In the Matter of MusclePharm Corp.

MusclePharm Corporation (MusclePharm) (defendant) became a public corporation in 2010. However, MusclePharm failed to satisfy its resultant obligations as a public company to accurately track and disclose the perquisites it provided to its executives. For example, MusclePharm did not disclose any executive perquisites in 2010 and 2011 (despite providing perquisites worth $37,000 in 2010 and $160,000 in 2011) and failed to disclose 93 percent of perquisites it provided in 2012 and 35 percent of perquisites it provided in 2013. These perquisites included cars, meals, payments of medical bills, and golf-club memberships. In mid-2013, a MusclePharm internal review uncovered more than $100,000 worth of undisclosed perquisites, yet MusclePharm subsequently filed a form with the Securities and Exchange Commission (SEC) (plaintiff) that continued to understate the executive perquisites MusclePharm provided. By the spring of 2014, MusclePharm’s internal review revealed another $189,000 in undisclosed executive perquisites for 2011 and 2012 and $134,000 for 2013. On October 31, 2014, MusclePharm filed revised executive-perquisite disclosures for 2012 and 2013. All told, MusclePharm failed to report approximately $482,000 in executive perquisites for 2010 through 2013. To resolve an anticipated SEC cease-and-desist proceeding, MusclePharm submitted an offer of settlement, which the SEC accepted. Among other things, MusclePharm agreed to hire an independent consultant for one year to (1) review MusclePharm’s policies, procedure, controls, and training regarding the payment of expenses and required financial-statement disclosures and (2) recommend any improvements required to ensure MusclePharm’s compliance with its controls over and disclosure of executive perquisites. The SEC issued findings in connection with the cease-and-desist order.