SEC Charges Bankrate, Execs With Accounting Fraud

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By Rob Tricchinelli

Sept. 8 — Bankrate Inc., which runs a personal finance website,agreed Sept. 8 to pay $15 million to settle Securities and Exchange Commission charges that the company made up revenue figures in 2012 to meet forecasted earnings metrics.

The SEC also charged in federal court former chief financial officer Edward DiMaria and former accounting director Matthew Gamsey with orchestrating a scheme to falsely book additional revenues that the company didn't earn.

Hyunjin Lerner, who was then the company's vice president of finance, will pay $180,000 to settle related charges.

Executive Charges

After the company announced the puffed-up financial results from 2012's second quarter, the SEC alleged, the company's stock rose and DiMaria sold more than $2 million of it.

In its complaint, the SEC also said that DiMaria threatened, in an expletive-laden e-mail, to “rip [the] head off” of the head of Bankrate's credit card division if the division didn't book the additional revenue. He also threatened to fire the accountants in that division.

“This case demonstrates a form of earnings management that is pernicious and highly problematic,” Andrew Ceresney, the SEC's enforcement director, said in a conference call with reporters. “When a public company meets analysts’ expectations through a series of accounting entries that fail to comply with GAAP, they mislead the public and undermine confidence in financial reporting generally.”

The SEC sought industry bars, disgorgement and civil penalties from DiMaria and Gansey. Ceresney said he anticipates administrative proceedings against the pair as well.

Comment

DiMaria's lawyer said the former CFO would fight the charges.

“At all times, Edward DiMaria worked diligently and in good faith to make sure that Bankrate’s financial reporting accurately reflected the company’s performance,” Barry Berke, a partner at Kramer Levin Naftalis & Frankel LLP in New York, told Bloomberg BNA. “He looks forward to disproving the SEC’s unfair allegations and being vindicated in court.”

Gamsey's attorney, Robert Knuts of Sher Tremonte LLP in New York, didn't respond to a request for comment.

Settlement

Bankrate and Lerner didn't admit or deny the SEC's charges.

Lerner also agreed to a five-year bar from being a director of a publicly traded company and restrictions on working in public company accounting.

Bankrate was represented by Wachtell, Lipton, Rosen & Katz in New York. Lerner was represented by Morvillo Abramowitz Grand Iason & Anello in New York.

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

For the Bankrate order, visit http://www.sec.gov/litigation/admin/2015/33-9901.pdf

For the complaint against DiMaria and Gamsey, visit http://www.sec.gov/litigation/complaints/2015/comp-pr2015-180.pdf

To see the settlement order with Lerner, visit http://www.sec.gov/litigation/admin/2015/33-9902.pdf