SEC Charges Bankrate and Former Executives with Securities Fraud

Securities Fraud

On September 8, 2015, the Securities and Exchange Commission (“SEC”) announced that Bankrate Inc. has agreed to pay $15 million to settle accounting and securities fraud charges. Three former executives also are charged in the case that involves fraudulent manipulation of the company’s financial results to meet analyst expectations.

The Commission alleges that Bankrate’s then-CFO Edward DiMaria, then-director of accounting Matthew Gamsey, and then-vice president of finance Hyunjin Lerner engaged in a scheme to fabricate revenues and avoid booking certain expenses in order to meet analyst estimates for two key financial metrics: adjusted earnings per share as well as adjusted earnings before interest, taxes, depreciation, and amortization. Bankrate consequently overstated its second quarter 2012 net income. Bankrate’s stock rose when the company announced the inflated financial results, and DiMaria allegedly proceeded to sell more than $2 million in company stock.

Lerner agreed to pay more than $180,000 to settle the Commission’s charges, while the litigation continues against DiMaria and Gamsey.

According to the Commission’s complaint filed in federal court in Manhattan:

  • After learning that Bankrate’s preliminary financial results for the second quarter of 2012 fell short of analyst estimates, DiMaria arbitrarily decided to increase the company’s revenue after the end of the quarter.
  • Through Lerner and with Gamsey’s assistance, DiMaria improperly directed two Bankrate divisions (insurance and credit cards) to book round dollar amounts of additional revenue without any support.
  • The insurance division immediately booked the requested revenue to a dormant customer account with no intention of justifying the revenue until it was flagged by the company’s auditor.
  • The credit cards division resisted DiMaria’s directive but nevertheless booked some improper revenue.
  • Refusing to accept the credit cards division’s unwillingness to record the full amount of improper revenue as he directed, DiMaria insisted that the approximate difference be recorded as revenue by a different business unit.
  • As a result, Bankrate recorded additional unsupported revenue to two arbitrary mortgage business customers.
  • In addition to booking improper revenue, Bankrate, through the accounting executives, improperly reduced certain expenses or failed to book them at all in order to meet analyst estimates.
  • One of the expense accounts and related accrual account manipulated by Bankrate had been used as a “cushion” account to manipulate the company’s financial results for at least a year.
  • DiMaria, Gamsey, and Lerner lied to the company’s auditor regarding the improper accounting entries.

Bankrate and Lerner consented to an order to cease and desist from violating the antifraud, reporting, books-and-records, and internal controls provisions of the federal securities laws. Without admitting or denying the Commission’s findings, Bankrate agreed to pay a $15 million penalty and Lerner agreed to pay a $150,000 penalty as well as full disgorgement of his ill-gotten gains of $30,045 from selling Bankrate stock after the company announced false financial results. Lerner also agreed to be barred from serving as an officer or director at a public company for five years and from public company accounting for at least five years.

The Commission’s complaint filed against DiMaria and Gamsey alleges they violated and/or aided and abetted the violation of the antifraud, lying-to-auditors, books-and-records, and reporting provisions of the federal securities laws. The complaint and anticipated administrative proceeding seek financial penalties, officer-and-director bars, and prohibitions on working in public company accounting. The complaint also seeks to recover the profits improperly obtained by DiMaria when he sold his Bankrate stock following the release of the inflated second quarter 2012 financial results.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
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Boca Raton, Florida 33432
Telephone: (561) 416-8956
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