The SEC’s orders find that Endurance’s former chief executive Hari Ravichandran and former chief financial officer Waruna Ellawala knowingly provided inflated subscriber figures for the Massachusetts-based online marketing company. The SEC also filed a complaint in U.S. District Court in Massachusetts alleging that former Constant Contact CFO Harpreet Grewal hid its slowing customer growth from investors and inflated its publicly reported subscriber numbers. Constant Contact became a subsidiary of Endurance after it was acquired by it in 2016.
The SEC filed a settled enforcement action in June against Endurance and Constant Contact in which Endurance agreed to pay an $8 million penalty. In the latest action, Ravichandran and Ellawala agreed to settle the charges without admitting or denying them and pay $1.38 million and $34,000 respectively in disgorgement, interest, and penalties. They also agreed to cease and desist from further violations of various antifraud, reporting, books and records, and internal controls provisions of the federal securities laws.
“For companies who provide subscription-based services, size and growth of subscriber base can be critical metrics,” said Paul Levenson, Director of the SEC’s Boston Regional Office. “Investors depend on the integrity of management in reporting such figures, which commonly fall outside the scope of formal audits. Holding senior executives accountable for failures of oversight as well as outright manipulation of such metrics is vital to protecting our markets.”
The SEC’s case is being handled by Michael J. Vito, David M. Scheffler, Rachel E. Hershfang, Patrick Noone, and Celia D. Moore of the Boston office.