SEC Slap On The Wrist For TheStreet

While Jim Cramer wasn't looking, some of his underlings at TheStreet were doing some pretty shady things for which TheStreet will get off scot-free.
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While Jim Cramer wasn't looking, some of his underlings at TheStreet were doing some pretty shady things for which TheStreet will get off scot-free.

TheStreet's ex-CFO and the heads of its former promotional agency, Promotions.com, will, however, have to pony up some fine money and won't be running any public companies any time soon. It seems the three were playing pretty fast and loose with the books four years ago. (None, obviously, admitted or denied wrongdoing as per SEC settlement standards.)

“Alwine and Barnett used crooked tactics, Ashman ignored basic accounting rules, and TheStreet failed to put controls in place to spot the wrongdoing,” Andrew Calamari, director of the SEC’s New York regional office, said today in a statement….

The SEC allegations were connected to improper revenue recognition at the online promotion unit, which the SEC identified as “Subsidiary A.” Before it was acquired by TheStreet, the closely held company wasn’t required by U.S. securities law to maintain accurate financial records, the SEC said.

In that marriage, those less-than-ideal figures got all mixed into TheStreet's own books and led it to report improper revenue recognition for 2008.

TheStreet, Former Executives Settle SEC Announting Probe [Bloomberg]

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I Sell Cardboard Boxes For A Living

Excuse my agitation. It's rare I get a Friday night off. Such evenings go to shit when I'm at a party and I get introduced by my real profession. Can you imagine introducing casual acquaintances at a party with “Yeah, so this is Jimmy. He's a meth dealer”? I don't know, maybe you can. In which case I don't really want to be invited to your parties. As for me, left to my own devices, I tell people I'm a cardboard box salesman. That suits me nicely. Nothing against people who sell cardboard boxes: I've never actually met one. But when I tell people that's what I do, nobody ever asks me to elaborate on my workday. It's actually a backstory I stole from another bookie—a guy who always had an identity or two to spare along with a great mind and approach to the profession. I started by telling people I was an electricity meter reader, and then once some guy asked me “isn't that all done by computer now?” and I had that So-Totally-Busted look on my face. So my colleague got me into the cardboard box business, which never goes out of style by always being precisely out of style. So this time I got introduced as The Bookie and my head immediately starts scanning the room for Feds. I've watched all the movies—I'm looking at everybody's shoes, looking for G-man wingtips. No immediately suspicious footwear—and no way out as the crowd starts circling me asking me all the Usual Questions. No, I don't break people's kneecaps. No, I don't lend people money at 1% a week. No, I don't fix games or know more about sports than anybody else. It was turning into one of those Wizard of Oz moments: I'm just the old, fat guy behind the curtain, which suits me, when I was asked a question I felt the need to rant on: How come I'm living in he shadows here when I could be living large in Costa Rica? Believe it or not, I'm safer here. The US government is this two-headed beast. One head wants to raise tax revenues by legalizing more gambling. Whoops, “gaming”. If it's legal, it's no longer gambling, it's “gaming." That's not quite as Orwellian as “collateral damage” (dead civilians), but it still makes me smile bitterly. The government's other head is trying to shut down the offshore industry. Poker sites, online casinos, sports books—it's all in the crosshairs. And they're rounding up anybody on The List who sets foot in the Good Old USA. When that doesn't work, they try extraditing people, from everywhere. Costa Rica, Canada, the UK, Antigua, wherever. The extradition policy is the worst of it. Consider Bob Eremian. His client base was mostly Southern New England, with a little NYC and Jersey thrown in. He moved his operation to Antigua in the mid 90s, figuring that even if what he was doing in the US was illegal (the trial of Jay Cohen showed it would be), since it was legal in Antigua, he couldn't be extradited. That's a key part of extradition law, I'm told: what you're doing has to be illegal in both jurisdictions. Except Uncle Sam didn't come after Bob for making book, just like how he didn't actually go after Martha Stewart for insider trading per se. The Eremian charges were money laundry, tax evasion, and so on—things that were illegal in Antigua. 11 years after he was originally deported, the civil cases just kept coming. The US government's current instrument of choice is the Unlawful Internet Gaming Enforcement Act. It was tacked onto a bill about port safety. Honest. Life is too short. So I'm onshore and offline. Any trouble I'm going to get from the Law is going to be local. If caught, I'll spend some time doing graffiti removal or cleaning up a park. I'll sleep in my own bed. I don't need 16 hours a day in front of a computer screen trying to move my numbers faster than internet wiseguys can pick me off. I don't need to try to figure out Costa Rica's ever changing tax code. (When I left, sports books were charged, among other things, $1000 per computer monitor on the premises, per year.) I don't need to court the DOJ's wrath. But I still don't need my cover blown at parties. I sell cardboard boxes, period. It didn't help that a very good customer and his wife, my new part-time employee, were in the room making faces at me to see if they could get me to crack up or soil myself as I took questions. If the rant hadn't gotten me four new customers, the night would have been a total bust.

Football? Yep. Oscars? OK. The VIX? Really?

I was scoring up the Super Bowl (small loss) when Ocean called. Ocean is a good customer. He had a couple questions, and I told him fire away. First he wanted to know if we were doing the Oscars again this year. Of course we are. I'm not thrilled about it –I'm half paranoid about inside information bubbling on the Internet, but I'm learning to embrace the inside mis-information. Most importantly, we do it as a service, so the customers won't start betting online with bookies in Costa Rica. Ocean was pleased. For what it's worth, he likes The Artist at very short odds. He watches rom-coms. With his wife, he says. His favourite movie though is Love Story, and he cries shamelessly every time he watches it: he truly believes that love means never having to say you're sorry. I've never figured that out. I'm forever apologizing to my wife for doing boneheaded things and saying stupid shit. And apologizing is a necessity But whatever. A happy customer is a beautiful thing. And I thought the phone call was over. And then Ocean said it. “What do you have on the VIX for this summer?” I asked him what the hell he was talking about because I didn't compute what I was hearing. He then said how he had been watching CNBC. He went to his mutual fund guy determined to buy the VIX, and the salesman blew him off with “Oh, that's just gambling”. So, hey, I must surely book the VIX, right, because I take bets from gamblers? Well I totally had my pants down and started mumbling about monthly contracts and the need to be a sophisticated investor and how there were a few products out there and...he cut me off. He understood how “the 1% were trying to make this complicated” and he just wanted a near-even-money type bet that the VIX would be over 30 at the end of June, as per the top of the screen on CNBC. I gave him the bet. 30's a pretty big number, and I figure this'll make me learn about trading the VIX instruments so I can lay it off if I want to. (I've never done anything more sophisticated than buy a put spread when I was afraid of a downturn. Go ahead, laugh.) 30's a lot. So I let him have it at 6-to-5. He was only expecting even money or slightly worse, so he was pleased. Ten minutes later I was using this episode as an object lesson for my Faithful Assistant, a guy who is muddling through an MBA while living in his parents' basement. Garage loft, I stand corrected. Anyway, good customers need to be kept happy, good customers lose, and happy customers pay. The Hollywood-movie days of kneecapping customers who stiff you were over before I was born, if they ever even existed, and—and the phone rang again. Ocean again, wanting an over/under number on where Apple would be in a couple months' time. Oh, and Facebook. I told him I would have to call him back. I started throwing coffee cups and in between my screams my Faithful Assistant told me he'd just pretend I have Tourette's. He's cold. Then he asked me what was going on. And after I told him, he smiled, and tried to give his boss an object lesson of his own: “This is great. You trade the odd option. All my electives are Finance. We just set the over-under price, I mean you KNOW he's going 'over', high enough that we can buy calls a couple strikes below that number. We use his bet to buy the calls, if he wins we clean up, and we're covered.” And when I asked what would happen to Ocean's bankroll over time, the answer came back that we would sodomize it. I just shook my head. My young friend may well end up in a business career where the necessary m.o. is to grab-it-all and grab-it-now, but that's not how my business works. I actually want my customers to win 45-50% of their bets, lose fairly small amounts over time, and never lose so much in one fell swoop that they can't pay or that they decide to stop playing. There's a purpose behind all that languid ritual at the Baccarat table in the high-limit room at the casino: try to keep the House's earn slow-and-steady. It makes the news when a whale beats Vegas for $10 million, or drops $10 million, but the casinos tolerate those lumpy earnings—aside from a little ink, they don't really want them. The casinos want everybody playing dollar-slots, losing three cents a spin. His eyes kind of glazed over, so I thought, what would Suze Orman do to get her point across? I figured Suze, to make the young'uns understand, would probably Go Gangsta. So I said “Look, we make money by drawing blood from our customers.” His eyes lit up as I continued: “We're blood collectors. We need a nice orderly blood bank. What you're proposing, is a drive-by.” (Well, I actually said “drive-thru”, but we sorted it out after a little confusion.) So we've told Ocean that these bets are going to be for peanuts and we're going to have fun with them. He's on board, and he's all excited. Faithful Assistant is going to make the numbers and I told Ocean to give us some requests for stocks he thought would go lower. “Oh you mean I could bet 'under' too? Not just 'over'?” Yep, 'under' too. February's a shit month in the bookie biz—the regulars are there, but football's over and it's a ways before March Madness. Ocean's stockpicking is going to keep me interested.

Bank Of America Makes Policy On Flashing Your Bare Ass At The Office Clear

Do you anticipate that at some point the future, in a moment of anger, you'll get the urge to unbuckle your belt, drop trou, and display your ass in the direction of your superiors? Do you hope to keep your job afterwards? If so, just a forewarning: Bank of America is not the company for you. Send a resumé to Citigroup or KKR or wherever. According to court documents, Jason Selch's friend Chris O'Dea was fired after he refused to accept lower compensation. This ticked Selch off. Selch burst into a conference room where executives from Columbia were meeting to give them a piece of his mind. He wound up giving them a piece of something else as well. First Selch asked if he had a non-compete agreement, which on Wall Street is usually a way of threatening to quit and go to work for a competitor. After the executives said he didn't have a non-compete, Selch mooned them, told one of the New York-based executives never to return to Chicago, and left the meeting. Extraordinarily, Selch wasn't fired. Instead he was issued a formal warning. Selch’s boss testified that while 99 percent of employees would have been immediately fired, Selch was one of the one percent who could be granted a one free mooning reprieve. The executive actually fought for Selch to keep his job. When Columbia CEO Brian Banks found out about this incident, he insisted that Selch be fired. The behavior was too “egregious” to allow Selch to continue at Columbia. No free mooning at Bank of America, Banks decided—even if you are in the one percent. The firing meant that Selch lost a multi-million contingent bonus package that would have vested if he had remained at the company a few months more. Because he was fired, Bank of America got the keep the money. Selch sued, arguing that firing him after issuing warning was a breach of contract...Last Wednesday, a three-judge appeals panel upheld the trial court, describing the mooning as “insubordinate, disruptive, unruly and abusive.” BofA Right to Fire Broker Who Mooned His Boss: Court [NetNet]

The Bar Has Been Set For Lengths Gone To In Order To Secure Seed Capital

[caption id="attachment_77416" align="alignleft" width="260" caption="Home?"][/caption] Want to get in shape? Want to save money? Want to impress industry execs with your problem solving skills and can-do attitude? Want to hole up and pound out a business plan for the [hedge fund/private equity firm/boutique investment bank/whathaveyou] you want to get off the ground? What if we told you there was a foolproof way to accomplish all those goals and more, that it wouldn't cost you a thing, that you might even have some fun doing it, and that there'd be free cereal and Coke involved? Would that sound like something you'd be interested in? Then, congratulations, you're already halfway there. Step 1 was getting on board, Step 2 is choosing the investment bank or asset management firm that's lax on night security and moving in. Eric Simons wanted to get straight into the thick of it, so after high school, and a short period crashing on couches with friends at the University of Illinois, Simons accepted a slot in the inaugural class of Imagine K12, a new Silicon Valley incubator focused entirely on education. His plan? Start a company that builds tools allowing teachers to create and discover lesson plans, and share them with students and teachers...But his initial idea wasn't quite working. Imagine K12 was a great place to get mentorship and learn how startups are built, but he and his ClassConnect partners had been given just $20,000 by the incubator, and after the four-month program ended, the money was gone. When his friends left to go back to college, Simons needed another solution. Imagine K12 is hosted at AOL's Palo Alto campus, and everyone involved gets a building badge. As it turns out, Simons told CNET, the badges kept working, even after the program ended, giving him ongoing access, along with a face that had become familiar to others who worked there. "I couldn't afford to live anywhere," Simons recalled. "I started living out of AOL's headquarters." For someone with neither money nor an aversion to sleeping on others' couches, the AOL building had plenty of allure. "They had a gym there with showers," Simons said. "I'd take a shower after work. I was like, 'I could totally work here...They have food upstairs, they have every drink on tap. This would be a sweet place to live.'" Note that Simons said he would work there. After his four months in the incubator, he was used to toiling away at ClassConnect inside the building, and with other programs, from the Stanford-focused incubator StartX to AOL's own First Floor Labs also taking up space there, there was no shortage of non-AOL employees shuffling in and out all the time. But Simons was intent on launching his startup, so why not find a desk and pound away for 12 to 16 hours a day? "There were so many people going in and out each day," he said. "They'd say, 'Oh, he just works, here, he's working late every night. Wow, what a hard worker.'" Having spent several months legitimately working in the building, often quite late, Simons had noticed that although there were security guards with nightly rounds, there were at least three couches that seemed outside those patrols. Plus, they looked fairly comfortable. He claimed them. This was his routine: He'd work until midnight or later, and then fall asleep around 2 a.m. on one of the couches. At 7 a.m. -- and no later than 8 a.m. so he'd be safely out of his field bed before anyone else arrived -- he'd wake up, go down to the gym for a workout and a shower, and then go back upstairs and scarf a breakfast of cereal and water or Coke. Then he'd work all day, finally waiting until everyone else in the building had gone home before returning to one of his three favored couches. "I got a really good work ethic," he said, "and I got in shape, since I had to work out every morning." Simons could probably have crashed elsewhere, but he wanted to see how long he could make the AOL squatting work. Some friends knew what he was doing, and they thought it was funny. But no one helped him, other than a couple buddies who discussed strategies with him on how to evade security. And then came that fateful morning with the 6 a.m. yelling. "One of the guys who manages the building came in at like 5 or 6 in the morning," Simons lamented, "and he scoured the entire place to find me. And he ripped me a new one. He was pissed that I was treating it like a dorm. Which was reasonable." No one called the police, Simons "continues to go to the AOL building for meetings to this day," and a venture capitalist, Paul Sherer, threw some seed money Simons' way, based on the fact that the guy lived out of the place. ("Tenacity and commitment are key attributes of a great entrepreneur," Sherer said. "Eric has these in spades as demonstrated by his willingness to do whatever it takes to get his company off the ground.") This could be you. Meet The Tireless Entrepreneur Who Squatted At AOL [CNET]

SEC Staffers Have Made Remarkable Progress Re: Learning What Constitutes Appropriate Use Of A Work Computer

If you had asked us two years or two months or two days ago if we thought that there would be a time in the near future when Securities and Exchange employees would not be getting reprimanded for watching porn on their work-issued computers, we would have said absolutely not. No judgment, but in our professional opinion, people do not go from, among other things: * Receiving "over 16,000 access denials for Internet websites classified by the Commission's Internet filter as either "Sex" or "Pornography" in a one-month period" * Accessing "Internet pornography and downloading pornographic images to his SEC computer during work hours so frequently that, on some days, he spent eight hours accessing Internet pornography...downloading so much pornography to his government computer that he exhausted the available space on the computer hard drive and downloaded pornography to CDs or DVDs that he accumulated in boxes in his office." * www.ladyboyx.com, www.ladyboyjuice.com, www.trannytit.com, and www.anal-sins.com ...to living a porn-free existence at l'office. Did we think they'd take baby steps toward that goal sure? But when you've tried to log on to your websites of choice, on average, 533 times a day, assuming weekends were worked, baby steps means getting yourself to a place where you can do a solid two hours of work each week without hitting up anal-sins.com. So you can imagine (and probably share in) our surprise to hear that, according to a probe by Interim Inspector General Jon Rymer re: "misuses of government resources," the worst offenses one office was charged with claiming they needed iPads to do their jobs when really they just wanted to watch movies on them at home and going to hacker conferences without encrypting the data on their computers. Granted, it doesn't look so great that the group that was running around with computers that didn't even have anti-virus programs on their computers was the one that "is responsible for ensuring exchanges are following a series of voluntary guidelines...concerning computer audits, security, and capacity" but still, no ladyboyjuice while on the job-- that's huge. In a 43-page investigative report that probed the misuse of government resources, SEC Interim Inspector General Jon Rymer discovered that an office within the SEC's Trading and Markets division spent over $1 million on unnecessary technology. The report also found that the staffers failed to protect their computers and devices from hackers, even as they were urging exchanges and clearing agencies to do just that. Although no breaches occurred, the staffers left sensitive stock exchange data exposed to potential cyber attacks because they failed to encrypt the devices or even install basic virus protection programs...On Friday Reuters reviewed a copy of the full report, which details an even broader array of problems, from misleading the SEC about the office's need to buy Apple Inc products, to cases in which staffers took iPads and laptops home and used them primarily for pursuits such as personal banking, surfing the Web and downloading music and movies. The report says the staff may have brought the unprotected laptops to a Black Hat convention where hacking experts discuss the latest trends. They also used them to tap into public wireless networks and brought the devices along with them during exchange inspections...The report also found that some people who worked in the office had little or no experience with exchange technical matters. SEC staffers used govn't computers for personal use - report [Reuters] Earlier: SEC Supervisor Surfed Tranny Porn To Cope With Stress Of The Job; SEC Official Who Surfed Tranny Porn To Deal With Stress Of The Job– Not Alone!;

Are You A Financial Services Company Stuffed To Gills With Toxic Assets And/Or On The Verge Of Bankruptcy? Don't Hold Your Breath For Brian Moynihan's Call

Time was, Bank of America loved buying companies. Bonus points if there was a not-so-subtle suggestion by the target's CEO that BofA would one day be very sorry for doing so, or that they would've been better off picking up an asbestos manufacturer, or that they were looking at roughly $40 billion (and counting) in legal fees associated with fuck-ups that were to become Bank of America's problem, or that they would have night terrors for the rest of their lives about signing those papers. As it's been a while since BofA went shopping, some in the financial services industry have been wondering if we can expect any announcements re: big deals anytime soon or if Ken Lewis's unsolicited suggestions (Groupon, Sino Forest, The Thirsty Beaver, and most recently: "a P&C insurer with outsized exposure to the Northeast") are or have ever been under consideration? Sadly for fans of the Lewis Era/style of doing business, not so much. Mr. Moynihan said in response to an audience question [at the bank's two-day investor presentation conference for financial companies at the Plaza hotel] that the bank has "no acquisition plan at all." BofA's Moynihan Says Fiscal Cliff Impact Already Happening [WSJ]