The Securities and Exchange Commission said Tuesday that the company, TheStreet Inc., and the executives engaged in a scheme in 2008 to artificially inflate the company's revenue and mislead investors. The co-presidents of a company subsidiary and a former chief financial officer of the company agreed to pay a total of about $409,000 to settle the charges.
Co-presidents Gregg Alwine and David Barnett were barred for 10 years from serving as officers or directors of any public company. Former CFO Eric Ashman was barred for three years.
TheStreet Inc. and the three executives neither admitted nor denied the allegations but agreed to refrain from future violations of the securities laws.
Attorneys for the executives and company representatives didn't immediately return calls seeking comment.
The company filed false financial reports throughout 2008 which reported revenue from sham transactions at the subsidiary, which it acquired in 2007, the SEC said. The subsidiary conducts promotions such as sweepstakes on the Internet.
The agency said Alwine and Barnett made the phony transactions and also fabricated and backdated documents to enable the fraud.
Ashman caused TheStreet Inc. to report revenue before the company had earned it, the SEC said in a civil lawsuit filed in federal court in Manhattan.
The company restated its 2008 earnings in February 2010 and disclosed several accounting improprieties for the subsidiary, the SEC said.
"Alwine and Barnett used crooked tactics, Ashman ignored basic accounting rules and TheStreet failed to put controls in place to spot the wrongdoing," Andrew Calamari, director of the SEC's regional office in New York, said in a statement. "The SEC will continue to root out accounting fraud and punish the executives responsible."
Under the settlements Alwine agreed to pay a civil fine of $120,000 and Barnett is paying a $130,000 civil fine. Ashman agreed to a $125,000 civil fine and to reimburse TheStreet Inc. $34,240.40. The SEC recovered the money for the company in a so-called "clawback," under an anti-fraud law that requires senior executives to repay bonuses and stock profits they received during a period in which their company violated financial reporting rules.
In September, TheStreet Inc. announced its purchase of The Deal LLC for $5.8 million. The digital publication specializing in news on mergers and acquisitions brings a customer base of 40,000 professionals, including bankers, lawyers and partners in private equity firms, TheStreet said.