First Pro Forma Case: SEC Faults ‘Positive Spin’

Trump Hotels & Casino Resorts has the dubious distinction of being the target of the Securities and Exchange Commission’s (SEC’s) first enforcement case on pro forma earnings.

The SEC said Trump’s third-quarter 1999 earnings release 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.

The Commission also found that Trump Hotels, through the conduct of its chief executive officer, chief financial officer and treasurer, violated the antifraud provisions of the Securities Exchange Act by knowingly or recklessly issuing a materially misleading press release.

Wayne M. Carlin, Regional Director of the Commission's Northeast Regional Office says, "This case demonstrates the risks involved in mishandling pro forma reporting. Enforcement action can result if a company fails to disclose information necessary to assure that investors will not be misled by the pro forma numbers."


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