WASHINGTON (AP) — Bankrate Inc., an online publisher of widely read consumer-finance data, has agreed to pay a $15 million fine to settle federal regulators' charges that it manipulated its financial results to meet Wall Street's expectations.
The Securities and Exchange Commission on Tuesday announced the settlement of civil charges of accounting fraud with Bankrate and a former vice president of finance at the company. Bankrate, based in North Palm Beach, Florida, neither admitted nor denied wrongdoing. It has agreed to refrain from future violations of the securities laws.
The former vice president, Hyunjin Lerner, agreed to resolve allegations that he and two other Bankrate executives ran a scheme to inflate revenues and omit some expenses from reports to meet analysts' estimates for the second quarter of 2012. Lerner is paying a $150,000 fine and making restitution of $30,045 that he allegedly gained from selling Bankrate stock after the company announced the false results and the share price rose from $15.95 to $17.57.
Lerner also was barred for five years from serving as an officer or director of any public company, and for at least five years from working as an accountant for one.
The SEC is continuing the case against the two others, who are contesting the charges: Edward DiMaria, Bankrate's former chief financial officer, and Matthew Gamsey, its ex-accounting director. DiMaria sold more than $2 million in Bankrate stock to profit from the artificially inflated stock price, the agency alleged.
An attorney for DiMaria, Barry Berke, said the allegations were "unfair" and DiMaria expects to be vindicated. "At all times, Edward DiMaria worked diligently and in good faith to make sure that Bankrate's financial reporting accurately reflected the company's performance," Berke said in a statement.
Gamsey's attorney, Robert Knuts, said his client "did nothing wrong by raising concerns early in the financial reporting process about certain accounting entries that were immaterial to Bankrate's unaudited financial statements." Gamsey looks forward to establishing his innocence in court, Knuts said.
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.
"We allege that at the highest levels of its accounting department, Bankrate improperly inflated its financial performance to avoid falling short of Wall Street's expectations," SEC Enforcement Director Andrew Ceresney said in a statement.
The $15 million fine against Bankrate is a "significant" penalty for a company of its size, Ceresney told reporters in a conference call. Bankrate had revenue of $544.9 million and net income of $6.1 million in 2014.
The company is best known for its Bankrate.com website, which lists current data on interest rates, credit cards, insurance, mortgages, auto loans and other areas. Bankrate also licenses content to news organizations including The Wall Street Journal, The New York Times and USA Today.
Bankrate said in a statement that it restated its earnings to resolve the allegedly false accounting. The company also said it previously set aside $15 million to cover the settlement amount.