U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19375 / September 14, 2005
Accounting and Auditing Enforcement
Release No. 2312 / September 14, 2005
Securities and Exchange Commission v. Marcy Wilson Roke, Case No. 04 CV 1966 H (POR) (S.D. Cal.)
FORMER DIRECTOR OF ADVERTISING AT ADVANCED MARKETING SERVICES, INC. SETTLES SEC'S CHARGES OF SCHEMES TO INFLATE ADVERTISING EARNINGS
The Securities and Exchange Commission announced today that, on September 8, 2005, the United States District Court for the Southern District of California entered final judgment as to defendant Marcy Wilson Roke in a civil enforcement action previously filed by the Commission. Roke was the former director of advertising at Advanced Marketing Services (AMS), a San Diego-based wholesaler of general interest books that provides a variety of other services, including promotional and advertising services. The final judgment (1) permanently enjoins Roke from violating and/or aiding and abetting violations of the antifraud, record keeping and falsifying books and records provisions of the federal securities laws, specifically, Section 17(a) of the Securities Act of 1933 and Sections 10(b), 13(b)(2)(A), and 13(b)(5) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13b2-1 thereunder; and (2) requires Roke to pay a $25,000 civil penalty and $56,458.20 in disgorgement of ill-gotten gains and prejudgment interest. Roke consented to the entry of the final judgment without admitting or denying the allegations in the Commission's complaint.
On September 29, 2004, the Commission filed a complaint against Roke alleging that she was involved in two schemes at AMS which caused AMS to fraudulently overstate its earnings. First, through Roke's involvement, AMS improperly recognized revenue on a greater number of print and mail advertising vehicles than AMS had in fact produced and distributed for its publisher clients. Second, Roke participated in a scheme to increase AMS's income by directing AMS personnel to not inform retailers of credits due to them for certain advertising and promotional services that the retailers provided. Instead of contacting the retailers and reconciling amounts, AMS improperly reversed the liability and thereby decreased expenses and increased its income. Roke profited from her participation in the fraudulent schemes from her receipt of annual bonuses and sales of AMS stock. The complaint alleges that the fraudulent schemes caused AMS to overstate its pre-tax earnings by about 9% in fiscal year 2001, 10% in fiscal year 2002, and 19% in fiscal year 2003.
In September 2004, the United States Attorney's Office for the Southern District of California announced that Roke had pled guilty to a two-count Information charging her with conspiracy and wire fraud in connection with her participation in a scheme to defraud AMS's customers. Roke entered her guilty plea in San Diego before the Honorable Nita L. Stormes, United States Magistrate Judge.
The Commission's investigation is continuing.