North Palm Beach-based Bankrate Inc. has agreed to pay $15 million to settle accounting fraud charges, the Securities and Exchange Commission announced Tuesday.
Bankrate agreed to pay the multimillion-dollar penalty without admitting to or denying the SEC’s findings.
"Bankrate...today announced a final settlement with the Securities and Exchange Commission that concludes the company’s part in its investigation related to its historical financial reporting for the quarter ended June 30, 2012," the company said in a statement. "The accounting entries encompassed by this settlement were addressed as part of the restatement that Bankrate previously disclosed in its FORM 10-K filed on June 18, 2015."
The financial news company (NYSE: RATE) was investigated by the SEC and U.S. Department of Justice for earnings reports issued in 2011, 2012 and 2013. The SEC alleges that Bankrate’s Q2 earnings were knowingly overstated.
Three former Bankrate executives were also charged in the case: then-CFO Edward DiMaria, then-director of accounting Matthew Gamsey, and then-vice president of finance Hyunjin Lerner. The SEC alleges that the three took part in a scheme to fabricate revenues and avoid booking expenses to meet analyst estimates, resulting in an overstated Q2 2012 net income and inflated stock prices.
DiMaria allegedly decided to arbitrarily increase Bankrate’s revenue to meet certain key metrics, according to the SEC order. Bankrate’s Insurance and Credit Cards division were then improperly instructed to add additional revenues to the books of $300,000 and $500,000, respectively, without any support, according to the order.
When the company’s outside auditor asked for an explanation of the Insurance department’s revenue, “Lerner sent a misleading, generic explanation…an explanation that was reviewed and approved by DiMaria and Gamsey,” the order states.
Accountants from the Credit Cards department only recorded $176,000 of the additional $500,000 in revenue as directed by DiMaria, which infuriated the then-CFO, according to the order. DiMaria insisted that an approximate difference be recorded as revenue of Bankrate’s mortgage business, Bankrate Core.
In addition, DiMaria directed a Bankrate Core accountant to reduce the accrual for certain expenses by $400,000, and Bankrate did not book approximately $99,000 in accounting expenses in Q2, according to the order.