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The federal government fined The Cheesecake Factory $ 125,000 for allegedly hiding how much money the family restaurant chain was hemorrhaging at the start of the coronavirus crisis.
The company agreed to disburse the payment in a settlement Friday with the Securities and Exchange Commission that marked the regulator’s first charges against a publicly traded company for misleading investors about the financial effects of the pandemic.
Cheesecake Factory – which made headlines in March when it laid off 41,000 workers, or 90% of its staff, at the start of COVID-19 – had claimed in regulatory filings that its restaurants were “operating sustainably” in late March and early April. The crisis has emptied dining halls across the country, officials said.
But the California-based company was actually burning around $ 6 million a week at the time and expected it had only four months of cash left, according to the SEC.
The Cheesecake Factory did not disclose these alarming details in public statements to investors – but did reveal them to potential lenders or private equity investors as it sought additional liquidity, officials have alleged. DRY.
“When state-owned companies describe to investors the impact of COVID-19 on their business, they need to speak precisely,” Stephanie Avakian, director of the SEC’s law enforcement division, said in a statement.
The chain’s March 23 regulatory brief outlining the steps it had taken to maintain financial flexibility also omitted the fact that it had previously told its owners that it would not pay April rent for its restaurants. , according to the SEC.
As it imposed time off shortly thereafter, Cheesecake Factory told affected workers they would retain their eligibility for insurance and benefits until June 1, along with a “free daily meal from their restaurant.”
The Cheesecake Factory – which owns and operates nearly 300 restaurants in the United States and Canada – said it is “fully cooperating” with the SEC but has neither admitted nor denied any of the agency’s claims.
The company’s settlement with the SEC also requires it to “cease and desist” from violating reporting standards under federal securities law.
The chain’s shares fell 2% to $ 38.62 on Friday.
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