Global analytics firm Comscore has paid a $5m penalty after the US Securities and Exchange Commission (SEC) claimed the firm, which measures internet traffic, had made false and fraudulent claims about its revenue
The US regulator said Comscore overstated revenue by approximately $50m and inflated key performance metrics, such as the number of customers. Between February 2014 and February 2016, the company’s former CEO Serge Matta entered into a series of fake transactions intended solely to boost its reported revenue.
Comscore and a counterparty would negotiate and agree to exchange sets of data without any cash consideration, with Comscore then recognising revenue on these transactions based on the fair value of the data it delivered.
The SEC also alleged 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.
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 $5m and $700,000, respectively.
Matta also agreed to reimburse Comscore $2.1m representing profits from the sale of Comscore stock and incentive-based compensation. He has also been barred from serving as an officer or director of a public company for 10 years.
Melissa Hodgman, associate director in the SEC's enforcement division, said: ‘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.
‘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.’