TheStreet, Inc. (NASDAQ:TST) and three of its former executives settled a probe, relating to various acts of accounting fraud at the company, with the Securities and Exchange Commission.
The fraud was committed between 2008 to 2009 as told by the SEC, the same time as when CNBC stock picker Jim Cramer was the chairman of the financial website. SEC’s lawsuit claims that the fraud was undertaken with an aim to make the website appear more successful than it actually was.
The lawsuit further claimed that former executives, ex-CFO Eric Ashman and former co-presidents Gregg Alwine and David Barnett produced fictitious sales contracts to enhance the company’s growth and profits. All of these acts of accounting mismanagement were performed at the company’s former Promotions.com unit.
At the time of filing the claims, director of the SEC’s New York Office, Andrew Calamari, had the following to say about the allegations; “Alwine and Barnett used crooked tactics, Ashman ignored basic accounting rules, and TheStreet, Inc. (NASDAQ:TST) failed to put controls in place to spot the wrongdoing.” He also went on to say “The SEC will continue to root out accounting fraud and punish the executives responsible.”
The SEC believed that contracts were forged and backdated in an attempt to bolster the deceptive accounting. Barnett had also been charged for misleading the company’s auditor to believe that the subsidiary company had been paid for services it had completed, when in fact it had not completed any services at all. The SEC also claimed that the former CFO of The Street Inc., Eric Ashman reported revenue and income before it had even been earned. .
“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 office.
Cramer was not named in the suit, and he is the fourth-largest shareholder of TheSreet.com. As per the filings, Cramer is a director but not an officer anymore and is listed only as an employee earning $1.6 million a year as a writer.
The company’s new CEO, Elisabeth DeMarse revealed that the company conducted its own internal probe and cooperated with the SEC, and “are pleased to put this matter behind us”.
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However, despite the settlement and probe, TheStreet, Inc. (NASDAQ:TST) didn’t inherently admit or deny any guilt.