Digital finanical media company TheStreet—as well as three of its executives—have been charged by the Securities and Exchange Commission with accounting fraud for filing false financial reports and reporting fraudulent payments to a subsidiary group.
The primary complaint, according to reports, deals with TheStreet's former subsidiary, Promotions.com. The SEC first announced in April 2010 that it would be investigating accounting practices at Promotions.com, which TheStreet sold back in December 2009.
The SEC reports that the site's former CFO, Eric Ashman, "caused the company to report revenue before it had been earned" while Gregg Alwine and David Barnett—co-presidents of the Promotions.com subsidiary— "entered into sham transactions with friendly counterparties that had little or no economic substance. They also fabricated and backdated contracts and other documents to facilitate the fraudulent accounting."
As a result of the charges, all the executives in question have agreed to not act as corporate officers and will all pay a fine. Ashman, who also spent nearly two years as CFO for The Huffington Post, will reimburse TheStreet $34,240.40 along with a $125,000 penalty. He will be barred for three years from serving as an officer or director. Barnett and Alwine have agreed to penalties of $130,000 and a 10-year bar. None have formally admitted to the allegations.
According to comScore, the property has experienced year-over-year growth of 13 percent from November 2011 to November 2012, topping out around 7.4 million unique visitors last month.
Update: TheStreet has responded to Adweek's request for comment with the following statement. “We are pleased to put this matter behind us,” said Elisabeth DeMarse, TheStreet’s chief executive officer. “We remain deeply committed to adhering to the highest standards of corporate governance.”