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Domino's manipulated reports to approve higher advertising and promotion fees in a scheme to boost stocks and dividends for insiders, according to a new report.
In a report to the Securities and Exchange Commission, a corporate insider laid out the alleged scheme. Ultimately, the whistleblower says, officers, board members, and others enjoyed "higher stock prices and dividends through share repurchases and dividend payouts."
The SEC has not filed charges against Domino's, but the agency will investigate whether the franchisor violated securities laws or was just doing business as usual.
Forbes writer Janet Sparks said the "well-documented whistleblower report" makes "serious allegations" against the company, its top-level officers, and various staff members. The allegations include filing false financial statements, manipulation of securities, insider trading, and bribery.
The report says Domino's orchestrated an advertising and promotion campaign to pay a $1.85 billion transaction with a partially funded $1.67 billion debt owed to "securitization entities."
"To clarify, documents show that although Domino's was required to get 100% votes from franchisees on raising the advertising fee from 5.5% to 6% as part of the securitization, the franchisor fell short of the votes," Sparks wrote. "However, the company publicly stated that they did get the 100% and moved forward with the transaction."
As a result, the report alleges, Domino's Pizza's chief executive officer, board members, and others received higher stock prices and dividends.
Stone, a freelance reporter who has covered the franchise industry for 30 years, said whistleblower reports are serious matters for the SEC.
"The Commissions repeated expresses that it takes these reported allegations seriously in hopes of finding corporate securities fraud," she said. "Especially when it comes from a corporate insider."