U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23335 / September 8, 2015
Securities and Exchange Commission v. Edward DiMaria and Matthew Gamsey, Civil Action No. 1:15-cv-07035 (S.D.N.Y., filed September 8, 2015)
SEC Charges Bankrate and Former Executives with Accounting Fraud
The Securities and Exchange Commission ("Commission") today announced that Bankrate Inc. has agreed to pay $15 million to settle accounting fraud charges. Three former executives also are charged in the case that involves fraudulent manipulation of the company's financial results to meet analyst expectations.
The Commission alleges that Bankrate's then-CFO Edward DiMaria, then-director of accounting Matthew Gamsey, and then-vice president of finance Hyunjin Lerner engaged in a scheme to fabricate revenues and avoid booking certain expenses in order to meet analyst estimates for two key financial metrics: adjusted earnings per share as well as adjusted earnings before interest, taxes, depreciation, and amortization. Bankrate consequently overstated its second quarter 2012 net income. Bankrate's stock rose when the company announced the inflated financial results, and DiMaria allegedly proceeded to sell more than $2 million in company stock.
Lerner agreed to pay more than $180,000 to settle the Commission's charges, while the litigation continues against DiMaria and Gamsey.
According to the Commission's complaint filed in federal court in Manhattan:
Bankrate and Lerner consented to an order to cease and desist from violating the antifraud, reporting, books-and-records, and internal controls provisions of the federal securities laws. Without admitting or denying the Commission's findings, Bankrate agreed to pay a $15 million penalty and Lerner agreed to pay a $150,000 penalty as well as full disgorgement of his ill-gotten gains of $30,045 from selling Bankrate stock after the company announced false financial results. Lerner also agreed to be barred from serving as an officer or director at a public company for five years and from public company accounting for at least five years.
The Commission's complaint filed against DiMaria and Gamsey alleges they violated and/or aided and abetted the violation of the antifraud, lying-to-auditors, books-and-records, and reporting provisions of the federal securities laws. The complaint and anticipated administrative proceeding seek financial penalties, officer-and-director bars, and prohibitions on working in public company accounting. The complaint also seeks to recover the profits improperly obtained by DiMaria when he sold his Bankrate stock following the release of the inflated second quarter 2012 financial results.
The SEC's continuing investigation is being conducted by Jeffrey Lyons, Kimberly Greer, Donna Walker, and Ian Karpel, with supervision from Thomas Krysa. The SEC's litigation against DiMaria and Gamsey will be led by Nicholas Heinke, Stephen McKenna, and Gregory Kasper.