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SEC cites Trump Hotels
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January 16, 2002: 11:13 a.m. ET
Casino operator said to obfuscate facts in pro forma earnings.
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NEW YORK (CNN/Money) - Trump Hotels & Casino Resorts Inc. has consented to a Securities and Exchange Commission cease-and-desist order after being accused by regulators of making misleading statements in the company's third-quarter 1999 earnings release.
In its first case involving controversial pro forma financial reporting, the SEC said Wednesday that Trump Hotels "cited pro forma figures to tout the company's purportedly positive results of operations but failed to disclose that those results were primarily attributable to an unusual one-time gain rather than to operations."
Trump Hotels (DJT: down $0.29 to $1.66, Research, Estimates), chaired by real estate magnate Donald Trump, did not admit or deny any wrongdoing.
The SEC said that on Oct. 25, 1999 the company, in an effort to meet analysts' expectations, reported third-quarter net income which excluded a one-time charge of $81.4 million but did not exclude a one-time gain of $17.2 million.
According to the commission, if the company had excluded the gain, the results "would have reflected a decline in revenues and net income and would have failed to meet analysts' expectations."
The SEC said the CEO at the time, Nicholas Ribis, violated the antifraud provisions of the Securities and Exchange Act by "knowingly or recklessly issuing a materially misleading press release."
Ribis left the company at the end of June 2000, when his contract was not renewed.
Jay Goldberg, an attorney acting as a spokesman for Donald Trump, told CNNfn, "It was one act, three years ago by a man who has been dismissed. It is a single instance."
"There is no proof whatsoever that Donald Trump was aware of participated in or had any knowledge of this," Goldberg said.
"This is the first commission enforcement action addressing the abuse of pro forma earnings figures," said Stephen M. Cutler, director of the SEC's enforcement division. "In this case, the method of presenting the pro forma numbers and the positive spin the company put on them were materially misleading."
"The case starkly illustrates how pro forma numbers can be used deceptively and the mischief that can cause," Cutler said. 
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