Two former executives at Bankrate were unsuccessful in convincing a federal judge to throw out U.S. Securities and Exchange Commission allegations that they manipulated the company’s results to meet forecasts of Wall Street analysts.
According to a report, U.S. District Judge Gregory Woods in Manhattan said on Thursday (Sept. 15) the SEC can pursue all of the claims against former Chief Financial Officer Edward DiMaria and all but one claim against former Director of Accounting Matthew Gamsey.
The Securities and Exchange Commission contends that Bankrate, which is based in New York and reached a $15 million settlement last September, and the executives of using accounting practices that were questionable to increase revenue and understate expenses it had during the second quarter of 2012. According to the report, in one allegation, the SEC said DiMaria threatened to harm a high-ranking credit card executive at Bankrate if $500,000 of improper revenue wasn’t booked. The SEC also contends DiMaria sold $2 million worth of Bankrate stock at prices that were higher due to the improper accounting.
The defendants in the case argue the accounting entries were immaterial and that the SEC failed to demonstrate the two intended to commit fraud. “DiMaria’s alleged conduct crosses the line from corporate officers’ common practice of taking affirmative action to meet revenue, earnings or profit estimates, to consciously, falsely creating the appearance that Bankrate was meeting its targets when he knew that was not the case,” Woods wrote, according to the report.
The judge also pointed to the SEC claims that Gamsey asked other executives to defend the improper accounting and lied to the auditor at Bankrate about what he was privy to. “Although DiMaria may have been the one pulling the strings, through his alleged actions, Gamsey sought to make the alleged scheme succeed,” the judge wrote. The SEC claim that Gamsey received money or property via the alleged misstatements was dismissed.
Bankrate isn’t the only financial firm to get in trouble with the government. Wells Fargo is embroiled in a fake account-opening scandal.