SEC Regulation G Violation
Convicted felon turned fraud fighter Barry Minkow went on to point out that an inVentiv Health "violated SEC Regulation G governing non-GAAP financial measures, such as EBITDA, and failed to make other appropriate disclosures about certain transactions."
In its Q2 2009 press release, inVentiv violated SEC Regulation G by defining EBITDA as "operating income before depreciation and amortization." SEC guidance specifically requires EBITDA to be measured as earnings (meaning net income and not operating income), before interest, taxes, depreciation, and amortization. However, inVentiv improperly used operating income, rather than net income as a starting point to compute EBITDA, and failed to exclude interest and taxes from its non-compliant EBITDA financial measure.
In a follow up 8-K report filed with the SEC, inVentiv added certain other disclosures required by SEC Regulation G, but failed to disclose that it violated SEC rules by using an improper EBITDA measure. Instead, the 8-K report referred to the Q2 2009 press release and wrongfully continued to claim that "operating income before depreciation and amortization" is EBITDA. See below:
This press release also contains the non-GAAP financial measure EBITDA, which is defined as operating income before depreciation and amortization.
In 2005, the SEC Division of Corporation Finance reviewed the same non-compliant EBITDA financial measure (operating income before depreciation and amortization) improperly used by CKX Inc. In response, CKX renamed its non-compliant EBITDA measure as "OIBDA" or "operating income before depreciation and amortization" since the starting point for computing any EBITDA or adjusted EBITDA financial measure must be net income and not operating income.
Sam E. Antar
I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped Eddie Antar and other family members mastermind one of the largest securities frauds uncovered during the 1980s. I pleaded guilty to three felonies.
I am assisting Barry Minkow and Fraud Discovery Institute in researching inVentiv and Minkow has a short position in inVentiv. I have no position in inVentiv securities, long or short.