Fathom Holdings Cites Former CEOs for Financial Control Failures

Fathom Holdings disclosed potential "material misstatements" in previous financial reports, attributing these issues to alleged failures by former CEOs to maintain an effective control environment. In a filing with the Securities and Exchange Commission concerning its Q1 2026 financial results, the company stated that former executives may have made these misstatements. Specifically, the firm identified "material weaknesses" in its financial reporting disclosure controls and procedures. These weaknesses were linked to the actions of former CEO Joshua Harley and former CFO Marco Fregenal, who later became CEO in 2023 before Harley's departure. Fregenal was terminated as CEO in June 2026, coinciding with the announcement of Fathom's acquisition by Bed Bath and Beyond, with his termination cited as due to unspecified policy violations. Adam Rothstein is currently serving as interim CEO.

The SEC filing detailed specific "deficiencies" in Fathom's reporting processes. These included a failure to maintain an effective risk assessment and a lack of quality information and communication. The company warned that these deficiencies could have resulted in "material misstatements to the Company's quarterly consolidated financial statements that would not have been prevented or detected on a timely basis." The company's current leadership is working to address these control environment issues.

A significant contributing factor to these financial reporting problems, according to the filing, was a "side agreement" executed in 2021. At that time, company founder and CEO Joshua Harley and then-CFO Marco Fregenal allegedly entered into this agreement without the board's knowledge or authorization. The filing indicates that the board only became aware of this deal later, suggesting it bound Fathom in ways not previously disclosed or approved. The exact nature of the alleged misstatements and the terms of the side agreement were not fully detailed in the filing.