Casino operator settles SEC charge

Wednesday, Jan. 16, 2002 | 9:45 a.m.

WASHINGTON -- The Securities and Exchange Commission said today it filed its first case against a company for misleading use of "pro forma" accounting, charging Trump Hotels & Casino Resorts Inc. with a deceptive 1999 news release.

Atlantic City-based Trump, led by developer Donald Trump, settled the SEC's civil fraud allegations that it deceptively included a one-time $17 million gain under operating revenue. The company, which owns four casinos in New Jersey and Indiana, didn't pay a fine.

Pro forma earnings, typically issued in press releases, highlight what companies call their core performance. These reports are prepared differently than required by U.S. accounting rules and are often followed later by a company's official results. They are illegal only if misleading.

Trump Hotels, which neither admitted nor denied the SEC allegations, agreed to be subject to stiffer sanctions if it again commits similar violations. The company lost $37.3 million in 2000 on revenue of $1.3 billion.

The SEC alleged Trump Hotels' misleading October 1999 announcement gave it a third-quarter revenue increase from a year before when in fact revenue declined. Company shares rose 7.8 percent, to $4.31, after its Oct. 25, 1999, release. They fell 3.2 percent, to $3.75, a week later after stock analysts criticized the company's accounting.