SEC Alleges Trump Firm Misled Investors

Trump Hotels & Casino Resorts Inc. was charged Wednesday in the Securities and Exchange Commission’s first case that alleges investors were misled by an earnings report that didn’t follow U.S. accounting standards.

Regulators said the third quarter 1999 earnings release from the Atlantic City, N.J., company, headed by real estate mogul Donald Trump, did not disclose that a higher-than-expected pro forma profit was mainly because of a one-time gain rather than from operating performance.

“The earnings release was fraudulent because it created the false and misleading impression that the company had exceeded earnings expectations primarily through operational improvements when in fact it had not,” an SEC statement said.

In settling the three-year dispute, Trump Hotels did not admit or deny the charges. The 1999 news release was issued by an executive who is no longer with the company, the firm said in a statement.

Trump Hotels (ticker symbol: DJT), which was not fined, said it promptly corrected the matter and has had procedures in place since 1999 that guard against any officer repeating such an action.

The company’s stock fell 22 cents to $1.73 on Wednesday in trading on the New York Stock Exchange.

Company earnings announcements that depart from generally accepted accounting principles--and typically make profits look better--grew more popular in the Internet stock boom of the late 1990s, when new companies with no profit looked for ways to reassure shareholders.

The figures, which typically are referred to as pro forma results, often exclude costs involving mergers, noncash compensation and research and development.

The SEC warned investors in December that pro forma results can differ dramatically from a company’s official financial statements and threatened to sue companies that issue misleading results.