Former WWE CEO Vince McMahon settles SEC charges for undisclosed agreements

Investing.com -- Vince McMahon, the former Executive Chairman and CEO of World Wrestling Entertainment (NYSE:TKO ) Inc., has settled charges with the Securities and Exchange Commission (SEC) today. McMahon was charged for signing two settlement agreements on behalf of himself and WWE without disclosing them to the company’s Board of Directors, legal department, accountants, financial reporting personnel, or auditor.

The undisclosed agreements, one signed in 2019 and another in 2022, bypassed WWE's system of internal accounting controls and resulted in material misstatements in WWE’s 2018 and 2021 financial statements.

The SEC's order detailed that one settlement agreement required McMahon to pay a former employee $3 million in return for the former employee's agreement to not disclose her relationship with McMahon and her release of potential claims against WWE and McMahon. The second agreement obligated McMahon to pay a former WWE independent contractor $7.5 million in exchange for her agreement to not disclose her allegations against McMahon and her release of potential claims against WWE and McMahon.

The SEC found that because McMahon did not disclose these agreements to WWE, the company could not evaluate the disclosure implications or the appropriate accounting for these transactions in its financial statements. The unrecorded payments from the 2019 and 2022 agreements led to WWE overstating its 2018 net income by approximately 8 percent and its 2021 net income by approximately 1.7 percent. The SEC's order also indicated that these payments should have been disclosed as related party transactions.

McMahon also signed management representation letters provided to WWE’s auditor that did not disclose the existence of either settlement agreement. After learning of the settlement agreements, WWE issued a restatement of its financial statements in August 2022.

Thomas P. Smith Jr., Associate Regional Director in the SEC's New York Regional Office, stated that company executives cannot enter into material agreements on behalf of the company they serve and withhold that information from the company’s control functions and auditor.

McMahon has agreed to the entry of the SEC’s order finding that he violated the Securities Exchange Act by knowingly circumventing WWE’s internal accounting controls and making or causing to be made false or misleading statements to WWE’s auditor. He has agreed to cease-and-desist from violating those provisions, pay a $400,000 civil penalty, and reimburse WWE $1,330,915.90 under Section 304(a) of the Sarbanes-Oxley Act, without admitting or denying the SEC’s findings.

The SEC’s investigation involved several individuals from the New York Regional Office and had assistance from the Division of Economic and Risk Analysis.

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Source: Investing.com