Bankrate Inc. (NYSE:RATE) has agreed to pay $15 million in fines to settle charges that the consumer financial services company committed accounting fraud by fudging its financial reports to boost its quarterly earnings results.
Continue Reading Below
The Securities and Exchange Commission said Tuesday that three former executives were charged in the case that “involves fraudulent manipulation of the company’s financial results to meet analyst expectations.”
“We allege that at the highest levels of its accounting department, Bankrate improperly inflated its financial performance to avoid falling short of Wall Street’s expectations,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement.
Bankrate provides all manner of consumer finance advice through its popular web site Bankrate.com.
In a statement, the SEC said that Bankrate’s then-CFO Edward DiMaria, its then-director of accounting Matthew Gamsey, and then-vice president of finance Hyunjin Lerner worked together “to fabricate revenues and avoid booking certain expenses to meet analyst estimates” for the key financial metric adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA.
By cooking Bankrate’s books, the three accounting executives allowed the company to overstate its second quarter 2012 net income, according to the SEC.
After Bankrate announced the inflated results, the company’s stock rose and DiMaria allegedly sold more than $2 million of his shares.
Lerner has agreed to pay more than $180,000 to settle the SEC’s charges, the regulator said. The litigation continues against DiMaria and Gamsey.
In its complaint, the SEC alleged that after learning Bankrate’s preliminary financial results for the second quarter of 2012 fell short of analyst estimates, DiMaria “arbitrarily” decided to increase the company’s revenue after the end of the quarter and enlisted Lerner and Gamsey’s to help.
Bankrate, which neither admitted nor denied the charges, has agreed to pay a $15 million penalty and Lerner agreed to pay a $150,000 penalty as well as return his "ill-gotten gains" of $30,045 from selling Bankrate stock after the company announced false financial results.
A Bankrate spokesperson didn’t immediately respond to a request for comment.