Toymaker Mattel Accepts A $3.5 Million SEC Penalty For False Claims About Its 2017 Financial Earnings

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Last Updated on October 22, 2022 by Bitfinsider

The Securities and Exchange Commission (SEC) stated Friday that toymaker Mattel has agreed to pay a $3.5 million fine to resolve allegations of making false statements about its financial performance in two quarters of 2017.

The SEC said that by understating its tax-related valuation for the third quarter of 2017 by $109 million, Mattel “violated numerous professional standards.” In the fourth quarter of that year, the corporation exaggerated its tax expense by a similar amount, the SEC’s ruling states.  The corporation misreported its quarterly losses as a result.

The penalty relates to an SEC investigation that was concluded in 2019. The $109 million tax charge miscalculation at Mattel wasn’t fixed until its restatement in November 2019.

That year, the chief financial officer of Mattel made his resignation known. The SEC claimed that Mattel did not confirm or refute the investigation’s conclusions.

Separately, the commission is seeking enforcement action against the former PricewaterhouseCoopers auditor who was in charge of the project.

Alka Patel, associate director of the SEC’s Los Angeles Regional Office, said in a statement: “An auditor’s adherence to professional standards and independence is critical to preserving investors’ trust in a company’s financial statements. Auditors who advise their clients on who to hire will have an interest in the success of such hires and could therefore be less critical of their effectiveness, all of which undermines the auditor’s independence.”

The SEC discovered that Joshua Abrahams, the PwC auditor involved and named in the report, was aware of the issue but failed to inform Mattel’s audit committee about it. According to the statement, Abrahams also gave Mattel limited human resource guidance.

A Mattel company spokesperson said: ““We’re pleased to have the matter behind us. While we’re not going to comment on the underlying facts, we appreciate the SEC’s recognition of the company’s remedial measures.” According to the SEC, a public hearing on Abrahams’ actions will be held.

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