Amazon Settles SEC Case Over Accounting Monday reached a settlement with the U.S. Securities and
Exchange Commission (SEC) over whether it helped skirt
accounting rules. The online giant did not admit or deny guilt, and will not
pay a fine in the matter.

The settlement calls for Amazon,, and’s two former
top executives at the time of the violations to cease and desist violation of SEC rules. Former CEO Kenneth Kurtzman agreed to pay
$60,000, and former CFO Brian Bergeron consented to pay $25,000.

According to the SEC case filing, the cease-and-desist order arose from a
November 1999 marketing deal gone awry between Seattle-based Amazon and
luxury goods retailer The New Customer Agreement called for
Houston-based to pay Amazon $6 million in return for promotion
and marketing, with an extra $2 million payment if Amazon delivered 45,000
customers before the end of 2000.

On Valentine’s Day 2000, in the first promotion from the deal, Amazon issued
discount coupons to its customers for, but it failed to include
unique serial numbers. The coupons ended up on an Internet message board,
leading to 8,500 unintended recipients of the 11,500 discounts given,
according to the SEC.

Under a March 2000 settlement, Amazon agreed to pay $600,000,
and agreed to credit with 11,500 new customers under
their marketing agreement, according to the complaint. However, following
generally accepted accounting principles (GAAP) would mean would
need to recognize expenses arising from the deal. To avoid missing analysts’
estimates, the SEC said, CEO Kurtzman suggested only crediting
Amazon 3,500 customer in this quarter, then crediting the remaining
customers the following reporting period. Bergeron suggested splitting the
settlement into two letters, the SEC said.

Amazon agreed to draft letters to this effect, aiding to
improperly defer $1.5 million in expenses in order to return a pro forma net
loss in line with analysts’ estimates, the SEC filing said.

Sports acquired
in September 2001 for $14 million in cash
and stock.

In a separate matter, Amazon said the SEC had concluded its informal inquiry
of Amazon’s accounting practices in its Commerce Network. Amazon said no
enforcement inquiry would be recommended.

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