Long before Donald Trump launched his campaign to become president of the United States, the entertainment giant he founded faced the wrath of the Securities and Exchange Commission, whose leadership he would shape if elected.

As the SEC calls attention to an increasing use of non-GAAP accounting metrics to explain financial results to investors, PwC partner Wayne Carnall, a former chief accountant at the SEC, pointed out at a regional accounting conference that Trump Hotels & Casino Resorts was an early subject of an SEC enforcement action for its portrayal of non-GAAP results. “There was nothing factually inaccurate, down to the penny,” in Trump Hotels’ third quarter 1999 financial results that led to the SEC action. “What was wrong was the omission of information.”

When the SEC brought its case in 2002 against Trump Hotels, now doing business as Trump Entertainment Resorts, it was the first enforcement action to address abuse of pro forma earnings presentation, said then-director of enforcement Stephen Cutler.

The SEC said the entertainment company adjusted its GAAP earnings figure by excluding a one-time $81.4 million charge, but failed to also add a one-time $17.2 million gain. The company’s stock price rose 7.8 percent on the initial earnings announcement, then fell 6 percent three days later when the market learned of the undisclosed one-time gain. Trump Hotels agreed to the cease-and-desist order without admitting or denying the SEC’s findings.

“The fact that they omitted the gain from the press release was a material omission,” said Carnall. “When people use non-GAAP, they report far more debits than credits. You have to look for unusual credits as well as unusual debits.”

Brian Croteau, deputy chief accountant at the SEC, said the SEC is using forums like the Ohio regional conference of the Institute of Management Accountants, where he and Carnall both spoke, to spread the word that companies need to be cautious about their use of non-GAAP accounting or the SEC may start considering new guidance. He urged companies to assure their non-GAAP presentations are not misleading to investors, are not “cherry picking,” or presenting only favorable results, and are properly explained and reconciled. “Audit committees have an important role to play here in their oversight of financial reporting,” he said.

The SEC’s five-member panel has two vacancies currently, with the October 2015 nominations by President Obama of Lisa Fairfax and Hester Peirce awaiting a Senate vote. SEC Chair Mary Jo White, a Democrat appointed by Obama, is widely expected to depart the SEC with the election of a new president.

The SEC has become increasingly political in recent years, in Carnall’s view. “It’s like a microcosm of what’s in Congress,” he said. “It’s a negative trend.”

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