Comscore charged with fraudulent accounting, agrees to $5 million settlement with SEC
The Securities and Exchange Commission today announced that Comscore and its former CEO Serge Matta were charged with engaging in a fraudulent scheme that resulted in a $50 million overstatement of revenue. The charges, which include allegations that Comscore made “false and misleading statements about key performance metrics,” is the latest setback for the embattled company, which provides marketing data and analytics to media, advertising agencies and publishers.
As part of a settlement agreement, Comscore and Matta agreed to penalties of $5 million and $700,000 respectively, “without admitting or denying the orders' findings,” the SEC stated. Matta also agreed to reimburse Comscore for $2.1 million. He is also barred from serving as an officer or director of a public company for 10 years.
The SEC alleges that for two years beginning in February 2014, Comscore, at the direction of Matta, “entered into non-monetary transactions for the purpose of improperly increasing its reported revenue.” The scheme involved Comscore exchanging sets of data with an unnamed party without cash consideration. It then recognized revenue as a result of these transactions “based on the fair value of the data it delivered, which had been improperly increased in order to inflate revenue,” according to the SEC.
Comscore and Matta “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,” Melissa Hodgman, associate director in the SEC's enforcement division, stated in a press release. "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.”
In a press release on Tuesday, Comscore stated 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.”
“We are pleased to have settled this legacy issue with the SEC,” stated board chairman Brent Rosenthal. “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.”
The settlement comes amid a tumultuous period for Comscore. Its stock price has plummeted since CEO Bryan Wiener and President Sarah Hofstetter abruptly resigned at the end of March, following a dispute with the board.
Wiener, formerly the executive chairman of Dentsu's 360i, joined as CEO in April 2018, replacing the retiring Gian Fulgoni, who took over from Matta as CEO in August 2016 when accounting issues first arose. Hofstetter’s brief tenure at Comscore began in October 2018 after a career at 360i, where she rose to the position of chairwoman.
Comscore in August reported that its second-quarter revenue fell 4.4 percent, missing projections of flat revenue. The decline prompted interim CEO Dale Fuller on the earnings call to say that “we are exploring all strategic options.”
Fuller in Tuesday’s press release stated that “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.”