The U.S. Securities and Exchange Commission (SEC) announced that Lovesac, a U.S. furniture manufacturer, has agreed to a $1.5 million settlement following charges of accounting fraud. The SEC accused two former executives of orchestrating a scheme to meet a key Wall Street metric by improperly recording expenses.
According to documents filed in a Connecticut federal court, the executives concealed $2.2 million in shipping costs after these expenses were misrecorded. This maneuver allowed Lovesac to avoid restating previous financial results, which would have attracted public scrutiny, and enabled the company to meet its gross margin expectations.
The SEC described the resultant financial statements as "materially misleading." The implicated individuals, both certified public accountants, also withheld critical information from the company's external auditors.
