U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18744 / June 14, 2004
Accounting and Auditing Enforcement
Release No. 2035 / June 14, 2004
SEC v. John P. Miller, Case No. 1:04-CV-1655 (N.D. Ga.)
SECURITES AND EXCHANGE COMMISSION SUES FORMER PRESIDENT OF MEMPHIS, TENNESSEE COMPANY FOR ACCOUNTING FRAUD
On June 8, 2004, the Securities and Exchange Commission filed a complaint in the United States District Court for the Northern District of Georgia against John P. Miller. Miller is the former president, chief executive officer and chairman of the board of directors of Master Graphics, Inc., a Tennessee-based printing company that was publicly traded on the NASDAQ National Market System, but is now defunct. The complaint alleges that, in the spring of 1999, Miller devised and implemented a scheme to fraudulently overstate the company's net income to meet analysts' expectations. Pursuant to the plan, the company fraudulently reclassified rent and salary expenses that Master Graphics had already paid to its division presidents in the first quarter to assets on the company's balance sheet, thus reducing expenses and increasing income. According to the complaint, this scheme fraudulently overstated Master Graphics' net income by 628%, 46% and 10% in the first, second and third quarter financial statements, respectively, that the company filed with the Commission in 1999.
The complaint alleges that Miller violated the antifraud provisions of the federal securities laws (Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rule 10b-5) and the books and records and internal controls provisions of the Exchange Act (Section 13(b)(5) and Exchange Act Rule 13b2-1). The complaint also alleges that Miller aided and abetted Master Graphics' violations of the reporting provisions of the Exchange Act (Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder). The complaint seeks an injunction, disgorgement plus prejudgment interest, civil penalties and an officer and director bar.
This complaint is the second lawsuit that the Commission filed in connection with Master Graphics' accounting issue. See Litigation Release No. 18733 (June 2, 2004).