Seaworld and Former CEO to Pay More Than $5 Million to Settle Fraud Charges
Company, Two Former Executives Charged with Misleading Investors About the Impact of Documentary On Business
Litigation Release No. 24272 / September 18, 2018
Securities and Exchange Commission v. SeaWorld Entertainment, Inc. and James Atchison, No. 1:18-cv-08480 (S.D.N.Y. filed September 18, 2018)
Securities and Exchange Commission v. Frederick D. Jacobs, No. 1:18-cv-08482 (S.D.N.Y. filed September 18, 2018)
The Securities and Exchange Commission today announced that SeaWorld Entertainment Inc. and its former CEO have agreed to pay more than $5 million to settle fraud charges for misleading investors about the impact the documentary film Blackfish had on the company's reputation and business. SeaWorld's former vice president of communications also agreed to settle a fraud charge for his role in misleading SeaWorld's investors.
Blackfish criticized SeaWorld's treatment of its orcas (killer whales) and received significant media attention as the film became more widely distributed in the latter half of 2013. The SEC's complaint alleges that from approximately December 2013 through August 2014, SeaWorld and former CEO James Atchison made untrue and misleading statements or omissions in SEC filings, earnings releases and calls, and other statements to the press regarding Blackfish's impact on the company's reputation and business. According to the SEC's complaint, on August 13, 2014, when SeaWorld for the first time acknowledged that its declining attendance was partially caused by negative publicity, SeaWorld's stock price fell, causing significant losses to shareholders.
The SEC's complaint, filed in Federal Court in New York, charges SeaWorld with violating Section 17(a)(3) of the Securities Act of 1933 (Securities Act) and Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) and Rules 12b-20, 13a-1, 13a-11, and 13a-13 thereunder, and charges Atchison with violating Sections 17(a)(2) and (3) of the Securities Act and with control person liability for SeaWorld's Exchange Act reporting violations. SeaWorld and Atchison have agreed to settle the SEC's charges without admitting or denying the allegations, with SeaWorld paying a $4 million penalty and Atchison paying $850,183 in disgorgement and prejudgment interest and a $150,000 civil penalty.
SeaWorld's former vice president of communications, Frederick D. Jacobs, agreed to settle to a Securities Act Section 17(a)(2) charge and to pay disgorgement and prejudgment interest of $99,155. He was not assessed a penalty, reflecting his substantial assistance in the SEC's investigation. All of the settlements are subject to court approval.
The SEC's investigation was conducted by James Lyman and Lee Robinson and supervised by Ian Karpel and Kurt Gottschall of the Denver office.