of these entries at the time that they were made was an entry in a 

spreadsheet noting that they were based on “DSO.” This violated ARA’s internal control that 

required supporting documentation for each journal entry.  

87. On October 27, 2017, an ARA employee sent Smith an updated version of ARA’s 

monthly close process noting that as part of the monthly close, this employee would “do DSO 

Adjustments [and] [s]end to Jason [Boucher]/Karen [Smith] for review” (emphasis in original). 

The “DSO Adjustments” described in the monthly close process that were sent to Boucher and 

Smith to be reviewed were topside adjustments based solely on achieving a DSO near “40.” 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 22 of 67



 

23 
 

Smith also directed people who worked for her at ARA to make topside adjustments solely based 

on achieving this desired DSO, on both the clinic level and the consolidated level.  

88. As discussed above, ARA set up a system where clinic and consolidated DSO 

appeared to work at cross-purposes, because a topside adjustment to increase revenue 

simultaneously decreased consolidated DSO but made it appear that the relevant, affected 

clinic’s DSO had increased. Nevertheless, Wilcox, Boucher, and Smith attempted to keep both 

consolidated DSO and individual clinic DSO near “40.” This resulted in the Defendants taking 

unusual steps to perpetrate the topside scheme.  

89. For example, according to ARA’s Revenue Controls, a clinic with a DSO 

significantly different from “40” should be examined to see if there were topside adjustments 

that should be taken. Logically, a clinic with a high DSO has many more days of unrecognized 

revenue than expected, and the payments to the clinic should be examined to see if additional 

revenue should be recognized. In contrast, a clinic with a low DSO has fewer days of 

unrecognized revenue than expected, and the revenue recorded should be examined to see 

whether it should be decreased.  

90. ARA’s revenue recognition manager, at times, attempted to follow this procedure. 

For example, on April 11, 2018 he emailed Smith and suggested nine topside adjustments. Four 

of the adjustments called for recognizing additional revenue at clinics with DSOs higher than 

“40”; five of the adjustments called for reducing revenue at clinics with DSOs lower than “40.” 

All of these adjustments were based on patient-level detail. In response, Smith countermanded 

his topside adjustments, instructing that two of the revenue increases should be eliminated saying 

“I would not book anything – why increase DSO,” since the DSO was already above 40. She 

also ordered him to reduce two other positive topside adjustments at clinics with DSOs higher 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 23 of 67



 

24 
 

than “40.” For each of the five revenue decreases, Smith instructed “I would not book anything – 

why decrease DSO,” since each clinic already had a DSO below “40.” Smith ignored the patient-

level detail that called for these adjustments. Below is an excerpt of a portion of the spreadsheet 

attached to the email showing Smith directing the revenue recognition manager not to take the 

identified adjustments: 

 

91. In his investigative testimony, while denying that ARA made accounting 

adjustments in order to achieve a specific DSO number, Wilcox admitted that targeting a specific 

DSO was wrong: 

Q:    Mr. Wilcox, would it have been incorrect to target DSO of 40? 

A:    It would have incorrect to have any targets. The business did what it did. 

Q:    Explain why that is. 

A:    The revenue and cash -- because DSO is an end result. DSO is AR divided 
revenue in days. So, if the AR and revenue is what it is, then the DSO is what it 
is. So, if the AR is correct and the revenue is correct, then the DSO is what it is. 

92. Wilcox also admitted in his testimony that making an entry to target a specific 

metric violated ARA’s internal controls: “If someone was making a target and making an entry 

to get to a target versus understanding the business and making those entries then, yes. It would 

have been a violation of the controls. Internal controls.” 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 24 of 67



 

25 
 

93. But targeting DSO is what Defendants did, as Smith admitted to the SEC staff: 

Q:    And so you continued to use a target of DSO at 40 in looking for topsides? 

A:    Yes. 

94. Wilcox knew it was wrong to base a topside solely on the DSO of a clinic, but 

Smith admitted that is precisely what ARA did. 

95. At times in 2017, Boucher asked members of the finance group to create patient-

level analyses—called “waterfalls”—to support some of the topside adjustments that had already 

been made to achieve certain DSO targets. Boucher, however, did nothing to verify that such 

post-hoc waterfalls were actually created or that any such reconciliation of the waterfalls’ results 

were undertaken. Many, if not most, of the topside adjustments recognized in 2017 did not have 

any patient-level waterfall support, either when they were made or after the fact. Thus, not only 

did Boucher fail to adhere to the proper system of basing topside adjustments on patient-level 

detail, he also failed to even verify the entries with patient-level detail after the fact. And he 

violated ARA’s internal control requiring supporting documentation for journal entries.  

96. From January 2017 to July 2017, ARA regularly made significant amounts of 

round-dollar adjustments to revenue based on their DSO target and other financial metrics. In 

each month, the net effect of these round-dollar adjustments was to increase revenue by more 

than $1,000,000, and sometimes more than $2,700,000. Across this seven-month period, these 

adjustments increased ARA’s reported revenue by more than $9,500,000.  

97. Boucher was aware of the continued use of round-dollar adjustments: on September 

15, 2017, Boucher sent an email to Smith and others attaching a spreadsheet that included 

numerous round-dollar adjustments.  

98. Wilcox personally directed specific topside adjustments in order to achieve certain 

DSO targets. For example, on June 27, 2017, he emailed Smith and another ARA employee and 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 25 of 67



 

26 
 

directed “Please book a $200,000 top-side to [the] Hazleton [clinic] and $125,000 top-side to 

[the] Lakewood [clinic]. DSO is too low there.”  Smith knew that Wilcox’s request was a 

violation of ARA’s internal controls, but she did not do anything to correct or address that 

violation. 

The Topside Adjustments Targeted a DSO of “40,”  
but “40” Was Not ARA’s Average Historical DSO 

99. Contrary to the statement in the Revenue Controls, ARA did not have a historical 

average DSO of 40. ARA’s S-1 and Amended S-1s, filed with the SEC in connection with its 

April 2016 Initial Public Offering, show that ARA’s historical DSO was not “40,” but in fact 

fluctuated between “40” and “48” from 2012 to 2015. Wilcox, Boucher, and Smith knew, or 

were reckless or negligent in not knowing, that ARA’s historical DSO was not “40.”  

C. The Defendants Adopted Other Improper Practices in the Topside Scheme 

100. In addition to recognizing topside adjustments discussed above, ARA, Wilcox, 

Boucher, and Smith employed a number of other improper accounting practices as part of this 

topside scheme. This included a) banking identified topside adjustments for use in future 

quarters, b) spreading out topside adjustments across multiple months, including across different 

quarters, and c) finding and/or creating offsetting topside adjustments between clinics in order to 

have a net zero effect on overall revenue and DSO. 

101. During the SEC’s investigation, Smith admitted that there were occasions in which 

identified topside adjustments were not taken in the month identified. On at least one occasion, 

Wilcox asked Smith not to record identified revenue without providing a reason, and Smith did 

as instructed.  

102. There was also a practice at ARA of booking a topside adjustment at one clinic and 

then booking an offsetting adjustment for another clinic. For example, on June 2, 2017, Boucher 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 26 of 67



 

27 
 

emailed an ARA employee and directed: “Can you please book $50k a month for the next 4 

months for each clinic (North Main and Central Columbia) one increase one decrease.”   

103. In another example, on June 14, 2017, an ARA employee informed Boucher that 

there was $1.4 million in identified topside adjustments at one clinic, but Boucher instructed that 

ARA should only book $500,000 of it.  

104. Wilcox, as CFO and a CPA, knew, or was reckless or negligent in not knowing that 

the practices described above were improper. 

105. Boucher understood that revenue must be timely recorded in the period it is 

identified. Thus, Boucher knew, or was reckless or negligent in not knowing, that the practices 

described above were improper.  

106. Smith also understood that revenue must be timely recorded in the period it is 

identified. Thus, Smith also knew, or was reckless or negligent in not knowing that the practices 

described above were improper.  

D. The Topside Scheme Expands to Include a Revenue “Cookie Jar” 

107. Over the course of 2017-2018, ARA’s topside adjustment process evolved, but 

improper accounting practices persisted. In the spring of 2017, ARA hired a revenue recognition 

manager. The revenue recognition manager reported to Smith, who reported to Boucher. For 

some matters, the revenue recognition manager worked directly with Boucher and was trained by 

Boucher on the process of booking topside adjustments based upon targeting DSO.  

The “Contractual Adjustments” Spreadsheet 

108. Under the revenue recognition manager, the revenue group began to prepare more 

patient-level waterfall analyses, and some topside adjustments were based on specific patient 

over- or under-payments identified by such analyses.  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 27 of 67



 

28 
 

109. However, ARA continued to target a DSO near “40” and typically only booked 

enough topside adjustments to get DSO close to target both on a company-wide basis and for 

individual clinics. Thus, over- and under-payments were identified by the revenue recognition 

manager in the waterfall process, but they were not recorded as topside adjustments. 

Additionally, Boucher and Smith also continued to instruct the revenue recognition manager to 

book topside adjustments, again in $25,000 increments, that were not based upon any actual 

patient-level analysis in order to achieve the target DSO for the given clinic. 

110. In the fall of 2017, in an effort to more efficiently identify over and under-

collections across all clinics and to respond to Boucher and Smith’s requests to identify topside 

adjustments in order to achieve the target DSO for the company, the revenue recognition 

manager created an Excel spreadsheet called “Contractual Adjustments.” The Contractual 

Adjustments spreadsheet was used to track all patient-level over- and under-collections that had 

been identified (and confirmed as appropriate for recognition), as well as whether they had or 

had not yet been booked by ARA as topside adjustments. 

111. Over time, the amount of over- and under-collections identified but not yet booked 

continued to increase, and the spreadsheet acted as a “cookie jar” from which ARA could find 

topside revenue when needed. As of July 2018, ARA had identified $35.7 million in net over-

collections related to services performed in Q2 2018 or earlier, but had only recorded $29.6 

million by the end of Q2 2018. The remaining $6.1 million, comprised of $10.2 million in un-

booked over-collections and $4.1 million in un-booked under-collections, was carried forward 

into future quarters by means of the cookie jar Contractual Adjustments spreadsheet. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 28 of 67



 

29 
 

Boucher and Smith Directed Which Topside Adjustments 
ARA Should Book from the Cookie Jar 

112. On a monthly basis, the revenue recognition manager reviewed patient cash 

collections and added the significant over- and under-collections to the cookie jar spreadsheet. 

He then reached out to ARA’s accounts receivable department to determine whether ARA 

expected to be able to keep the overpayments and whether ARA expected to be able to collect 

any more cash for the underpayments—i.e., whether each over- or under-payment should be 

recorded as a topside. However, in accordance with the instruction to target a particular DSO, the 

revenue recognition manager would propose to Smith and Boucher that ARA book only 

particular adjustments from the cookie jar that aligned with that goal.  

113. Smith or Boucher reviewed these proposals and made the final decisions as to 

which adjustments to book. These topside adjustments were then marked off in the cookie jar 

spreadsheet as booked, leaving an ongoing list of unbooked over- and under-collections for 

future use. Boucher also continued to request, at times, that additional topside adjustments be 

booked, which were not tied to particular patient payments and were typically in $25,000 

increments, in order to bring DSO closer to “40.’ These ad hoc adjustments were also tracked on 

the cookie jar spreadsheet. 

114. ARA, by and through Boucher and Smith, continued to use the Contractual 

Adjustments spreadsheet to spread identified revenue across multiple months. For example in 

November 2017, the revenue recognition manager highlighted to Smith that “You can tell the 

adjustment is spread over 3 months because the ‘Month Booked’ column (column J) has 10, 11, 

12,” referring to the fact that a particular topside adjustment was spread over October, November 

and December. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 29 of 67



 

30 
 

115. The April 11, 2018 email exchange between the revenue recognition manager and 

Smith, discussed above, is indicative of the way ARA improperly used the cookie jar. The 

revenue recognition manager suggested nine topside adjustments based on patient-level detail. In 

response, Smith explained that after reviewing the revenue adjustments proposed from the 

cookie jar, she wanted certain of the adjustments reversed out--i.e., not booked but instead held 

for future use, because of the negative effect booking the adjustments would have on DSO.  

116. In another example, an August 18, 2018 email between Smith, Boucher and another 

ARA employee regarding closing out the books for July 2018 discusses topside adjustments that 

had been identified for a particular clinic but not taken. The other ARA employee wrote: “All but 

25K of it was taken in April. I'm suggesting to not take the 25K this month, and I can look into it 

for August and see if I can take the full adjustment then. Are you okay with this, rather than 

having adjustments span multiple months?” Boucher and Smith agreed, and ARA spread the 

identified revenue across two quarters. 

117. In that same August 18, 2018 email chain, Boucher instructed Smith and the other 

ARA employee to hold off on booking identified topside adjustments as revenue. As Smith 

explained in her sworn testimony during the SEC’s investigation, this instruction violated 

GAAP: 

Q:    So Jason Boucher was asking for the proposed amount of topside to be 
decreased because of the effect that it would have on DSO? 

A:    That’s what it looks like from what I see here. 

Q:    And this was after revenue had already been identified and confirmed and 
proposed at topside that should be taken? 

A:    I believe so. 

Q:    Do you believe that that’s compliant with GAAP? 

A:   No. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 30 of 67



 

31 
 

Q:    What would happen to the revenue in the yellow -- what would happen to the 
revenue remaining that had been identified here but was not taken at Jason 
[Boucher]’s request? 

A:    I don’t recall. 

Q:    Wouldn’t that revenue be treated as unbooked revenue that could be taken at a 
later time? 

A:    Yeah, it could. 

118. All of these practices with respect to the cookie jar violated ARA’s then-existing 

internal controls, as described in the Revenue Controls. The use of a cookie jar to take or hold 

back revenue is at odds with the Revenue Controls’ required procedures.  

E. The Topside Scheme Expands Again to Include Targeting RPT 

119. Beginning in the spring of 2018, ARA, Wilcox, Boucher, and Smith used ARA’s 

improper topside process not just to target DSO, but also to achieve a specific target for 

consolidated RPT.  

120. Like many companies, ARA had a budget that established various goals for 

different financial metrics for each quarter and year. 

121. During the relevant period, Wilcox was primarily responsible for developing the 

budget, which was then approved by other ARA senior leadership and ARA’s Board of 

Directors. 

122. ARA’s budget included a budget for RPT in both 2017 and 2018. This RPT budget 

was based in part of actual performance for the prior year and in part on other factors. 

123. Wilcox tracked ARA’s performance versus budget, including its RPT budget. 

124. Shifts in ARA’s patient base over time resulted in a larger percentage of ARA’s 

patient base using lower-paying in-network and managed care coverage, as opposed to higher-

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 31 of 67



 

32 
 

paying out-of-network commercial coverage. As a result, by 2018, ARA’s management was 

particularly concerned about ARA’s RPT dropping.  

125. Also in or around 2018, Medicare and Medicaid changed how they paid for two 

medications used in connection with dialysis treatments, which also affected ARA’s RPT. 

Because of this change, personnel at ARA often focused the internal core RPT figure, which 

excluded those two drugs, sometimes referring to this metric as “RPT w/o S&P” (“S&P” 

referring to the names of the drugs).  

126. As Smith testified during the SEC’s investigation, ARA used the budget RPT as the 

basis for making certain topside adjustments: 

Q:    And did you also continue to target budget RPT in determining topsides to take 
as well? 

A:    I believe so, yes. 

127. And, in an email to another ARA employee on October 17, 2018, regarding revenue 

comments from Boucher, Smith complained that Boucher “changed the story on me a few times 

over this year, so it’s been frustrating…..first it was trying to meet budget RPT w/o S&P (he will 

not admit this) along with DSO.” 

Boucher and Smith Direct ARA Employees to “Find” More Revenue 

128. Boucher knew that ARA used RPT, or RPT w/o S&P, as a targeted metric in the 

topside adjustment process in May 2018. In mid-May 2018, Boucher instructed Smith to find 

enough revenue in topside adjustments to achieve ARA’s budgeted RPT w/o S&P, which Smith 

calculated would require finding $3 million in topside adjustments. On the afternoon of May 10, 

2018, the revenue recognition manager emailed Smith that he had identified $1.8 million in 

topside adjustments under their standard DSO targeting approach. In response, Smith emailed the 

revenue recognition manager, “Can you please find another $1-1.2m in topside?” 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 32 of 67



 

33 
 

129. Smith knew that to “find” this additional revenue, the revenue recognition manager 

would have to conduct a manipulated review where he examined payments at clinics that were 

likely to show revenue increases and ignored payments at clinics that were likely to show 

revenue decreases.   

130. Alarmed at the request to find a specific amount of additional revenue without any 

accounting basis, the revenue recognition manager asked Smith to confirm that he correctly 

understood her request. Smith expressed anger about the revenue recognition manager’s 

questioning her directive and his reluctance to fulfill the request. Fearful for his job, the revenue 

recognition manager used the Contractual Adjustment cookie jar to find another $1.2 million in 

revenue through topside adjustments.  

131. Later that night, Smith informed Boucher by email that they had the $3.0 million in 

topside needed to reach ARA’s budgeted RPT w/o S&P, and noted that they “could backoff 

$0.2m if you wanted” while still achieving this metric. ARA’s financial records show that 

Boucher and Smith did, in fact, “back-off” approximately $95,000, thereby meeting the budget 

RPT w/o S&P goal with an extra approximately $100,000 in revenue remaining in the cookie jar 

for future use.  

132. Eight days after questioning the request to “find” more revenue, the revenue 

recognition manager was fired. 

133.  After the revenue recognition manager was fired, and through at least August 2018, 

the finance group continued, at Boucher and Smith’s direction, and under Wilcox’s watch, to 

search for revenue to book as topside adjustments in order to achieve a target DSO and budget 

RPT w/o S&P.  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 33 of 67



 

34 
 

134. By July and August 2018, ARA had patient-level information to support its revenue 

adjustments and reported this in its SEC filing for the third quarter of 2018. Nevertheless, ARA, 

principally through Boucher and Smith continued to take a “top-down” approach by using a 

target RPT w/o S&P to determine the amount topside adjustments to make. Boucher knew, or 

was reckless or negligent in not knowing that, this approach violated GAAP and would result in 

ARA reporting inaccurate and misleading financial numbers in its SEC filings and elsewhere.  

135. Smith never questioned the process of targeting budget RPT w/o S&P for topside 

adjustments, nor asked why the practice was being adopted. Over time, Smith found it difficult to 

identify as much revenue through topside adjustments as was required to meet the target RPT 

w/o S&P, and became frustrated by the adjustments needed to find revenue—in some months 

totaling several million dollars in additional revenue. Still, she never questioned the decision to 

target RPT w/o S&P. Smith knew, or was reckless or negligent in not knowing that, this 

approach violated GAAP and would result in ARA reporting inaccurate and misleading financial 

numbers in its SEC filings and elsewhere. 

136. Although RPT w/o S&P was not publicly reported by ARA, overall RPT was 

reported. The Restatement shows that the scheme to manage RPT w/o S&P affected overall RPT, 

as the Restatement included new figures for ARA’s RPT in Q2 2018, decreasing from $379 to 

$359, a 5.6% decrease, and Q3 2018 decreasing from $364 to $355, a 2.5% decrease.  

Wilcox, Boucher, and Smith Drove a Radical Increase 
in ARA’s Use of Topside Adjustments 

137. Although ARA had used topside adjustments for many years (and GAAP required 

the use of some topside adjustments), the net amount of topside adjustments, both as a total and 

as a percentage of ARA’s Net Income, greatly increased when Wilcox, Boucher, and Smith took 

over responsibility for topside adjustments in 2017, and again in 2018.  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 34 of 67



 

35 
 

138. As the chart below shows, as a percentage of Net Income, ARA’s topside 

adjustments in 2017 were more than double the highest figure from the preceding three years, 

and more than triple the historical average over that same period. The 2018 topside adjustments 

were larger still. Moreover, the topside adjustments in 2017 and 2018 were not just larger than 

the preceding years as a percentage of Net Income, they were also larger as raw totals. For 

example, the average total topside adjustments for 2014 through 2016 was approximately $7.6 

million. The 2018 topside adjustments were $31,609,292, more than four times that amount—

and only represented the three quarters of adjustments before ARA began to investigate and halt 

this practice following an inquiry from the SEC.  

 
Total Net 
Topside 
Adjustment 

Net Topside Adjustment as 
% of ARA’s Reported Net 
Income  

Net Topside Adjustment as 
% of ARA’s Restated Net 
Income  

2014 $6,290,000                      7.63%                       7.61% 
2015 $2,550,000                      2.74%                       2.66% 
2016 $14,011,429                     15.89%                     13.78% 
2017 $25,141,210                     33.22%                     43.25% 
Q1-Q3 2018 $31,609,292                     92.20%                   279.90% 

Wilcox and Boucher Failed to Correct a Significant Deficiency 
Related to the Topside Scheme 

139. Additionally, although ARA publicly touted its competitively low DSO and its 

effective revenue cycle management, billing, and collection, in actuality ARA had a significant 

number of old uncollected receivables for years, reflecting failures in its billing, collection, and 

revenue cycle management. The Audit Firm had identified ARA’s failure to resolve this large 

amount of older receivables as a significant internal control deficiency since at least 2011 and 

continued to identify it as a deficiency every year through 2018. The Audit Firm also warned 

ARA every year that the volume and value of these uncollected old receivables increased the risk 

of misstating revenue. Wilcox and Boucher were aware of this deficiency and that it remained 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 35 of 67



 

36 
 

unremediated through 2018. Their failure to remediate this deficiency is further evidence of their 

intent, recklessness and/or negligence with respect to misstating ARA’s financial information. 

F. Wilcox, Boucher, and Smith Concealed the Topside Scheme from the Audit 
Firm. 

140. In order to prevent discovery of ARA’s improper accounting practices, Wilcox, 

Boucher, and Smith misled the Audit Firm regarding the topside scheme. 

Wilcox, Boucher, and Smith Failed to Disclose Their 
Topside Adjustment Practices to the Audit Firm 

141. ARA, Wilcox, Boucher, and Smith never disclosed to the Audit Firm the process by 

which Wilcox and Boucher determined a consolidated topside amount and then allocated topside 

adjustments to individual clinics based on their DSO target. Instead, ARA finance department 

personnel represented to the Audit Firm that ARA performed a detailed patient- or payor-level 

analysis of cash collections before making a topside adjustment. Wilcox, Boucher, and Smith 

took no efforts to ensure that the Audit Firm had a proper understanding of ARA’s topside 

process; in fact, they actively concealed it. 

142. ARA represented in its internal documents and to the Audit Firm that DSO was 

only used in the topside adjustment process to determine clinics for which it would conduct a 

further detailed cash collections analysis and that the topside adjustments were based solely on 

the results of this detailed analysis. Smith knew that ARA provided the Audit Firm with the 

Revenue Controls procedure, but Smith also knew that the Revenue Controls did not accurately 

describe the actual method that ARA used for topside adjustments, at least for the large portion 

of topside adjustments in 2017 that were designed to manage DSO and had no patient support. 

Similarly, Boucher never told the Audit Firm that ARA was using a process for topside entries 

that was not based on patient-level information, and despite being the process owner for the 

Revenue Controls procedure, he did not take sufficient steps to ensure it was accurate. Also, 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 36 of 67



 

37 
 

Wilcox never told the Audit Firm about his top-down method of determining ARA’s topside 

adjustments, and did not take sufficient efforts to ensure that his top-down method was reflected 

in the Revenue Controls or any other documents provided to the Audit Firm. 

143. Likewise, ARA, Wilcox, Boucher, and Smith never disclosed to the Audit Firm the 

practices of targeting budget RPT in making topside adjustments, banking revenue in a cookie 

jar spreadsheet, spreading out revenue over months or quarters, or finding or creating offsetting 

topside entries.  

Boucher and Smith Manufactured False and Misleading Supporting Documents 
in Response to an Audit Request About Topside Adjustments 

144. Additionally, when the Audit Firm conducted testing of topside journal entries as 

part of its 2017 audit, ARA, principally through Boucher and Smith, created false and misleading 

support for many of these journal entries in order to mislead the Audit Firm that there was, in 

fact, patient-level support for every adjustment.  

145. As part of its audit of ARA’s 2017 financial statements, in January 2018, the Audit 

Firm sent to Smith and the revenue recognition manager a list of topside adjustments that they 

wanted to “test.” The Audit Firm intended to examine the contemporaneous documentary 

support that ARA had for these topside adjustments. This audit request consisted of a list of 37 

“credit” (or revenue increase) topside adjustments ranging in amounts from $25,000 to $700,000 

and 17 “debit” (or revenue decrease) topside adjustments ranging in amounts from $2,717 to 

$750,000. Boucher understood that the Audit Firm was looking for detailed support including 

patient-level information and/or information with patient dates of service. 

146. Smith and Boucher instructed the revenue recognition manager and his team to 

locate the support for each of the selected journal entries. However, for many of the selected 

entries, the topside adjustment had been made in order to hit the DSO target, and thus the only 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 37 of 67



 

38 
 

supporting documents were handwritten notes or lists, which merely documented the topside 

adjustment to book but provided no details or information supporting the topside adjustment. 

Smith and Boucher instructed their staff to withhold from the Audit Firm these handwritten notes 

and lists of topside adjustment amounts and to instead manufacture patient-level support for the 

topside adjustments. Smith and Boucher knew that the patient-level support they asked their staff 

to create did not exist at the time that the topside adjustments were made. Smith and Boucher 

also knew that the handwritten notes and other withheld documents were the actual, 

contemporaneous support for the topside adjustments. 

147. At least two of the “credit” selections and one of the “debit” selections related to the 

January 2017 close and were supported only by the handwritten notes of the Former COO. 

148. The handwritten notes should have been turned over, as Wilcox admitted during the 

SEC’s investigation: “If I were to assume that was the only support that was provided for the 

entry at the time the entry was booked, then that is -- that handwritten entry is what had -- is 

what should be, at a minimum, provided to the auditors.” 

The Support Was Not Only Post Hoc, But Fake 

149. Smith and Boucher did not tell the Audit Firm that they ordered ARA employees to 

create support for journal entries that did not exist when the Audit Firm made the request.  

150. Worse still, as explained in detail below, the support that Boucher and Smith had 

the revenue recognition manager and his team create was not just after-the-fact; in many 

instances they had no way of knowing whether the patient-level detail being provided was 

actually what the topside adjustments had been based on. Stated another way, Boucher and Smith 

directed their staff to manufacture fake support to make it appear that ARA had based certain 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 38 of 67



 

39 
 

topside adjustments on patient-level data when, in fact, that data had not been the basis for those 

topside adjustments.  

151. After identifying all the selected journal entries for which ARA lacked support, 

Smith and Boucher directed their staff to prepare retroactive waterfalls for each clinic. These 

backward-looking waterfalls identified patient-level under- and over- payments at the time the 

journal entry was made. However, in many instances, the identified patient-level over- and 

under-payments did not add up to the journal entry that had been recorded. Thus, Smith and 

Boucher instructed their staff to cherry-pick a sub-set of the identified patient-level over- or 

under-payments to get as close as possible to the amount of the journal entry that had been 

recorded months earlier.  

152. After reviewing the adjustments for which the Audit Firm wanted support, the 

revenue recognition manager noted the difficulties ARA would have in providing support for 

some of them. He emailed Smith on February 1, 2018, and listed the following problems, 

identifying the selections by their numbering on the audit request: 

 

153. Thus, for the Audit Firm’s sixth request, which was a March 2017 topside 

adjustment that increased revenue by $25,000, the topside adjustment was based solely on DSO 

at the time it was made. ARA did subsequently look for patient-level detail in June (which was in 

the following quarter), but that patient-level detail did not actually support the topside adjustment 

that had been made. Accordingly, Smith and Boucher directed the revenue recognition manager 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 39 of 67



 

40 
 

to create fake support for this topside adjustment to conceal the topside scheme from the Audit 

Firm, the Former CEO, ARA’s Board of Directors, ARA’s Audit Committee, and investors. 

154. Similarly, the Audit Firm’s seventh request was a March 2017 topside adjustment 

that increased revenue by $25,000 and was based solely on DSO. While ARA, principally 

directed by Smith and Boucher, compiled patient-level detail at the time, that detail did not 

support the topside adjustment. Accordingly, Smith and Boucher directed the revenue 

recognition manager to create fake support for this topside adjustment to conceal the topside 

scheme from the Audit Firm, the Former CEO, ARA’s Board of Directors, ARA’s Audit 

Committee, and investors. 

155. For the 11th and 16th selections, which were $225,000 and $175,000 increases to 

revenue, there was simply no support to be found. So Smith and Boucher directed the revenue 

recognition manager to create fake support that could be provided to the Audit Firm. 

156. Boucher and Smith did not care whether or not the patient-level support 

subsequently located by the revenue recognition manager was the actual basis for the selected 

topside adjustments, as long as the amounts added up to be close enough that they could 

convince the Audit Firm that it was the support. In fact, many of the entries were originally made 

by Boucher, and he was well aware there was no patient-level support at the time of the entry. 

For other entries, which were suggested by the Former COO when Boucher and Wilcox 

consulted with him in early 2017, Smith has admitted that she and Boucher simply speculated 

about the possible basis for the entries: 

Q:    So when the support is being created for [the Audit Firm], it’s not just being 
created after the fact. People are just taking guesses at what [the Former COO] 
might have looked like; is that fair? 
 
A:    Yeah, we were taking a shot at like he may have been looking at this. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 40 of 67



 

41 
 

157. When compiling the fake support, the revenue recognition manager (and other 

junior ARA employees working at his direction) were instructed to cherry-pick patient data until 

they were able to come up with a total that came as close to the DSO-based number as possible. 

Since they could not actually equal the round-number DSO-based adjustments, even when using 

the cherry-picked data, they described any differences as “various immaterial amounts” to 

conceal from the Audit Firm the fact that this support was created after the fact and based on 

cherry-picked data. 

158. After Boucher and Smith reviewed and finalized the purported support, Boucher 

asked Smith to do a final review of the support and send it to the Audit Firm. Smith sent the 

information in Excel spreadsheets to the Audit Firm. Boucher and Smith did not inform the 

Audit Firm that the purported support did not exist at the time the journal entries were made and 

was manufactured in response to the Audit Firm’s requests. Importantly, this was not just an 

after-the-fact cover-up. The topside scheme was still ongoing, and the manufacture of these fake 

documents was a critical part of enabling the scheme to continue on a going-forward basis. 

159. Boucher has admitted that he understood that the Audit Firm would have wanted to 

know that they were creating documents that did not exist in order to provide support for the 

audit. Indeed, compiling after-the-fact support based on cherry-picked data and providing it to 

auditors as though it were the actual, contemporaneous support for accounting decisions hampers 

auditors’ ability to perform a meaningful audit. 

160. The manufactured support provided to the Audit Firm included the statement 

“Originally based on analytics - built better processes through out [sic] the year and add patient 

details.” This confusing and oblique statement, if intended to alert the Audit Firm that the 

document and support in it were manufactured in response to their audit request, was utterly 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 41 of 67



 

42 
 

insufficient to do so. And it failed to do so. This language failed to inform the senior manager 

from the Audit Firm or any other persons working on the audit of ARA that the documents had 

been created in the manner described above. Rather, the Audit Firm personnel understood during 

the relevant period, based on the Revenue Controls (and explanations provided to them in walk-

throughs that were consistent with the Revenue Controls), that ARA based topside adjustments 

on patient-level detail. 

161. Even if Smith or Boucher had specifically told the Audit Firm how they had created 

the support, it still would have been improper for Boucher and Smith to provide this fake 

support. One of the purposes of an audit is to assure investors that a company’s financials are 

sound. Executives at a company agreeing or conspiring with an auditor to use fake support in 

place of the insufficient actual support results in an audit that cannot properly give such 

assurances to investors. 

162. Smith admitted in her sworn testimony that it is not correct for a company to create 

fake support in response to a request from its auditors, and further admitted: 

Q:    Yeah. Even if [the Audit Firm] knew about the handwritten spreadsheets from 
[the Former COO], don’t you think that ARA investors would want to know that in 
response to a request from its auditors, ARA had to create support that didn't exist? 

A:    I guess so.  

Wilcox, Boucher, and Smith Misled the Audit Firm 
in Management Representation Letters 

163. For every quarterly review and annual audit that the Audit Firm performed for 

ARA, ARA submitted a management representation letter. The purpose of these letters was for 

management to affirm certain representations made by ARA to the Audit Firm. The Audit Firm 

relied on the accuracy of these management representation letters as part of its audit 

responsibilities for ARA.  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 42 of 67



 

43 
 

164. ARA management submitted management representation letters to the Audit Firm 

on March 8, 2017, May 9, 2017, August 8, 2017, November 14, 2017, March 6, 2018, May 8, 

2018, August 7, 2018, and November 9, 2018.   

165. Boucher signed each of these letters. Wilcox also signed each of these letters except 

the November 9, 2018 letter, which Smith signed.  

166. Each of these letters represented that ARA management had provided the Audit 

Firm with “access to all information of which we are aware that is relevant to the preparation and 

fair presentation of the consolidated financial statements, including all financial records and 

related data, documentation of internal control over financial reporting, and related information.”   

167. This representation was false because ARA, by and through the individual 

defendants, did not inform the Audit Firm about their actual method for determining topside 

adjustments, described above. This representation was also false as to the 2018 letters because, in 

connection with the 2017 year-end audit in early 2018, Boucher and Smith did not provide the 

actual (albeit insufficient) support for topside entries and did not inform the Audit Firm that they 

had directed accounting personnel to manufacture support for the entries after the fact. Boucher 

and Smith knew the representation was false, because they understood ARA’s actual topside 

adjustment process and that they had not provided the Audit Firm with access to the actual 

topside support but had, instead, commissioned its creation after the fact.   

168.  Each of these letters also falsely represented that “there are no material transactions 

that have not been properly recorded in the accounting records underlying the consolidated 

financial statements.” 

169. Again, the topside scheme described above led to transactions not being properly 

recorded, which had a material impact on ARA’s financial statements. Wilcox, Boucher, and 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 43 of 67



 

44 
 

Smith knew this representation was false because they knew that ARA’s methodology led to 

transactions being improperly recorded in ARA’s accounting records—indeed, that was the 

entire point of their scheme. 

170. Each of these letters also falsely represented that the “methods and significant 

assumptions used in making accounting estimates, including those measured at fair value, are 

reasonable, consistently applied, and result in a measurement appropriate for financial statement 

and disclosure purposes.” 

171. The methods and assumptions for determining topside adjustments were not 

reasonable, consistently applied or appropriate, as described above. Wilcox, Boucher, and Smith 

knew this representation was false because they knew the methods and assumptions they were 

using, including targeting specific DSO and, later, RPT numbers, were not based on any analysis 

of whether those targets were reasonable or appropriate.  

III. The Impact of the Topside Scheme 
 

A. ARA’s Restatement and Financial Impact of the Topside Scheme 

172. In October 2018, ARA’s Audit Committee commenced an internal investigation 

into its revenue recognition methodology and related accounting matters. The company delayed 

the filing of its 2018 10-K, and on March 27, 2019, it announced that its financial statements and 

other financial data for 2014-September 2018 were not prepared in accordance with GAAP and 

“should be restated and should no longer be relied upon.”  It also announced the resignation of 

Boucher and the appointment of an interim CFO. Shortly thereafter, Smith also resigned. 

173. On September 5, 2019, ARA filed its 2018 10-K and restated financial information 

showing material changes in almost every financial metric, including DSO, revenues, income 

and Adjusted EBIDTA-NCI. On that same date, ARA also filed a Form 8-K with the SEC, which 

attached a press release announcing that ARA had restated its financials. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 44 of 67



 

45 
 

174. The Restatement admitted that ARA had not followed GAAP with respect to 

topside adjustments: “in recording revenue based on expected payments from third-party payors 

during the Restated Periods, we did not appropriately reconcile contractual allowance estimates 

for discounts and price concessions with cash subsequently received in respect of prior period 

patient claims.” 

175. The Restatement further admitted that ARA had not based topside adjustments on 

patient-level details: “Our methodology for reserving for contractual allowances did not 

reconcile revenue and accounts receivable to our collection experience and actual cash 

collections.”  

176. The Restatement also admitted that ARA had material weaknesses in its internal 

controls, and explained that there were internal control failures regarding revenue recognition: 

We did not maintain an effective control environment in connection with the 
revenue recognition process . . . and review and approval of journal entries. As 
our Company grew, this was evidenced by our failure to: (i)(a) invest in, prioritize 
and support an adequate environment of controls, (b) establish and support 
adequate controls relating to compliance with appropriate accounting policies and 
procedures, and (c) implement controls that were adequately designed and 
operating effectively, thereby enabling our preparation of financial statements to 
be in accordance with GAAP; and (ii) employ personnel with an appropriate level 
of accounting knowledge, experience and training in the application of GAAP 
commensurate with the increasing size of the entity and nature and complexity of 
our financial reporting requirements. 

177. The Restatement also admitted material weaknesses in internal controls regarding 

journal entry support: 

We did not maintain effective internal control over the review and approval of 
journal entries. Specifically, our internal controls over journal entries were not 
operating effectively to ensure that journal entries included appropriate 
underlying supporting documentation to ensure the validity, accuracy, and 
completeness of recorded amounts.  

178. And the Restatement admitted material weaknesses in internal controls regarding 

monitoring controls and compliance: 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 45 of 67



 

46 
 

We did not design and maintain effective monitoring controls over compliance 
with established accounting policies, procedures and controls related to: revenue 
recognition (including accounting for accounts receivable and related reserves and 
amounts due to payors); 

179. ARA’s restated DSO numbers were uniformly higher than originally reported and 

much closer in line with, or worse than, its competitors for the time period 2017-2018: 

  
ARA DSO 

as Reported 
ARA DSO 
as Restated 

Percent 
Understated 

[Competitor 1] 
DSO 

[Competitor 2] 
DSO 

2017 Q1 39 64 39.06% 54 60 

2017 Q2 38 60 36.67% 56 50 

2017 Q3 39 59 33.90% 60 52 

2017 Q4 37 55 32.73% 57 59 

2018 Q1 40 53 24.53% 59 73 

2018 Q2 38 46 17.39% 59 66 

2018 Q3 40 44 9.09% 61  60 

180. The Restatement included new figures for ARA’s RPT in Q2 2018, decreasing from 

$379 to $359 (a 5.6% decrease), and Q3 2018 decreasing from $364 to $355 (a 2.5% decrease).  

181. The Restatement also included new annual figures for operating income, net income 

and Adjusted EBIDTA-NCI, among other, that were materially worse than previously reported: 

(in thousands) 
Reported Restated 

Percent 
Overstated 

2017 Operating Income $106,458  $90,208  18.01% 

2017 Net Income $75,683  $58,136  30.18% 

2017 Adjusted EBITDA - NCI $105,531  $98,126  7.55% 

        

YTD Sept-2018 Operating Income $58,901  $32,373  81.94% 

YTD Sept-2018 Net Income $34,284  $11,293  203.59% 

YTD Sept-2018 Adjusted EBITDA - NCI $80,877  $65,312  23.83% 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 46 of 67



 

47 
 

182. The Restatement also included new quarterly figures for operating income, net 

income and Adjusted EBIDTA-NCI, among other, that were materially worse than previously 

reported, and shown in the charts below: 

(in 
thousands) 

 Operating Income as 
Reported  

Operating Income as 
Restated 

Percent Overstated 
(Understated) 

Q1 2017  $     12,470   $     11,674  7% 
Q2 2017  $     27,156   $     18,277  49% 
Q3 2017  $     32,901   $     33,224  (1%) 
Q4 2017  $     33,931   $     27,033  26% 
Q1 2018  $     21,399   $     12,573  70% 
Q2 2018   $       7,453   $      (4,310) 273% 
Q3 2018  $     30,049   $     24,110  25% 

 
(in 

thousands)  
 Net Income as 

Reported  
Net Income as 

Restated 
Percent Overstated 

Q1 2017  $     12,902   $     11,762  10% 
Q2 2017  $     16,391   $       9,759  68% 
Q3 2017  $     26,672   $     25,791  3% 
Q4 2017  $     19,718   $     10,824  82% 
Q1 2018  $     13,713   $       7,164  91% 
Q2 2018   $       2,277   $      (8,383) 127% 
Q3 2018  $     18,294   $     12,512  46% 

 
(in 

thousands)  
 Adjusted EBITDA - 

NCI as Reported  
Adjusted EBITDA - 

NCI as Restated 
Percent Overstated 

(Understated) 
Q1 2017  $     21,415   $     20,954  2% 
Q2 2017  $     27,403   $     22,543  22% 
Q3 2017  $     28,149   $     28,644  (2%) 
Q4 2017  $     28,564   $     25,985  10% 
Q1 2018  $     22,738   $     17,308  31% 
Q2 2018   $     31,508   $     24,754  27% 
Q3 2018  $     26,631   $     23,250  15% 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 47 of 67



 

48 
 

183. On March 8, 2019, ARA announced a delay in filing its 2018 10-K, related to the 

revenue recognition issues described above, which resulted in a drop in ARA’s stock price of 

more than 16%, and ARA’s stock price continued to decline the next trading day. On March 27, 

2019, ARA announced its intent to restate its financials and the resignation of CFO Boucher, 

which resulted in a 38% drop in ARA’s stock price.   

B. ARA, Wilcox, Boucher, and Smith Received Benefits from the Topside 
Scheme 

184. As a result of the scheme orchestrated by Wilcox, Boucher and Smith, ARA 

received a corporate benefit through awarding share-based compensation at improperly inflated 

prices (as described above). ARA also received a corporate benefit from marketing false 

financial and operating results, including that it purportedly had a lower DSO than its 

competitors, in sales pitches to doctors that may have resulted in ARA getting an increased 

number of clinic joint venture partners.  

185. Wilcox, Boucher, and Smith also personally benefited from the topside scheme in 

the form of inflated bonuses and stock sales. Both Wilcox and Boucher received bonuses that 

were based, at least in part, on the company’s Adjusted EBITDA for 2017, and Boucher received 

a bonus that was based, at least in part, on the company’s Adjusted EBITDA for 2018. As 

discussed above, these metrics were materially overstated.  

186. Both Wilcox and Boucher had employment agreements that indicated that they 

would receive bonuses based, at least in part, on ARA reaching certain EBITDA or Adjusted 

EBITDA targets. Had ARA not used Wilcox’s top-down approach to falsely report inflated 

Adjusted EBITDA figures for 2017 and 2018, Wilcox and Boucher would not have received 

bonuses as large as they did, if they received bonuses at all. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 48 of 67



 

49 
 

187. The topside scheme had a significant impact on the 2017 and 2018 bonuses for 

ARA’s Former CEO and another ARA senior executive, as shown in the chart below: 

(in 
millions) 

Budget 
Adjusted 
EBITDA 

As 
Reported 
Adjusted 
EBITDA 

As 
Reported 
Adjusted 
EBITDA 
as % of 
Budget 

Resulting 
% of 
target 
bonus 
potential 

Restated 
Adjusted 
EBITDA 

Restated 
Adjusted 
EBITDA 
as % of 
Budget 

Resulting 
% of 
target 
bonus 
potential 

2017 $185.6 $176.4 94% 70% $160.9 87% 0% 
2018 $186.4 $168.05 90% 50% $141.3 75% 0% 

188. Based on this, Wilcox and Boucher’s bonuses—which were based at least in part on 

the same metric—were also inflated by the topside scheme. 

189. In connection with the Restatement, the Former CEO repaid the company $880,223, 

representing amount of his overpaid bonuses that were attributable to the inaccurately stated 

financials. The returned money included the full amounts of bonuses paid to the Former CEO 

with respect to fiscal years 2017 and 2018.  

190. Wilcox and Boucher did not return any money to ARA as a result of the 

Restatement. 

191. In August 2018, during the fraud period, Smith sold over 8,200 shares of ARA at 

stock prices that were inflated due to the fraud described above. Smith received a total of 

$172,577 in sale proceeds and the profitable gain from this stock sale was $161,958. A 

significant portion of those gains were due to the inflated stock price. 

192. In addition, in the fall of 2018, during the period of their fraudulent scheme, 

Boucher and Smith received promotions. Boucher was promoted to CFO to replace Wilcox when 

he left at the end of September 2018, and Smith was promoted to Vice President of Finance to 

replace Boucher. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 49 of 67



 

50 
 

C. ARA’s Financial Statements and Disclosures Were Materially False and 
Misleading. 

193. During the relevant period, ARA made the following periodic filings with the SEC, 

each of which was also disseminated through ARA’s website and through other means, and 

which contained materially false and misleading financial information: 

Form type Period / ending date Date filed Defendant who signed the 
filing as CFO 

10-Q Q1 2017 / Mar. 31, 2017 May 9, 2017 Wilcox 
10-Q Q2 2017 / Jun. 30, 2017 Aug. 8, 2017 Wilcox 
10-Q Q3 2017 / Sept. 30, 2017 Nov. 14, 2017 Wilcox 
10-K FY 2017 / Dec. 31, 2017 Mar. 6, 2018 Wilcox 
10-Q Q1 2018 / Mar. 31, 2018 May 8, 2018 Wilcox 
10-Q Q2 2018 / Jun. 30, 2018 Aug. 7, 2018 Wilcox 
10-Q Q3 2018 / Sept. 30, 2018 Nov. 9, 2018 Boucher 

194. Also during the same time period, ARA filed the following current reports on Form 

8-K attaching press releases regarding earnings announcements, each of which were also 

disseminated through ARA’s website and through other means, and which contained materially 

false and misleading financial information: 

Form type Period / ending date Date filed Defendant who signed the 
filing as CFO 

8-K Q1 2017 / Mar. 31, 2017 May 9, 2017 Wilcox 
8-K Q2 2017 / Jun. 30, 2017 Aug. 8, 2017 Wilcox 
8-K Q3 2017 / Sept. 30, 2017 Nov. 14, 2017 Wilcox 
8-K FY 2017 / Dec. 31, 2017 Mar. 6, 2018 Wilcox 
8-K Q1 2018 / Mar. 31, 2018 May 8, 2018 Wilcox 
8-K Q2 2018 / Jun. 30, 2018 Aug. 7, 2018 Wilcox 
8-K Q3 2018 / Sept. 30, 2018 Nov. 8, 2018 Boucher 

195. The financial statements in these Forms 10-Q, 10-K, and 8-K filed with the SEC 

were materially false and misleading, because, as discussed above (and shown by the 

Restatement), they did not accurately represent ARA’s financial information at the time, but 

instead reported figures that were materially different than what ARA’s actual financial 

statements would have been if they had reported them in compliance with GAAP.  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 50 of 67



 

51 
 

196. Each of the Forms 10-Q and K listed above included a certification by the signer 

listed above, as required by Section 302 of the Sarbanes-Oxley Act of 2002 [15 U.S.C. 7241], 

certifying the accuracy and completeness of the report. These certifications were false for the 

same reasons that the financial statements in those documents were false. 

197. Wilcox and Boucher knew, or were reckless or negligent in not knowing that these 

financial statements, and certifications regarding them, were materially false and misleading 

because Wilcox and Boucher had each actively participated in the scheme described herein. 

198. Each of the Forms 10-Q and K included a certification by the signer listed above, as 

required by Section 302 of the Sarbanes-Oxley Act of 2002 [15 U.S.C. 7241], certifying the 

effectiveness of ARA’s internal accounting controls. These certifications were false because 

ARA failed to devise and maintain a system of internal accounting controls sufficient to prevent 

Wilcox, Boucher, and Smith from carrying out the topside scheme. 

199. Wilcox and Boucher knew, or were reckless or negligent in not knowing that these 

certifications regarding internal controls were false because the way in which Wilcox and 

Boucher booked topside adjustments was inconsistent with the Revenue Controls and/or they had 

caused ARA to book journal entries without supporting documentation. 

200. In addition to the misstated financial results, ARA’s SEC filings listed above also 

contained other material misstatements and omissions in light of the topside scheme. For 

example, ARA listed its DSO in the filings described above, but failed to disclose that those 

DSO figures had been achieved through the processes described above.  

201. ARA’s Forms 10-Q for the first three quarters of 2017 were disseminated by ARA 

through its website and other means, and contained the following statement: 

Contractual allowances, along with provisions for uncollectible amounts, are 
estimated based upon contractual terms, regulatory compliance and historical 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 51 of 67



 

52 
 

collection experience. Net revenue recognition and allowances for uncollectible 
billings require the use of estimates of the amounts that will actually be realized. 
Changes in estimates are reflected in the then-current financial statements based 
on on-going actual experience trends, or subsequent settlements and realizations 
depending on the nature and predictability of the estimates and contingencies. 

202. This statement is materially false and misleading because, as described above, 

“changes in estimates” (meaning topside adjustments) were not based on “on-going actual 

experience trends, or subsequent settlements and realizations” but instead were based on efforts 

to meet predetermined targets. Wilcox knew, or was reckless or negligent in not knowing, that 

this statement was false because of his participation in the scheme described above.  

203. ARA’s Forms 10-Q for the first three quarters of 2018, signed and filed as 

described above, each contained the following statement: 

Patient service operating revenues may be subject to adjustment of the estimated 
transaction price as a result of (i) new information obtained, such as actual 
payment receipt, (ii) examinations of the Company, or Medicare or Medicaid 
Managed Care programs that the Company serves, by government agencies or 
contractors, for which the resolution of any matters raised may take extended 
periods of time to finalize; (iii) differing interpretations of government regulations 
by different fiscal intermediaries or regulatory authorities; (iv) differing opinions 
regarding a patient’s medical diagnosis or the medical necessity of service 
provided; (v) retroactive applications or interpretations of governmental 
requirements; and (vi) claims for refund from private payors, including as the 
result of government actions. 

204. This statement is materially false and misleading because Wilcox and Boucher in 

fact simply implemented the top-down system described above and booked topside entries to 

meet predetermined targets. Wilcox and Boucher each knew, or were reckless or negligent in not 

knowing, that this statement was false because of their participation in the scheme described 

above. 

205. Wilcox repeated and disseminated many of the false DSO figures on earnings calls 

that ARA held which were open to the public, including analysts and investors, on May 10, 

2017, August 9, 2017, November 15, 2018, March 7, 2018, May 9, 2018 and August 8, 2018. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 52 of 67



 

53 
 

Boucher repeated and disseminated the false DSO figures for September 2017 and 2018 in an 

earnings call on November 9, 2018. 

206. ARA’s Form 10-K for 2017, filed and signed as described above, contained the 

following statement: 

Based on our experience in the dialysis services industry, we will continue to 
follow a disciplined approach to enhancing performance in key areas such as: 
revenue cycle management; patient registration; facilitation and verification of 
insurance; payor interaction and arrangements; and billing and collection. We 
believe this has positively impacted our revenue per treatment and allowed us to 
maintain low levels of days’ sales outstanding and bad debt expense. 

207. This statement was materially false and misleading because it attributes ARA’s 

“low levels of days’ sales outstanding” to its “disciplined approach” in certain “key areas” of its 

business, including revenue cycle management and billing and collection. In fact, as described 

above, ARA’s low DSO was a result of a manipulated and undisclosed revenue methodology.  

208. Wilcox knew, or was reckless or negligent in not knowing, that the quote above 

from the 2017 Form 10-K was false because of his participation in the scheme described above. 

209. ARA’s Form 10-K for 2017, filed and signed as described above, contained the 

following statement: 

Changes in estimates are reflected in the then current financial statements based 
on on-going actual experience trends, or subsequent settlements and realizations 
depending on the nature and predictability of the estimates and contingencies. 

210. This statement was materially false and misleading because, as discussed above, 

Wilcox and Boucher’s undocumented and undefined methodology for topside adjustments was 

not based on “actual experience.”  

211. In addition, ARA’s practices of spreading out topside across quarters or banking 

topside adjustments for use in future quarters meant that changes in estimates were not reflected 

in the “then current financial statements.”      

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 53 of 67



 

54 
 

212. Wilcox knew, or was reckless or negligent in not knowing, that this statement was 

false because of his participation in the scheme described above.  

213. ARA’s Form 10-K for 2017, filed and signed as described above, contained the 

following statement: “The accompanying consolidated financial statements have been prepared 

in accordance with U.S. generally accepted accounting principles.” 

214. This statement was false and misleading because ARA’s financial statements were 

not prepared in accordance with GAAP, as described above. 

215.  Wilcox knew, or was reckless or negligent in not knowing, that this statement was 

false because of his participation in the scheme described above.  

ARA Made False Statements in Investor Presentations 

216. For each quarterly period in 2017 and 2018, ARA, by and through individuals 

including Wilcox and Boucher, created and disseminated a PowerPoint Presentation entitled 

“ARA Investor Presentation.” ARA posted these presentations to the investor relations section of 

the company’s website for purposes of making them available to investors and potential 

investors. As CFO, Wilcox (and later Boucher) was responsible for the accuracy of these 

presentations. The presentations were materially false and misleading because they repeated the 

incorrect DSO values described above and omitted the manipulation ARA engaged in to reach 

those values. Wilcox and Boucher knew, or were negligent or reckless in not knowing, that these 

statements were false by virtue of their participation in the topside scheme as described above. 

The False and Misleading Statements Were Part of the Overall Scheme 
 

217. All of the misstatements described above were part of the topside scheme, which 

also included the dissemination of the misstatements and the inherently deceptive conduct 

described above.  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 54 of 67



 

55 
 

218. ARA (prior to the announcement of the Restatement), Wilcox, and Boucher failed 

to correct the misstatements described above once they had been made. 

D. The Topside Scheme Resulted in Inaccurate Books and Records and Violated 
GAAP 

 
219. As a result of the topside scheme, and as shown by the Restatement, ARA’s internal 

accounting records reflected incorrectly stated revenue. This is because the practices employed 

as part of the topside scheme were not in accordance with GAAP.  

220. The topside scheme practices were not in accordance with ASC 954-605-35-1, 

because ARA failed to revise initial revenue estimates based on actual amounts (subsequent 

payments) obtained and include adjustments to revenue in the period that new information was 

obtained.  

221. Additionally, the topside scheme practices were not in accordance with the relevant 

provisions of ASC 606-10-32-42&43, adopted in January 2018, because ARA failed to record 

revenue adjustments in the period in which the resolution of uncertain events occurred (when 

ARA received the actual patient payments). 

E. ARA’s Topside Process Violated its Internal Accounting Controls From July 
2016 Through 2018 

 
222. ARA failed to devise and maintain a system of internal accounting controls 

sufficient to provide reasonable assurances that transactions were recorded as necessary to permit 

preparation of financial statements in conformity with GAAP and to maintain the accountability 

of assets. 

223. The topside scheme from 2017 to 2018, as described above, was inconsistent with 

ARA’s internal accounting controls, as documented in the July 2016 Revenue Controls quoted 

above. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 55 of 67



 

56 
 

224. Additionally, prior to the topside scheme, ARA, Wilcox, Boucher, and Smith all 

failed to ensure that sufficient supporting documentation was maintained for the journal entries 

for the Former COO’s topside adjustments during 2016. This was a violation of ARA’s internal 

control requiring all journal entries to be supported by documentation. 

F. Cooperation and Remediation  

225.  ARA cooperated with the SEC staff in connection with the SEC staff’s 

investigation.  ARA also implemented significant remedial measures, such as changes in 

management, corporate governance, and the remediation of internal controls deficiencies. 

FIRST CLAIM 
Violations of Securities Act Section 17(a) 

(All Defendants) 
 

226. All of the foregoing paragraphs are incorporated by reference herein. 

227. By engaging in the conduct described above, Defendants ARA, Wilcox, Boucher, 

and Smith, in the offer or sale of securities, and by the use of means or instruments of 

transportation or communication in interstate commerce or by use of the mails, directly or 

indirectly:   

(a) while acting knowingly or recklessly, employed devices, schemes, and artifices to 

defraud;  

(b) while acting knowingly, recklessly, or negligently, obtained money or property by 

means of untrue statements of a material fact or by omitting to state a material fact 

necessary in order to make the statements made, in light of the circumstances under 

which they were made, not misleading; and 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 56 of 67



 

57 
 

(c) while acting knowingly, recklessly, or negligently, engaged in transactions, practices, 

or courses of business which operated or would operate as a fraud or deceit upon the 

purchasers of ARA stock. 

228. By engaging in the foregoing conduct, Defendants ARA, Wilcox, Boucher, and 

Smith violated Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

SECOND CLAIM 
Aiding and Abetting Violations of Securities Act Section 17(a) 

(Against Defendants Wilcox, Boucher, and Smith) 

229. All of the foregoing paragraphs are incorporated by reference herein. 

230. As alleged above, Defendant ARA violated Securities Act Section 17(a) [15 U.S.C. 

§ 77q(a)]. 

231. Through their improper revenue practices, violations of internal controls, false 

statements to the Audit Firm, and other means alleged above, Defendants Wilcox, Boucher, and 

Smith knowingly provided substantial assistance to, and thereby aided and abetted, ARA’s 

violations of the securities laws. 

232. By engaging in the foregoing conduct, pursuant to Securities Act Section 15(b) [15 

U.S.C. § 77o(b)], Defendants Wilcox, Smith, and Boucher violated Securities Act Section 17(a) 

[15 U.S.C. § 77q(a)]. 

THIRD CLAIM 
Violations of Exchange Act Section 10(b) and Rule 10b-5(a) and (c) Thereunder 

(Against all Defendants) 
 

233. All of the foregoing paragraphs are incorporated by reference herein. 

234. By engaging in the foregoing conduct, Defendants ARA, Wilcox, Boucher, and 

Smith, directly or indirectly, in connection with the purchase or sale of a security, by the use of 

means or instrumentalities or interstate commerce, of the mails, or of the facilities of a national 

securities exchange, with scienter:  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 57 of 67



 

58 
 

(a) employed devices, schemes, or artifices to defraud; and  

 (c) engaged in acts, practices or courses of business which operated or would operate as 

a fraud or deceit upon the purchasers of ARA stock, and other persons. 

235. By engaging in the foregoing conduct, Defendants ARA, Wilcox, Boucher, and 

Smith violated, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(a) and 

(c) thereunder [17 C.F.R. § 240.10b-5]. 

FOURTH CLAIM 
Violations of Exchange Act Section 10(b) and Rule 10b-5(b) Thereunder 

(Against ARA, Wilcox, and Boucher) 
 

236. All of the foregoing paragraphs are incorporated by reference herein. 

237. By engaging in the foregoing conduct, Defendants ARA, Wilcox, and Boucher, 

directly or indirectly, in connection with the purchase or sale of a security, by the use of means 

or instrumentalities or interstate commerce, of the mails, or of the facilities of a national 

securities exchange, with scienter: 

(b) made untrue statements of a material fact or omitted to state a material fact necessary 

in order to make the statements made, in the light of the circumstances under which they 

were made, not misleading; 

238. By engaging in the foregoing conduct, Defendants ARA, Wilcox, and Boucher, 

violated, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(b) thereunder 

[17 C.F.R. § 240.10b-5]. 

FIFTH CLAIM 
Aiding and Abetting Violations of Exchange Act 10(b) and Rule 10b-5 Thereunder 

(Against Defendants Wilcox, Boucher, and Smith) 
 

239. All of the foregoing paragraphs are incorporated by reference herein. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 58 of 67



 

59 
 

240. As alleged above, Defendant ARA violated Exchange Act Section 10(b) [15 U.S.C. 

§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

241. Through their improper revenue practices, violations of internal controls, false 

statements to the Audit Firm, and other means alleged above, Defendants Wilcox, Boucher, and 

Smith knowingly provided substantial assistance to, and thereby aided and abetted, ARA’s 

violations of the securities laws. 

242. By engaging in the foregoing conduct, pursuant to Exchange Act Section 20(e) [15 

U.S.C. § 78t(e)], Defendants Wilcox, Boucher, and Smith violated Exchange Act Section 10(b) 

[15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

SIXTH CLAIM 
Violations of Exchange Act Section 13(a) and  

Exchange Act Rules 12b-20, 13a-1, 13a-11, and 13a-13 
(Against ARA) 

 
243. All of the foregoing paragraphs are incorporated by reference herein. 

244. Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 13a-1, 13a-11, 

and 13a-13 thereunder [17 C.F.R. §§ 240.13a-1, 240.13a-11, and 240.13a-13] require issuers of 

registered securities to file with the SEC factually accurate annual reports (on Form 10-K), 

quarterly reports (on Form 10-Q), and current reports (on Form 8-K). Exchange Act Rule 12b-20 

[17 C.F.R. § 240.12b-20] provides that, in addition to the information expressly required to be 

included in a statement or report, there shall be added such further material information, if any, 

as may be necessary to make the required statements, in light of the circumstances under which 

they were made, not misleading. 

245. By engaging in the foregoing conduct, Defendant ARA violated Section 13(a) of 

the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder 

[17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-11, and 240.13a-13].  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 59 of 67



 

60 
 

SEVENTH CLAIM 
Aiding and Abetting Violations of Exchange Act Section 13(a) and 

Rules 13a-1, 13a-11, 13a-13 and 12b-20 
(Against Wilcox, Boucher, and Smith) 

 
246. All of the foregoing paragraphs are incorporated by reference herein. 

247. As alleged above, Defendant ARA violated Exchange Act Section 13(a) and Rules 

13a-1, 13a-11, 13a-13 and 12b-20. 

248.  Through their improper revenue practices and other means alleged above, 

Defendants Wilcox, Boucher, and Smith knowingly provided substantial assistance to, and 

thereby aided and abetted, ARA’s violations of the securities laws. 

249. By engaging in the foregoing conduct, pursuant to Exchange Act Section 20(e) [15 

U.S.C. § 78t], Defendants Wilcox, Boucher, and Smith violated Exchange Act Section 13(a) [15 

U.S.C. § 78m(a)] and Rules 12b-20, 13a-1, 13a-11, and 13a-13 [17 C.F.R. §§ 240.12b-20, 

240.13a-1, 240.13a-11, and 240.13a-13]. 

EIGHTH CLAIM 
Violations of Exchange Act Section 13(b)(2)(A) 

(Against ARA) 
 

250. All of the foregoing paragraphs are incorporated by reference herein. 

251. Section 13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)] requires 

issuers to make and keep books, records, and accounts, which, in reasonable detail, accurately 

and fairly reflect the transactions of the company and dispositions of its assets.  

252. By engaging in the foregoing conduct, Defendant ARA violated Section 

13(b)(2)(A) of the Exchange Act [15 U.S.C. § 78m(b)(2)(A)]. 

NINTH CLAIM 
Aiding and Abetting Violations of Exchange Act Section 13(b)(2)(A) 

(Against Wilcox, Boucher, and Smith) 

253. All of the foregoing paragraphs are incorporated by reference herein. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 60 of 67



 

61 
 

254. As alleged above, Defendant ARA violated Exchange Act Section 13(b)(2)(A). 

255.  Through their improper revenue practices and other means alleged above, 

Defendants Wilcox, Boucher, and Smith knowingly provided substantial assistance to, and 

thereby aided and abetted, ARA’s violations of the securities laws. 

256. By engaging in the foregoing conduct, pursuant to Exchange Act Section 20(e) [15 

U.S.C. § 78t], Defendants Wilcox, Boucher, and Smith violated Exchange Act Section 

13(b)(2)(A). 

TENTH CLAIM 
Violations of Exchange Act Rule 13b2-1 

(Against Wilcox, Boucher, and Smith) 
 

257. All of the foregoing paragraphs are incorporated by reference herein. 

258. Rule 13b2-1 under the Exchange Act [17 C.F.R. § 240.13b2-1] provides that no 

person shall, directly or indirectly, falsify or cause to be falsified, any book, record or account 

subject to section 13(b)(2)(A) of the Exchange Act. 

259. By engaging in the foregoing conduct, Defendants Wilcox, Boucher, and Smith 

violated Rule 13b2-1 under the Exchange Act [17 C.F.R. § 240.13b2-1]. 

ELEVENTH CLAIM 
Violations of Exchange Act Section 13(b)(2)(B) 

(Against ARA) 
 

260. All of the foregoing paragraphs are incorporated by reference herein. 

261. Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)] requires 

issuers to devise and maintain a system of internal accounting controls sufficient to provide 

reasonable assurances that transactions are recorded as necessary to permit preparation of 

financial statements in conformity with GAAP and to maintain the accountability of assets. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 61 of 67



 

62 
 

262. By engaging in the foregoing conduct, Defendant ARA violated Section 

13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)]. 

TWELFTH CLAIM 
Aiding and Abetting Violations of Exchange Act Section 13(b)(2)(B) 

(Against Wilcox, Boucher, and Smith) 
 

263. All of the foregoing paragraphs are incorporated by reference herein. 

264. As alleged above, Defendant ARA violated Exchange Act Section 13(b)(2)(B) [15 

U.S.C. § 78m(b)(2)(B)]. 

265. Through their improper revenue practices and other means alleged above, 

Defendants Wilcox, Boucher, and Smith knowingly provided substantial assistance to, and 

thereby aided and abetted, ARA’s violations of the securities laws. 

266. By engaging in the foregoing conduct, pursuant to Exchange Act Section 20(e) [15 

U.S.C. § 78t], Defendants Wilcox, Boucher, and Smith violated Exchange Act Section 

13(b)(2)(B) [15 U.S.C. § 78m(b)(2)(B)].  

THIRTEENTH CLAIM 
Violations of Exchange Act Section 13(b)(5) 

(Against Wilcox, Boucher, and Smith) 
 

267. All of the foregoing paragraphs are incorporated by reference herein. 

268. Exchange Act Section 13(b)(5) [15 U.S.C. § 78m(b)(5)] provides that 

no person shall knowingly circumvent or knowingly fail to implement a system of internal 

accounting controls. 

269. By engaging in the foregoing conduct, Defendants Wilcox, Boucher, and Smith 

violated Exchange Act Section 13(b)(5) [15 U.S.C. § 78m(b)(5)]. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 62 of 67



 

63 
 

FOURTEENTH CLAIM 
Violations of Exchange Act Rule 13b2-2(a) 

(Against Wilcox, Boucher, and Smith) 
 

270. All of the foregoing paragraphs are incorporated by reference herein. 

271. Rule 13b2-2(a) [17 C.F.R. § 240.13b2-2(a)] provides that no director or officer of 

an issuer shall, directly or indirectly, make or cause to be made a materially false or misleading 

statement to an accountant or omit to state, or cause another person to omit to state, any material 

fact necessary in order to make statements made, in light of the circumstances under which such 

statements were made, not misleading, to an accountant in connection with any audit, review, or 

examination of the financial statements of the issuer or the preparation or filing of any document 

or report required to be filed with the SEC. 

272. By engaging in the foregoing conduct, Defendants Wilcox, Boucher, and Smith 

violated Rule 13b2-2(a) under the Exchange Act [17 C.F.R. § 240.13b2-2(a)]. 

FIFTEENTH CLAIM 
Aiding and Abetting Violations of Exchange Act Rule 13b2-2(a) 

(Against Wilcox) 
 

273. All of the foregoing paragraphs are incorporated by reference herein. 

274. As set forth above, defendants Boucher and Smith violated Exchange Act Rule 

13b2-2(a) [17 C.F.R. § 240.13b2-2(a)]. 

275. Through his supervisory role, signing of false and misleading management 

representation letters given to the Audit Firm, and other means alleged above, Defendant Wilcox 

knowingly provided substantial assistance to, and thereby aided and abetted, Boucher and 

Smith’s violations of the securities laws. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 63 of 67



 

64 
 

276. By engaging in the foregoing conduct, pursuant to Exchange Act Section 20(e) [15 

U.S.C. § 78t], Defendant Wilcox violated Exchange Act Rule 13b2-2(a) [17 C.F.R. § 240.13b2-

2(a)].  

SIXTEENTH CLAIM 
Violations of Exchange Act Rule 13a-14 

(Against Wilcox and Boucher) 
 

277. All of the foregoing paragraphs are incorporated by reference herein. 

278. Exchange Act Rule 13a-14 [17 C.F.R. § 240.13a-14] provides that each principal 

executive and principal financial officer of a public company must sign a certification at the time 

that the company files its Forms 10-Q and 10-K certifying that the report does not contain any 

untrue statement of a material fact or omit to state a material fact necessary in order to make the 

statements made, in light of the circumstances under which such statements were made, not 

misleading. 

279. By engaging in the foregoing conduct, Defendants Wilcox and Boucher violated 

Exchange Act Rule 13a-14 [17 C.F.R. § 240.13a-14]. 

SEVENTEENTH CLAIM 
Violations of Sarbanes Oxley Act Section 304(a) 

(Against Wilcox and Boucher) 
 

280. All of the foregoing paragraphs are incorporated by reference herein. 

281. ARA, by engaging in the conduct described above, filed Forms 10-K for fiscal year 

2017 and Forms 10-Q for each of the first three quarters of fiscal years 2017 and 2018 that were 

in material non-compliance with its financial reporting requirements under the securities laws. 

282. ARA’s material non-compliance with its financial reporting requirements under the 

securities laws was the result of its misconduct described above. 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 64 of 67



 

65 
 

283. Due to ARA’s material non-compliance with its financial reporting requirements 

under the securities laws, and as a result of its misconduct, ARA was required to prepare an 

accounting restatement for fiscal year 2017 and the first three quarters of 2018. 

284. Wilcox and Boucher received or obtained, during the statutory time periods 

established by the Sarbanes-Oxley Act of 2002, bonuses, incentives and/or equity-based 

compensation or profits from their sale of ARA stock, which they have failed to reimburse ARA.   

285. The Commission has not exempted Wilcox or Boucher, pursuant to Section 304(b) 

of the Act, 15 U.S.C. § 7243(b), from the application of Section 304(a) of the Act, 15 U.S.C. § 

7243(a). 

286. By engaging in the conduct described above, Wilcox and Boucher violated Section 

304(a) of the Sarbanes Oxley Act [15 U.S.C. § 7243(a)]. 

PRAYER FOR RELIEF 

Accordingly, the SEC respectfully requests that the Court enter a final judgment: 

A. Finding that Defendants ARA, Wilcox, Boucher, and Smith violated the federal 

securities laws as alleged above. 

B. Permanently enjoining ARA from further violations of Section 17(a) of the 

Securities Act, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and 

Rules Rule 10b-5, 12b-20, 13a-1, 13a-11, and 13a-13 thereunder [15 U.S.C. §§ 77q(a); 15 U.S.C. 

§§ 78j(b); § 78m(a); 78m(b)(2)(A); and 78m(b)(2)(B); 17 C.F.R. §§ 240.10b-5; 240.12b-20; 

240.13a-1, 240.13a-11, and 240.13a-13]; 

C. Permanently enjoining Wilcox from further violations of Section 17(a) of the 

Securities Act; Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange 

Act, Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13b2-1, 13b2-2(a), and 13a-14 thereunder, and 

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 65 of 67



 

66 
 

Section 304(a) of the Sarbanes Oxley Act [15 U.S.C. §§ 77q(a); 15 U.S.C. §§ 78j(b); § 78m(a); 

78m(b)(2)(A); 78m(b)(2)(B); and 78m(b)(5); 17 C.F.R. §§ 240.10b-5; 240.12b-20; 240.13a-1, 

240.13a-11, 240.13a-13; 240.13b2-1; 240.13b2-2(a); and 240.13a-14; and 15 U.S.C. § 7243(a)]; 

D. Permanently enjoining Boucher from further violations of Section 17(a) of the 

Securities Act; Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Exchange 

Act, Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13b2-1, 13b2-2(a), and 13a-14 thereunder, and 

Section 304(a) of the Sarbanes Oxley Act [15 U.S.C. §§ 77q(a); 15 U.S.C. §§ 78j(b); § 78m(a); 

78m(b)(2)(A); 78m(b)(2)(B); and 78m(b)(5); 17 C.F.R. §§ 240.10b-5; 240.12b-20; 240.13a-1, 

240.13a-11, 240.13a-13; 240.13b2-1; 240.13b2-2(a); and 240.13a-14; and 15 U.S.C. § 7243(a)]; 

E. Permanently enjoining Smith from further violations of Section 17(a) of the 

Securities Act; Sections 10(b), 13(b)(2)(B), and 13(b)(5) of the Exchange Act, and Rules 10b-5, 

12b-20, 13a-1, 13a-11, 13a-13, 13b2-1, and 13b2-2(a) thereunder [15 U.S.C. §§ 77q(a); 15 

U.S.C. §§ 78j(b); § 78m(a); 78m(b)(2)(A); 78m(b)(2)(B); and 78m(b)(5); 17 C.F.R. §§ 240.10b-

5; 240.12b-20; 240.13a-1, 240.13a-11, 240.13a-13; 240.13b2-1; and 240.13b2-2(a)]; 

F. Ordering ARA, Wilcox, Boucher, and Smith to disgorge their ill-gotten gains as a 

result of the conduct alleged in this Complaint, plus prejudgment interest thereon; 

G. Ordering ARA, Wilcox, Boucher, and Smith to pay civil money penalties 

pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the 

Exchange Act [15 U.S.C. § 78u(d)(3)];  

H. Ordering that Defendants Wilcox, Boucher, and Smith be barred from acting as 

officers or directors of any public company pursuant to Section 20(e) of the Securities Act  [15 

U.S.C. § 77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)];  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 66 of 67



 

67 
 

I. Ordering that Defendants Wilcox and Boucher reimburse ARA for all bonuses, 

incentive-based and equity-based compensation, and/or profits realized from their sale of ARA 

stock pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 [15 U.S.C. § 7243(a)]; and 

J. Granting such other and further relief as the Court deems appropriate. 

JURY DEMAND 

Pursuant to Federal Rule of Civil Procedure 38, the SEC demands a trial by jury on all 

issues so triable. 

 

Dated:  December 6, 2021 Respectfully submitted, 
 
 
 /s/ Christopher M. Bruckmann  
 Christopher M. Bruckmann 
 (SDNY Bar No. CB-7317) 
 Pei Yuan Chung 
 (pro hac vice motion forthcoming) 
 Jonathan Austin 
 (SDNY Bar No. JA-2073) 
 Securities and Exchange Commission 
 100 F Street, NE 
 Washington, D.C. 20549 
 202-551-5986 (Bruckmann) 
 202-551-7713 (Chung) 
 202-551-3786 (Austin) 
 [email protected] 
 [email protected] 
 [email protected] 
 

Attorneys for Plaintiff Securities and 
Exchange Commission  

Case 1:21-cv-10366   Document 1   Filed 12/06/21   Page 67 of 67