The Securities and Exchange Commission settles charges against Vince McMahon, the former Executive Chairman and CEO of World Wrestling Entertainment Inc., for signing two settlement agreements, one in 2019 and one in 2022, on behalf of himself and WWE without disclosing the agreements to WWE’s Board of Directors, legal department, accountants, financial reporting personnel, or auditor.
The forging resulted into WWE’s circumventing internal accounting controls and caused material misstatements in WWE’s 2018 and 2021 financial statements.
According to the SEC’s order, one settlement agreement obligated McMahon to pay a former employee $3 million in exchange for the former employee’s agreement to not disclose her relationship with McMahon and her release of potential claims against WWE and McMahon, and the second agreement obligated McMahon to pay a former WWE independent contractor $7.5 million in exchange for the independent contractor’s agreement to not disclose her allegations against McMahon and her release of potential claims against WWE and McMahon.
The order found that, because McMahon failed to disclose the agreements to WWE, WWE did not evaluate the disclosure implications or the appropriate accounting for these transactions in its financial statements.
The SEC’s order found that, because the payments required by the 2019 and 2022 agreements were not recorded, WWE overstated its 2018 net income by approximately 8 percent and its 2021 net income by approximately 1.7 percent.
In addition, according to the order, these payments should have been disclosed as related party transactions.
The order further found that McMahon signed management representation letters that were provided to WWE’s auditor that did not disclose the existence of either settlement agreement. After learning of the settlement agreements, WWE issued a restatement of its financial statements in August 2022.
McMahon consented to the entry of the SEC’s order finding that he violated the Securities Exchange Act by knowingly circumventing WWE’s internal accounting controls and that he directly or indirectly made or caused to be made false or misleading statements to WWE’s auditor.
The order also found that McMahon caused WWE’s violations of the reporting and books and records provisions of the Exchange Act. Without admitting or denying the SEC’s findings, McMahon agreed to cease-and-desist from violating those provisions, pay a $400,000 civil penalty, and reimburse WWE $1,330,915.90 pursuant to Section 304(a) of the Sarbanes-Oxley Act.
