Operators of the popular financial news site TheStreet.com and three of its former executives inflated the company's revenue and significantly misstated financial results in 2008, the Securities and Exchange Commission alleged in a lawsuit Tuesday.
TheStreet Inc. (Ticker:TST) — which CNBC personality Jim Cramer co-founded in 1996 — and former executives Gregg Alwine, David Barnett and Eric Ashman agreed to settle the allegations that stemmed from subsidiary Promotions.com, which TheStreet acquired in 2007 and sold in 2009, the SEC said.
In settling the charges, the three executives agreed to pay a total of about $400,000 and to be barred from serving as officers and directors in a public company. They neither admitted nor denied the allegations.
“Alwine and Barnett used crooked tactics, Ashman ignored basic accounting rules, and TheStreet failed to put controls in place to spot the wrongdoing,” said Andrew Calamari, director of the SEC's New York region. “The SEC will continue to root out accounting fraud and punish the executives responsible.”
TheStreet.com gained an adviser following in the late 1990s for its investment news and market analysis. The company has grown from one website to multiple platforms for investors, including subscription services. Promotions.com specialized in online promos such as sweepstakes.
In a complaint filed in federal court in New York, the SEC said that TheStreet reported revenue from sham transactions through its Promotions.com subsidiary and tbat co-presidents Alwine and Barnett created fake contracts to support the fraudulent accounting.
Mr. Ashman, TheStreet's former chief financial officer, caused the company to report revenue before it had been earned, the SEC said. The three executives' New York attorneys did not immediately return calls seeking comment on the settlements.
TheStreet settled the allegations that it failed to put in place internal controls at Promotions.com by agreeing not to violate securities laws. TheStreet's attorney referred calls to the company's chief financial officer, Thomas Etergino, who could not be reached for comment.
In February 2010, TheStreet restated its 2008 financial results and disclosed revenue improprieties at the subsidiary, the SEC said in the complaint.