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<ul class="summary-list"><li><keyword id="239232" type="COMPANY" weightage="60" keywordseo="Under-Armour">Under Armour</keyword> received a "<keyword id="150068" type="PERSON" weightage="60" keywordseo="Wells-Notice">Wells notice</keyword>" last week, warning executives that they could face a suit over allegations they violated securities laws.</li><li>The <keyword id="6362470" type="ORGANIZATION" weightage="60" keywordseo="sec">SEC</keyword> is scrutinizing Under Armour over claims its disclosures of "pull forward" accounting practices throughout 2015 and 2016 may have violated securities laws.</li><li>About 80% of companies served with a Wells notice face charges, according to a <a href="https://www.wsj.com/articles/sec-drops-20-of-probes-after-8216wells-notice8217-1381363343">WSJ analysis</a> of government data. </li></ul>SEC investigators intend to recommend that the SEC move forward with allegations that Under Armour executives violated securities laws, according to <a href="https://underarmourinc.gcs-web.com/static-files/0c7f78bb-bf88-4090-a7d7-29d6287cdc2d">documents</a> released July 22. The SEC sent Under Armour a Wells Notice warning <keyword id="9653700" type="UNKNOWN" weightage="60" keywordseo="kevin-a-plank">Kevin A. Plank</keyword>, Under Armour founder, and <keyword id="9653701" type="UNKNOWN" weightage="60" keywordseo="david-e-bergman">David E. Bergman</keyword>, Under Armour CFO, that they could face SEC enforcement for allegedly manipulating company sales in a way that violates securities laws. The SEC is scrutinizing Under Armour over disclosure-related allegations around its use of "pull forward" sales tactics throughout 2015 and 2016. Though a Wells Notice does not formally charge the company of breaking laws, it does indicate that SEC staff has recommended pursuing enforcement action. About 80% of companies served with a Wells Notice face charges, according to a <a href="https://www.wsj.com/articles/sec-drops-20-of-probes-after-8216wells-notice8217-1381363343">WSJ analysis</a> of government data. 'The Wells Notices informed the Company and the Executives that the SEC Staff has made a preliminary determination to recommend that the SEC file an enforcement action against the Company and each of the Executives that would allege certain violations of the federal securities laws," the company wrote in the July 22 SEC filing. Shares of Under Armour were down nearly 4% in pre-market trading on Monday morning, but the stock rebounded by noon. Federal investigators have been looking into Under Armour's accounting practices since 2017. Last November, the Wall Street Journal <a href="https://www.wsj.com/articles/under-armour-is-subject-of-federal-accounting-probe-11572819835?mod=hp_lead_pos1&amp;adobe_mc=MCMID=87670005472937582434063529156742997470|MCORGID=CB68E4BA55144CAA0A4C98A5%40AdobeOrg|TS=1595853448&amp;adobe_mc=MCMID=87670005472937582434063529156742997470|MCORGID=CB68E4BA55144CAA0A4C98A5%40AdobeOrg|TS=1595853461&amp;adobe_mc=MCMID%3D71214716331503335210633219613257647589%7CMCORGID%3DCB68E4BA55144CAA0A4C98A5%2540AdobeOrg%7CTS%3D15958608633D1595860863">reported</a> that Under Armour was the subject of a federal accounting probe. The athletic-wear company addressed the investigation in November, stating that it had been cooperating with the SEC since 2017 while denying wrongdoing. In the coming days, Under Armour has the opportunity to file a formal response to the Wells Notice and talk with SEC staff in an attempt to resolve the issue. "The Company and the Executives maintain that their actions were appropriate and intend to pursue the Wells Notice process," the company wrote in the filing.

Under Armour executives were warned they could be charged over accounting disclosures that may have violated securities laws

<div class="KonaFilter image-container display-table"><div><div class="image on-image"><a href="https://www.gettyimages.com/detail/news-photo/under-armour-ceo-kevin-plank-during-ces-2016-the-annual-news-photo/504023374?adppopup=true">Justin Solomon/Getty Images</a>Kevin Plank announced in October that he would be leaving his post as CEO to become executive chairman.</div></div></div><ul class="summary-list"><li>In its third-quarter earnings call on Monday, <a href="https://www.businessinsider.com/category/under-armour">Under Armour</a> executives addressed a <a href="https://www.wsj.com/articles/under-armour-is-subject-of-federal-accounting-probe-11572819835?mod=breakingnews">Wall Street Journal report</a> that the sports retailer's accounting practices are at the center of a federal investigation.</li><li>"We have been fully cooperating with these inquiries for nearly two and a half years," Under Armour's chief financial officer, David Bergman, said on the call. "We firmly believe that our account practices and disclosures were appropriate."</li><li>Under Armour reported that revenue decreased by 1% in the third quarter of 2019 as <a href="https://markets.businessinsider.com/stocks/uaa-stock">shares dropped</a> by as much as 14% on Monday morning. </li><li><a href="https://www.businessinsider.com/?hprecirc-bullet">Visit Business Insider's homepage for more stories</a>.</li></ul>A day after reports surfaced that <a href="https://www.businessinsider.com/category/under-armour">Under Armour</a> is at the center of a <a href="https://www.businessinsider.com/under-armour-under-federal-investigation-over-accounting-practices-2019-11">federal investigation</a>, executives are maintaining that its accounting practices are above board. On its third-quarter earnings call on Monday, Under Armour's chief financial officer, David Bergman, deviated from the numbers to briefly address allegations that the company formerly manipulated sales disclosures. On Sunday, <a href="https://www.wsj.com/articles/under-armour-is-subject-of-federal-accounting-probe-11572819835?mod=breakingnews">the Wall Street Journal reported</a> that the retailer's accounting practices have been under federal investigation by the US Securities and Exchange Commission and the US Department of Justice since 2017. Investigators are examining whether the company shifted "sales from quarter to quarter to appear healthier," the Journal reported. "We have been fully cooperating with these inquiries for nearly two and a half years," Bergman said on the call. "We firmly believe that our account practices and disclosures were appropriate. I underscore that we are staying focused, disciplined, and methodical in our practices."When asked for further detail on the inquiry by an investor during the question-and-answer portion of the call, Bergman said he was "prohibited" from sharing additional details but said he has continued to ensure the company has been compliant."We feel like our foundation is strong and we look forward to igniting the Under Armour brand as we move into the next chapter," he responded. An Under Armour spokesperson similarly declined to disclose information about what prompted the investigation when asked by <a href="https://www.businessinsider.com/under-armour-under-federal-investigation-over-accounting-practices-2019-11">Business Insider's Rosie Perper on Sunday.</a> According to the Journal, investigators questioned employees in Baltimore "as recently as last week." <h2>Under Armour faces ongoing sales woes</h2>Despite Under Armour's focus on revitalization and several mentions of its "next chapter" on Monday's call, the company reported that revenue decreased by 1% to $1.4 billion in the third quarter of 2019. Executives cited low sales at outlet stores and off-price venues, as well as sluggish e-commerce sales for the decline.Meanwhile, <a href="https://markets.businessinsider.com/news/stocks/under-armour-stock-price-shares-tank-on-accounting-probe-lowered-forecast-2019-11-1028655193">shares dropped by as much as 14%</a> in the wake of the announcement of the SEC and Justice Department investigation.Under Armour has experienced <a href="https://www.businessinsider.com/under-armour-history-to-uncertainty-2019-8">significant sales woes in recent years</a> as it has slipped behind competitors Nike and Adidas and failed to capture market share. A series of missteps resulted in $1.3 billion in unsold merchandise in 2018, and the company experienced a reputational hit after the <a href="https://www.wsj.com/articles/under-armours-metoo-moment-no-more-strip-clubs-on-company-dime-1541450209">Journal reported</a> that executives had been expensing strip-club outings. The company has also struggled significantly in North America, and the third quarter of 2019 was no exception: On the call, Under Armour executives reported that revenue in the region decreased 4% to $1 billion. In October, Under Armour CEO <a href="https://www.businessinsider.com/under-armour-new-ceo-complete-turnaround-2019-10">Kevin Plank announced he would step down</a> to assume a new role as executive chairman and brand chief, while Patrik Frisk, president and chief operating officer, would take the helm. Plank underscored several times on the call that the realignment was his decision and a strategic move to improve the brand. "I want to be clear that I love Under Armour," Plank said. "It is now today and tomorrow my full-time job. I want to make it clear that it was my decision. The strength of mine and Patrick combined creates a force that's really unique in our industry."Frisk joined the call in advance of assuming his new role on January 1, telling investors he was "humbled and honored" to serve as CEO, noting his focus on "pursuit of innovation, attention to detail, and outright grit to making athletes better." <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/under-armour-kevin-plank-and-patrik-frisk-on-under-armours-future-2019-10">We talked to Kevin Plank right before he stepped down as CEO of Under Armour, and he hinted at why the company may be ready for the change</a></h3> <div> </div> </div>

Under Armour executives defend accounting practices as 'appropriate' and say the company is fully cooperating with federal investigation

<ul class="summary-list"><li>In a recent <keyword id="10879" type="CITY" weightage="60" keywordseo="YouTube">YouTube</keyword> video, James Charles admitted to sexting with boys who now say they're minors.</li><li>Most <keyword id="31174" type="PERSON" weightage="60" keywordseo="brands">brands</keyword> working with or adjacent to Charles have ignored Insider's requests for comment. </li><li>YouTube did not respond to an inquiry, but announced that Charles would not host the second season of Instant <keyword id="1864633" type="PERSON" weightage="60" keywordseo="Influencer">Influencer</keyword>.</li></ul>In the five years since James Charles began posting regularly on YouTube, the 21-year-old beauty star has landed <keyword id="34952" type="PERSON" weightage="60" keywordseo="sponsorships">sponsorships</keyword> with brands like <keyword id="1325170" type="PERSON" weightage="60" keywordseo="Morphe">Morphe</keyword> and Chipotle, collaborated with Kylie Jenner, and even hosted a reality competition series on YouTube. The YouTuber now has over 25.6 million subscribers on the video platform and 36 million followers on TikTok.But recently, Charles - who has previously been involved with several YouTube spats - is in hot water after <a href="https://www.insider.com/james-charles-youtube-scandal-what-did-fired-sexting-allegations-video-2021-4">admitting to flirting and sexting with men who say they're younger than 18</a>.In an April 1 YouTube video, he addressed the allegations and recognized that the conversations with teen boys shouldn't have happened. "I was being reckless," he said. Charles said in the video that he believed the boys were 18, and blocked them on Snapchat when he found out their real ages, though one boy denied lying about his age in a conversation with Insider.Most brands who have collaborated with or are adjacent to Charles' career have ignored Insider's several requests for comment regarding Charles' latest video. Here are the companies that did, and didn't, respond to requests for comment: <ul><li>YouTube: YouTube has not responded to multiple requests for comment. Charles has been on the platform since 2015 and has earned income through video monetization and the YouTube partner program. YouTube monetization provides a stream of financial income for creators, and <a href="https://www.businessinsider.com/youtube-demonetizing-david-dobrik-following-vlog-squad-scandal-2021-3">the platform demonetized David Dobrik's channel</a> in light of a rape allegation against a former member of his Vlog Squad group. Following the video in which Charles addressed the allegations, there were <a href="https://twitter.com/TaurusCheck/status/1377727305838104576?s=20">multiple</a> <a href="https://twitter.com/KissmyKass18/status/1377604550182506496?s=20">calls</a> for demonetization of his videos on social <keyword id="6354777" type="COMPANY" weightage="60" keywordseo="Media">media</keyword>. On March 26, before the video was released, YouTube <a href="https://variety.com/2021/digital/news/james-charles-not-hosting-youtube-instant-influencer-season-2-1234937416/">told Variety</a> that James Charles wouldn't host the second season of its "Instant Influencer" show, though didn't specify a reason for the separation.</li><li>Morphe Cosmetics: Morphe has not responded to multiple requests for comment. The cosmetics company has seen <a href="https://www.businessinsider.com/james-charles-youtube-morphe-backlash-trisha-paytas-scandal-sexting-tiktok-2021-4">a lot of pressure to comment</a> on possible future plans with Charles after it released <a href="https://youtu.be/0c4wxwLbtxo">a popular eyeshadow palette</a> in collaboration with the YouTuber in November 2018, along with two brush sets.</li><li>Ulta Beauty: In a statement, the beauty brand told Insider it is "not a current sponsor of Instant Influencer," the YouTube series that Charles previously hosted. "I can confirm our work with the platform ended in May 2020 and we have no current plans in place to reengage," a spokesperson said. </li><li>Lilly Lashes: Lilly Lashes did not respond to Insider's multiple requests for comment. The lash company <a href="https://twitter.com/jamescharles/status/1047269000953188352?s=20">partnered</a> with Charles in 2018 and offered 15% off purchases for customers using his code. </li><li>Laura's Boutique: Laura's Boutique did not respond to Insider's multiple requests for comment. The boutique <a href="https://twitter.com/jamescharles/status/1007688829799575552?s=20">partnered</a> with Charles in 2018, offering 10% off for customers using an offer code.</li><li>Sephora: Sephora did not respond to Insider's multiple requests for comment. The makeup store <a href="https://www.sephora.com/ca/en/product/the-james-charles-palette-P442928">currently</a> stocks the Morphe collaboration palette with Charles on their website.</li><li>Ole Henriksen: Ole Henriksen did not respond to Insider's multiple requests for comment. In 2019, Charles shared a sponsored image using products from the skincare company. He also <a href="https://youtu.be/vZyf4pUyA64">appeared in an ad campaign</a> for the brand. </li><li>Sugar Bear Hair: Sugar Bear Hair did not immediately respond to Insider's multiple requests for comment. The vitamin company's partnership with Charles sparked the <a href="https://www.insider.com/jeffree-star-james-charles-dramageddon-2-tati-westbrook-2020-5#at-coachella-in-2019-the-foundation-was-laid-for-westbrook-to-attack-charles-who-she-perceived-as-disloyal-following-his-advertisement-for-a-competing-hair-care-company-2">now-infamous Dramageddon</a> involving fellow YouTubers Tati Westbrook and Jeffree Star.</li><li>The Trevor Project: The LGBTQ nonprofit organization has previously worked with Charles through his Morphe partnerships, but told Insider it "has no direct relationship with James Charles."</li><li>Chipotle: Chipotle has not responded to multiple requests for comment. Charles' <a href="https://youtu.be/Td21vqyG0n0">recent makeup review</a> of an eyeshadow palette from the e.l.f. cosmetics x Chipotle collaboration sparked rumors that Chipotle sponsored the video or paid him to make the review, but Charles did not disclose whether or not Chipotle was involved in the making of the video. </li></ul>Charles' YouTube video, titled "holding myself accountable," was posted on his main YouTube channel on April 1, after several accusations against Charles went viral on social media. In the video, he said he wasn't aware of the power dynamic inevitable when speaking with viewers or fans of his videos. "A power imbalance can happen even when it's not intentional," Charles said. "What I wasn't getting before is that the excitement that comes with talking to a celebrity is literally enough to make somebody do or say something that they normally wouldn't. Even if that celebrity isn't intentionally weaponizing their fame, money, or power. And that's the concept that I just wasn't getting, but I now do."He added that he would be taking a break from social media. Charles has not responded to multiple requests for comment. Lindsay Dodgson and Sirena Bergman contributed reporting to this piece.

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Under Armour executives were warned they could be charged over accounting disclosures that may have violated securities laws

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Under Armour executives defend accounting practices as 'appropriate' and say the company is fully cooperating with federal investigation

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Companies are staying silent amid beauty guru James Charles' sexting scandal

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