The Securities and Exchange Commission of the USA today charged global information and media analytics firm, Comscore, Inc., and its former CEO with engaging in a fraudulent scheme to overstate revenue by approximately $50 million and making false and misleading statements about key performance metrics.
“As the SEC orders find, Comscore and its former CEO manipulated the accounting for non-monetary and other transactions in an effort to chase revenue targets and deceive investors about the performance of Comscore’s business,” said Melissa R. Hodgman, Associate Director in the SEC’s Enforcement Division. “We will continue to hold issuers and executives accountable for such serious breaches of their fundamental duty to make accurate disclosures to the investing public while giving appropriate credit for a company’s prompt remedial acts and cooperation.”
Comscore and Matta will pay millions in penalties to avoid proof
The SEC informs that to settle the charges, without admitting or denying the orders’ findings, Comscore and Matta agreed to cease-and-desist from future violations of the antifraud provisions of the federal securities laws and to pay penalties of $5 million and $700,000, respectively.
Matta also agreed to reimburse Comscore $2.1 million representing profits from the sale of Comscore stock and incentive-based compensation pursuant to Section 304(a) of the Sarbanes-Oxley Act and to the entry of an order banning him to serve as an officer or director of a public company during 10 years.
In the press release telling about this settlement, published by comScore the company underscores that the SEC considered the Company’s cooperation during the investigation and its significant remedial efforts, including replacing the former CEO and other senior executives, constituting a new management team, implementing new and extensive internal control procedures and policies, and implementing a new, comprehensive compliance management system.
comScore points as well that the SEC specifically noted that all senior management and directors who were with the Company at the time of the conduct described in the Order are no longer with the company.
The Company’s Board of Directors and current management team are committed to maintaining strong internal controls, financial reporting, compliance, and corporate governance practices.
“We are pleased to have settled this legacy issue with the SEC,” said Brent Rosenthal, Chairman of the Board of Comscore. “In addition to our commitment to compliance and with this matter behind us, the Board and I remain fully focused on the business and are committed to further developing our unique data assets, differentiated data analytics, and strong brand equity.”
Dale Fuller, Interim Chief Executive Officer of Comscore, added, “With this matter now resolved, Comscore remains focused on its next phase of growth in order to drive profits and maximize shareholder value through the continued alignment of strategic priorities and development and delivery of products to drive future profitability.”
First missconduct Increased reported revenue through non monetary transactions
The SEC finds evidence, among other things, on the fact that from February 2014 through February 2016, Comscore, at the direction of its former CEO Serge Matta, entered into non-monetary transactions for the purpose of improperly increasing its reported revenue. Through these transactions, Comscore and a counterparty would negotiate and agree to exchange sets of data without any cash consideration. Comscore recognized revenue on these transactions based on the fair value of the data it delivered, which had been improperly increased in order to inflate revenue.
Second missconduct False and misleading public disclosures regarding customer base and flagship product
The SEC’s orders also find that Comscore and Matta made false and misleading public disclosures regarding the company’s customer base and flagship product and that Matta lied to Comscore’s internal accountants and external audit firm. This scheme enabled Comscore to artificially exceed its analysts’ consensus revenue target in seven consecutive quarters and create the illusion of smooth and steady growth in Comscore’s business.
Image over the headline.- © comScore
