The United States uses a system known as “generally accepted accounting principles,” or GAAP, as the standard for financial reporting of businesses across the country. GAAP includes reporting standards and principles when compiling important financial statements.
Non-GAAP accounting becomes an issue with the SEC when companies begin fraudulently manipulating financial documents they present to their potential investors. The requirements of GAAP are rigid, and critics have pointed out that in many cases, GAAP financial reports don’t accurately reflect a company’s performance.
Companies are resorting to using non-GAAP—also known as pro forma—numbers to adjust their financial statements to demonstrate their financial position.
The problem with companies using non-GAAP numbers is that they often paint a picture of a company doing better financially than it actually is. This misleads investors into thinking that their investment is in a “safer” position than it might actually be.
Because publicly traded companies’ use of non-GAAP numbers has been on the rise, more investors are being deceived about the successes or failures of the companies they are investing in or considering investing in.
Although non-GAAP numbers can be useful in describing large, one-time expenses so that the investor has a more realistic idea of the company’s financial earnings, some companies are adjusting their earnings to unrealistic levels.
Red flags that demonstrate a business is using non-GAAP numbers could be the omission of stock-based compensation and restructuring costs in their financial statements, as well as a focus on adjusted per-share earnings.
As the SEC opens more and more investigations into businesses that use non-GAAP accounting practices, the number of SEC whistleblower awards related to this conduct is likely to soar.
Many would-be whistleblowers are leery about moving forward with blowing the whistle on fraudulent non-GAAP accounting due to the fear of retaliation.
Businesses often do retaliate against suspected whistleblowers by terminating, harassing, or demoting them or ruining their professional reputation—even though both the Sarbanes-Oxley Act and Dodd-Frank Act contain provisions that explicitly prohibit retaliatory action by employers.
If your employers choose to violate these provisions, we can bring them to court. You could be entitled to reinstatement into your former position, back-pay, and the recovery of other losses you endured.
When you provide a tip to the SEC, you have the potential to win a substantial whistleblower reward. If your tip is original, valuable, and given voluntarily, you’ll have met the initial criteria for a reward.
In addition, the SEC must be able to take enforceable action against the violating company in question, as well as recover a minimum of $1,000,000 in sanctions for you to qualify. Of the recovered sanctions, you will be entitled to between 10 and 30 percent, depending on how valuable your tip was to the success of the SEC’s investigation.
If you are considering blowing the whistle on a potential securities violation like non-GAAP accounting and are interested in remaining anonymous or need protection from retaliation, get in touch with a qualified SEC whistleblower lawyer at Meissner Associates as soon as possible.
You can schedule your no-obligation tip evaluation today by completing the secure contact form below or by calling our office at 1-866-764-3100.