(Reuters) - Three former executives of the TheStreet Inc have agreed to pay civil penalties totaling $375,000 to settle accounting fraud allegations, the U.S. Securities and Exchange Commission said on Tuesday.
TheStreet, a financial media company that operates TheStreet.com website, was also charged in the case. The SEC said the company filed false financial reports in 2008 by reporting revenue from fraudulent transactions at a subsidiary.
“Without admitting or denying the allegations, the three executives and TheStreet agreed to be permanently enjoined from future violations of the federal securities laws,” the SEC said in a statement.
TheStreet Chief Executive Elisabeth DeMarse, who joined the company earlier this year, said in a statement the company cooperated with the SEC and conducted its own internal investigations.
“Upon learning of the irregularities, we promptly reported the matter to the SEC,” she said. “Under the terms of the settlement TheStreet is not required to pay any monetary penalties. We are pleased to put this matter behind us.”
As part of the settlement, former Chief Financial Officer Eric Ashman of Brooklyn, New York, agreed to pay a $125,000 penalty to the agency. He also agreed to reimburse TheStreet $34,149 for compensation he received from the company, the SEC said.
Gregg Alwine and David Barnett, former co-presidents of the company’s Corsis subsidiary, agreed to pay the SEC penalties of $120,000 and $130,000, respectively.
“Alwine and Barnett used crooked tactics, Ashman ignored basic accounting rules, and TheStreet failed to put controls in place to spot the wrongdoing,” said Andrew Calamari, director of the SEC’s New York Regional Office.
In documents filed in U.S. District Court in Manhattan, the SEC said Ashman was responsible for improperly recorded revenue at Corsis, a company that TheStreet acquired from Alwine and Barnett in 2007 as a way to expand online advertising.
The $20.7 million acquisition did not pan out as expected and Ashman directed staff to inflate Corsis revenue, according to the SEC complaint. That eventually led to TheStreet restating its 2008 annual report and its financial report for the first quarter of 2009.
Ashman served as CFO of TheStreet from July 2006 to May 2009. As part of the settlement, he agreed not to serve as an officer or director of any public company for three years. Alwine and Barnett have agreed to similar bans for 10 years.
The agreements require court approval.
Market commentator Jim Cramer founded TheStreet in 1996.
Reporting By Tom Hals in Wilmington, Delaware; Editing by Martha Graybow, Andrew Hay and Richard Chang