Bankrate’s former chief financial officer admitted in court this week that he cooked the company’s books over a four-year period in a scheme that eventually cost shareholders more than $25 million.
Edward DiMaria pleaded guilty this week to one count of conspiracy to make false statements to a public company’s accountants, falsify a public company’s books, records and accounts, and commit securities fraud; plus one count of making materially false statements to the Securities and Exchange Commission.
According to the Department of Justice, DiMaria used his position at Bankrate, a publisher, aggregator, and distributor of personal finance content and lead generator for the financial services industry, to artificially inflate the company’s earnings from 2010 through 2014.
Bankrate currently operates several different brands, including its flagship site: Bankrate.com. On Bankrate.com, for example, consumers can get financial advice about a variety of financial products including mortgages, credit cards, auto loans, banking, and personal loans.
Last year, Bankrate was acquired by Red Ventures in a $1.24 billion deal.
But before that acquisition, DiMaria was apparently playing fast and loose with the company’s financials.
According to the DOJ, DiMaria admitted that that between 2010 and 2014, he directed and conspired with others to engage in a complex scheme to artificially inflate the company’s earnings through “cookie jar” or “cushion” accounting, where millions of dollars in unsupported expenses were purposefully left on Bankrate’s books and then selectively reversed in later quarters in order to improve the company’s earnings.
Additionally, DiMaria admitted to conspiring with other Bankrate employees to falsely refer to certain company expenses as “deal costs,” in order to artificially inflate publicly reported adjusted earnings information.
DiMaria also admitted to lying to Bankrate’s independent auditors to conceal the improper accounting entries, and admitted to causing Bankrate to submit materially misstated financial statements to the SEC.
According to the DOJ, DiMaria also admitted that the company’s shareholders lost more than $25 million as a result of the scheme. As part of his plea agreement, DiMaria is required to pay $21 million in restitution to the affected shareholders.
“Edward DiMaria used his position as Bankrate’s CFO to inflate the company’s earnings and mislead shareholders, auditors, and the SEC, resulting in over $25 million in losses to innocent investors,” said Acting Assistant Attorney General John Cronan.
“DiMaria’s conviction and the restitution in this case will hopefully provide some solace to Bankrate’s shareholders, while also reminding potential bad actors of the Department’s commitment to hold individuals accountable for their involvement in complex accounting and securities fraud schemes that harm investors and undermine our markets,” Cronan added.
Earlier this year, Hyunjin Lerner, Bankrate’s former vice president of finance, pleaded guilty for his role in the conspiracy and was sentenced to 60 months in prison.
DiMaria is scheduled to be sentenced on Sept. 11, 2018.
[Update: A previous version of this article stated that Bankrate owns Caring.com. Caring.com was bought by Caring Holdings in May.]