The company’s outside auditing firm, Cherry Bekaert, expressed an adverse opinion on financial statements for fiscal 2017 on October 5.
Liberty said poor communication was also an issue with relevant information sometimes not communicated and in other cases withheld. There was also a material weakness in risk assessment, lack of proper technology and policies to carry out controls, along with poor information gathering and use of information.
The company said management assessed the controls over financial reporting as of April 30, 2018. “The control environment, risk assessment, control activities, information and communication, and monitoring controls were not effective. 'Tone at the top' issues contributed to an ineffective control environment,” Liberty wrote.
The report also cited problems with appropriate organizational structure, reporting lines, and authority and responsibilities in pursuit of objectives; commitment to attract, develop, and retain competent individuals, and holding individuals accountable for their internal control related responsibilities.
The tone issue related to the September 2017 firing of former CEO John Hewitt who was alleged to have been heard having sex in his office by employees. After he was fired, he used control of Class B shares to replace board members. Two auditing firms came and went during this period.
But in July, Hewitt sold his shares to Vintage Tributum and his Class B shares have been eliminated.
Liberty said having Nicole Ossenfort named as the new CEO in February, the Hewitt buyout and hiring Michael Piper as CFO in June were among steps contributed towards remedying the problems. Piper was VP of financial products but resigned shortly after Hewitt’s firing, even though he was offered a retention bonus.