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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22575 / December 18, 2012

Accounting and Auditing Enforcement Release No. 3432 / December 18, 2012

Securities and Exchange Commission v. TheStreet, Inc., Civil Action No. 12-CV-9187 (JGK) (S.D.N.Y. December 18, 2012)

Securities and Exchange Commission v. Eric Ashman, Civil Action No. 12-CV-9189 (S.D.N.Y. December 18, 2012); and

Securities and Exchange Commission v. Gregg Alwine and David Barnett, Civil Action No. 12-CV-9191 (S.D.N.Y. December 18, 2012)

SEC Charges TheStreet, Inc. and Former Executives In Connection With Accounting Fraud

The Securities and Exchange Commission today charged TheStreet, Inc. and three executives in connection with a 2008 accounting fraud at a former subsidiary of TheStreet, Inc. The fraud allowed TheStreet to report artificially inflated revenue and misstated operating income or loss in each period of 2008.

The SEC alleges that throughout 2008, Eric Ashman, TheStreet's former Chief Financial Officer, aided and abetted the fraud by improperly and prematurely recognizing revenue based on several of the former subsidiary's transactions. According to the complaint, Ashman caused TheStreet to recognize revenue when he knew or recklessly disregarded that there was no basis for revenue recognition.

Gregg Alwine and David Barnett, co-presidents of the subsidiary, are alleged to have aided and abetted the fraud by entering into sham transactions, and fabricating and backdating contracts and other documents. In addition, Barnett is charged with leading TheStreet's auditor to believe that the subsidiary had performed services and thereby earned revenue on a specific transaction when in fact it had not performed those services.

For its part, TheStreet is charged with lacking appropriate internal controls over its subsidiary's revenue and with violating books and records and reporting provisions of the securities laws.

The Commission alleges that (1) Ashman violated Section 13(b)(5) of the Exchange Act and Rules 13a-14 and 13b2-1 thereunder and aided and abetted violations by TheStreet.com of Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 10b-5(b), 12b-20, 13a-1 and 13a-13 thereunder; and failed to comply with Section 304(a) of the Sarbanes-Oxley Act of 2002; (2) Alwine and Barnett violated Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder and aided and abetted TSC's violations of Section 10(b)(5), 13(a) and 13(b)(2)(A) of the Exchange Act and Rules 10b-5(b), 12b-20 and 13a-13 thereunder; and Barnett violated Rule 13b2-2; and (3) TheStreet violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-13 thereunder.

Without admitting or denying the Commission's allegations, each of the defendants has agreed to be permanently enjoined from future violations of the federal securities laws. In addition, Ashman will pay a $125,000 penalty, reimburse TheStreet $34,240.40 pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, and will be barred from acting as a director or officer of a public company for a period of three years. Alwine and Barnett will pay penalties of $120,000 and $130,000, respectively, and will be barred from serving as officers or directors of a public company for ten years.

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http://www.sec.gov/litigation/litreleases/2012/lr22575.htm


Modified: 12/18/2012