A brand-management company and its former CFO settled SEC charges for generating fictitious revenue to outperform Wall Street analysts' consensus estimates in the second and third quarters of 2014. In addition, the SEC (see here) and Southern District of New York ("SDNY") office of the Department of Justice (see here and here) filed parallel charges against the brand-management company's former CEO and former COO.
According to the SEC and the SDNY, the CFO did not identify losses from the company's failing licensees' finances and sufficiently test for impairment. As a result, the CFO allegedly overstated net income by "hundreds of millions" of dollars between 2013 and 2015. The SEC also alleged that the CEO and COO - who have not yet settled charges - received ill-gotten gains from the stock sales when the fraud scheme was taking place. To conceal the fraud, the CEO and COO deleted emails and made inaccurate statements on behalf of the company during an SEC inquiry.
Pending court approval, the (i) company agreed to injunctive relief and to pay a $5.5 million penalty; (ii) the former COO agreed to injunctive relief, a permanent officer and director bar, disgorgement of over $147,000 and penalty to be determined at a later date; and (iii) the former CFO agreed to disgorge $39,042.61, prejudgement interest of $10,082.65, and a civil monetary penalty of $150,000 to be paid to the SEC.
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