NSCA Musclepharm Sponsorship Agreement Terminated
According to National Strength and Conditioning Association (NSCA) President, G. Gregory Haff, Ph.D., the NSCA is terminating its sponsorship agreement with Denver, Colorado-based sport nutrition company Musclepharm. The decision to terminate the sponsorship arrangement with Musclepharm comes from the NSCA’s board of directors who made the decision in light of the recent charges and investigation of Musclepharm by the Securities and Exchange Commission. The NSCA Musclepharm sponsorship partnership has existed since 2014.
On September 8, 2015, the Securities and Exchange Commission charged Musclepharm with a number of accounting and disclosure violations, including failing to properly report perks that were provided to Musclepharm executives as compensation. In response to the SEC charges, Musclepharm has agreed to settle the charges with three current or former executives and the company’s former audit committee chair.
The SEC investigation of Musclepharm found that the company had understated or omitted perks received by company executives totaling nearly half a million dollars. Musclepharm CEO Brad Pyatt received $244,000 in perks related to automobiles, clothing, meals, golf club memberships, personal tax services and legal services. Musclepharm also failed to disclose private jet use, vehicles, and golf club memberships for its executives.
According to the SEC, executive compensation, even in the form of perks, must be properly accounted for so that investors have accurate information. In addition to the disclosure violations related to executive perks, Musclepharm also failed to disclose party transactions with a major customer, failed to disclose bankruptcies related to two executive officers, and failed to disclose continuing sponsorship commitments. Musclepharm also improperly accounted for advertising costs and overstated its revenue, understated its rent expenses, and failed to implement internal accounting controls for perks and other areas were accounting and disclosure violations were committed.
Musclepharm’s case was settled without admitting or denying the SEC’s findings. A $700,000 penalty was paid by Musclepharm and the company also agreed to hire an independent monitor for one year. CEO Brad Pyatt agreed to a $150,000 penalty in the agreement.