Core Summary

  • The U.S. Securities and Exchange Commission (SEC) has dropped its civil enforcement action against View Inc.'s former Chief Financial Officer Vidul Prakash, which alleged negligence-based fraud, according to a litigation announcement released by the agency on Friday. The lawsuit, filed in 2023, claimed that Prakash was negligent in failing to properly disclose a $28 million warranty liability related to defects in the company's "smart" windows, which use artificial intelligence to control temperature, glare, and other factors.
  • According to court documents filed in the U.S. District Court for the Northern District of California, the parties jointly filed a motion to dismiss on November 26, and Judge Beth Labson Freeman approved it on Friday. The SEC stated in its announcement and the joint motion that its decision to exercise discretion and seek dismissal was "based on the facts and circumstances of this case, as well as its ongoing review of the evidence, including evidence obtained during discovery."
  • "I am pleased that Vidul has been vindicated after two and a half years of litigation," Craig Martin, managing partner at Morrison & Foerster and Prakash's attorney, told CFO Dive. Martin said that with the charges dismissed, Prakash can resume his career, which had been "long delayed" due to the case.

Deep Dive

The dismissal of this case marks the end of a two-year legal battle between the SEC and the former CFO. On November 3, shortly before the joint motion was filed, Judge Freeman denied Prakash's motion for summary judgment, noting that "a reasonable jury could find that Prakash breached his duty of care by failing to further investigate the warranty accrual issue or to further inform the accountants handling the matter," according to court documents.

The two-year court dispute centered on View's financial disclosures, involving the manufacturing costs of replacing windows with defective sealed components. The SEC alleged that the disclosures did not include the shipping and installation costs of the relevant windows.

The SEC settled with View in 2023 without imposing a civil penalty, noting that the company had self-reported the errors and taken remedial measures. In the case against Prakash—who served as View's treasurer from March 2019 to November 2021, leaving after an audit committee review—the SEC sought civil penalties, a permanent injunction, and officer and director bars, as CFO Dive reported at the time.

"When accounting disagreements arise, the CFO can easily become a target," Martin said regarding the dismissal. "The reality is that in the vast majority of companies, no single individual makes all accounting decisions." Such decisions are made collaboratively across departments and executives, he said.

"Unfortunately, however, the government tends to look for an individual, so CFOs need to be prepared to explain accounting decisions, sometimes years later, and to fight when necessary. Vidul did exactly that," he said.

Under the terms of the joint motion, the SEC has dismissed all charges against Prakash with prejudice, and each party bears its own costs.

As the legal dispute involving its former treasurer winds down, the smart window manufacturer has also undergone numerous changes aimed at mitigating ongoing financial challenges. The SoftBank-backed company reached unicorn status in 2021 but struggled to control cash burn and reduce expenses.

On April 2, 2024, View Inc. initiated a "prepackaged Chapter 11 process" and reached an agreement with investors led by Cantor Fitzgerald and RXR,transitioning to a private company, according to a letter from then-CEO Rao Mulpuri posted on the company's website at the time. He stated that the financial restructuring and privatization were intended to help strengthen the company's balance sheet. Mulpuri resigned as CEO in August of that year, as Business Insider reported at the time.

The SEC and View Inc. did not immediately respond to requests for comment regarding the dismissal.