U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20370 / November 26, 2007
Accounting and Auditing Enforcement Release No. 2752 / November 26, 2007
SEC v. Chancellor Corporation, et. al., 03-CV-10762-PBS (D. Mass.)
Jury Rules in SEC's Favor, Finds Former Chairman/CEO of Chancellor Corporation Liable for Securities Fraud
The Securities and Exchange Commission announced that a federal court jury returned a verdict on November 16, 2007 in the SEC's favor on all securities fraud charges against Brian M. Adley, who was the former chairman, chief executive officer and controlling shareholder of Chancellor Corporation, a defunct Boston-based transportation equipment-leasing company.
Adley was accused of orchestrating a scheme to inflate Chancellor's reported assets, revenue and profits, and to pay unwarranted fees to entities that he controlled by using fabricated documents and fraudulent accounting from1998 through 2000. The jury verdict followed a three-week trial in Boston before the Honorable Patti B. Saris, U.S. District Court Judge for the District of Massachusetts.
The Commission's complaint alleged that Adley caused Chancellor to file false financial statements in 1999 and 2000 by directing the wholesale fabrication of corporate documents, instructing that the fabricated documents be given to the company's auditors, and coordinating the filing of false financial statements with the SEC.
The jury found Adley liable for violating the antifraud and record-keeping provisions of the federal securities laws, for making false statements to its accountants, and for aiding and abetting Chancellor's reporting and recordkeeping provisions of the securities laws. The district court will determine the appropriate sanctions and remedies at a later date.
The Commission had previously settled with 10 other defendants: Chancellor Corporation; the former President and Chief Operating Officer; the former acting Chief Financial Officer; the former treasurer; two former Chancellor directors and audit committee members; Chancellor's outside auditing firm and three members of its audit team.