On Tuesday, the Securities and Exchange Commission charged TheStreet (NASDAQ:TST) and three of its executives with accounting fraud that "artificially inflated company revenues and misstated operating income to investors."
Specifically, the SEC alleged that TheStreet filed false financial reports "throughout 2008," claiming to have generated revenue at Promotions.com, a subsidiary that it acquired in 2007. The co-presidents of said subsidiary, Gregg Alwine and David Barnett, allegedly "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." Allegedly, TheStreet's then-Chief Financial Officer, Eric Ashman, also participated in the fraud.
At the same time the SEC announced the charges, it also announced that the three executives have agreed to pay fines and to not take jobs as corporate officers or directors of public companies in settlement of the charges.
Ashman must pay a $125,000 penalty and reimburse TheStreet $34,240.40. Barnett and Alwine will pay penalties of $130,000 and $120,000, respectively. In addition, Ashman is barred from serving as a corporate officer or director for three years, Barnett and Alwine for 10 years.
TheStreet.com shares are down 4.2% on the news.
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