SEC Charges TheStreet for Accounting Fraud

The SEC has announced that it has charged the TheStreet Inc and three former executives for accounting fraud performed at the company. TheStreet Inc manages the TheStreet.com, an investing portal which focuses on the US equity market and was founded by Finance celebrity Jim Cramer in 2006. According to the charges, TheStreet had falsified its accounting results during 2008 by reporting false revenues from a Promotions.com, a subsidiary it had acquired. The SEC also stated that TheStreet had reported revenues before they had accrued.

The former executives include EX-CFO Eric Ashman, and Promotions.com managers Gregg Alwine and David Barnett. Alwine and Barnet had acquired sweepstakes site Promotions.com in 2007 from NBC Universal and sold it to TheStreet Inc later that year, while buying it back in 2009. However, during the period it was owned by TheStreet, the two remained Co-Presidents of the subsidiary. During that time, the SEC charged that Promotions.com failed to meet financial results that were expected from the site and implemented a scheme of transactions between friendly counter parties to “inflate of entirely fake revenue.” As a subsidiary of TheStreet’s, the result was improper financial results being reported on TheStreet’s 2008 10-Q forms. On his part, “Ashman knowingly or recklessly recorded, or directed his staff to record, revenue that did not meet applicable revenue recognition criteria in connection with transactions that were, on their face, suspicious.”

The current charges from the SEC are part of an ongoing investigation at TheStreet which led to the company restating its 2008 10K in 2010. The SEC announced that “Ashman had agreed to pay a $125,000 penalty and reimburse TheStreet $34,240.40 under the clawback provision (Section 304) of the Sarbanes-Oxley Act, and he will be barred from acting as a director or officer of a public company for three years. Barnett and Alwine agreed to pay penalties of $130,000 and $120,000 respectively, and to be barred from serving as officers or directors of a public company for 10 years. Without admitting or denying the allegations, the three executives and TheStreet agreed to be permanently enjoined from future violations of the federal securities laws. ”

According to his Linkedin Profile, Ashman currently works as a Strategic Advisor at Thrillist Media Group and Alwine and Barnett are Managing Directors at Private Equity firm Marshall Junction Partners LLC.