Sectional sofamaker Lovesac Co. agreed to pay $1.5 million to settle Securities and Exchange Commission allegations that two former executives devised a fraudulent accounting scheme to meet a key Wall Street metric.
The executives hid $2.2 million of shipping expenses after it was discovered the costs had been incorrectly recorded, the
The move let the company avoid the expense and public attention of restating prior financial results, and it helped the company hit its gross margin projections, the regulator wrote in settlement documents filed in federal
That "led to materially misleading financial statements," the agency said. The pair, both certified public accountants, also withheld information from the company's outside auditor, it said.
The company, which didn't admit or deny the allegations, didn't immediately respond to a request for comment.
