America's financial watchdog will extract $1m from controversial insurance reseller Zenefits and its former CEO to settle claims they lied to investors.
The SEC said ex-boss Parker Conrad and the biz he founded Zenefits have agreed to shell out the dosh to end an investigation into whether they misled shareholders about the severity of the company's use of software bots to skirt state licensing requirements.
Zenefits was a former Silicon Valley darling that flogged employee health insurance packages to companies. In 2015, the biz was thrown into turmoil when it emerged it had built a browser extension that automatically took online classes for its brokers so that they could rapidly gain state-issued licenses to sell health insurance. Zenefits staffers were required to spend 52 hours in training for their certificates; instead, the bots crunched through the courses for them, allowing barely trained brokers to get cracking with sales almost straight away.
After that news broke, the subsequent 48 per cent stock plunge drew the attention of the SEC. The watchdog later claimed Conrad and Zenefits lied to the company's financial backers about the cheating.
"Although Zenefits recognized that it operated in a highly regulated industry, it did not take sufficient steps to ensure its growing workforce was properly licensed to sell insurance," the SEC said [PDF].
"Unbeknownst to investors, the company allowed employees to use a computer script created by Conrad to enable them to spend less time on pre-licensing education than required by California law."
Under the terms of the settlement, Conrad himself will pay out $533,692 in fines, disgorgement, and interest. Zenefits, meanwhile, will pay a $450,000 penalty. As part of the deal, neither Conrad or Zenefits will have to admit or deny any of the SEC's findings and charges.
Conrad left Zenefits in early 2016, only to resurface later that year. Zenefits has since implemented a plan to ensure all of its salespeople are properly trained and licensed to sell health insurance in their respective states of operation. ®