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In last night from the SEC:
The Securities and Exchange Commission today [Thursday] announced that Skechers U.S.A. Inc., a footwear company based in California, agreed to settle charges for failing to disclose payments for the benefit of its executives and their immediate family members. Skechers agreed to pay a $1.25 million civil penalty to settle the SEC’s charges.
The order says the Californian shoe company:
. . . did not comply with related person transaction disclosure requirements when it failed to disclose its employment of two relatives of its executives and did not disclose a consulting relationship involving a person who shared a household with one of its executives
That such a thing could occur will come as no surprise to Alphaville readers.
Exchange Act regulations state that 10-K “proxy” filings — the juicy disclosure documents that listed US companies drop before their AGMs — must disclose certain transactions involving related persons. It’s a broad category, including (but not limited to) siblings, siblings-in-law and fellow household members.
As we wrote last year, the incestuous nature of Skechers’ corporate structure led to couple of notable mistakes in its recent disclosures to investors. Which is to say they understated compensation for four children of founder Robert Greenberg who were on the Skechers payroll, over a period four years from 2018 to 2021. These errors were corrected in its filing last year.
Most notably, the company managed to neglect to mention that it paid Robert’s sister Marlene Greenberg roughly half a million dollars in both 2021 and 2022 for . . . something, possibly consultation.
A Skechers spokesperson told us at that time that it had “undertaken and will be undertaking process improvement measures to guard against similar situations arising in the future”.
So, uh, what else had gone wrong? The SEC says Skechers:
— Failed, in its 2019 10-K, “to disclose that a person sharing the same household as a director and executive officer of Skechers, in 2018, had received $210,000 in compensation as an independent contractor of the company”.
— Failed, in its 2020 10-K, “to disclose that a person sharing the same household as a director and executive officer of Skechers, in 2019, had received $210,000 in compensation as an independent contractor of the company”.
— Failed, in its 2021 10-K, “to disclose that a sibling-in-law of an executive officer and director of Skechers, in 2020, had received $213,645 in compensation while serving as a non-executive employee of the company”
— Failed, in its 2022 10-K, “to disclose that, in 2021, a sibling-in-law of an executive officer and director of Skechers had received $155,419 in compensation and a sibling of a different executive officer and director of Skechers had received $486,790 in compensation, while both served as non-executive employees of the company”
On top of all those forgotten payments, there are also the forgotten debts:
. . . each of the proxy statements described above failed to disclose that one or more executive officers and directors of Skechers owed in excess of $120,000 to Skechers with respect to personal expenses that had been paid for by Skechers but not yet reimbursed by the related person.
In particular, one executive officer and director of Skechers owed in excess of $120,000 to Skechers as of the years ended December 31, 2018, December 31, 2019, December 31, 2020, and December 31, 2021. Another executive officer and director of Skechers owed in excess of $120,000 to Skechers as of the years ended December 31, 2019 and December 31, 2021.
We’ve contacted Skechers for comment.
Keeping it in the family has never seemed like such a regulatory burden.
Read the full article here