Bankrate, based in North Palm Beach, neither admitted nor denied wrongdoing.
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Bankrate pursued “a form of earnings management that is pernicious and highly problematic”, SEC enforcement director Andrew Ceresney said on a conference call.
According to the SEC, Bankrate former financial chief Edward DiMaria, then-accounting director Matthew Gamsey, and then-vice president of finance Hyunjin Lerner allegedly fabricated revenue and avoided booking certain expenses to meet analysts’ estimates for Bankrate’s adjusted earnings before interest, taxes, depreciation, and amortization-a financial metric closely watched by analysts. “Bankrate manipulated its financial results through numerous small accounting entries in order to meet analyst estimates on a key metric”.
Bankrate consequently overstated its second-quarter 2012 net income, the SEC states.
Bankrate (NYSE:RATE) is on the move, +4.6%, after the SEC says it’s settled accounting fraud charges for $15M. Through Lerner and with Gamsey’s assistance, DiMaria improperly directed two Bankrate divisions (insurance and credit cards) to book round dollar amounts of additional revenue without any support. It has agreed to refrain from future violations of the securities laws.
After Bankrate announced the inflated results, the company’s stock rose and DiMaria allegedly sold more than $2 million of his shares.
In a 43-page civil suit, the SEC said DiMaria created spreadsheets with “cushion accounts” — derisively dubbed “Ed’s Cushion” by one fellow Bankrate executive – to “tune” Bankrate’s financials in 2011 and 2012.
The cases are In re: Bankrate Inc, SEC Administrative Proceeding, No. 3-16786; and SEC v. DiMaria et al, U.S. District Court, Southern District of New York, No. 15-07035.
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In its complaint filed against Gamsey, the SEC quotes from emails he sent to Lerner acknowledging that the accounting entries in question would have to be reversed in the following quarter.
