SEC wins against CEO who made up numbers
A US federal jury has found a former chairman and CEO guilty of securities fraud for inflating profit, revenue and asset figures
The District Court of Massachusetts has held Brian Adley, former chairman,
chief executive officer and controlling shareholder, liable for fabricating
documents and fraudulent accounting from 1998 to 2000, in a scheme to inflate
Boston-based transport equipment leasing company Chancellor Corporation’s
reported assets, revenue and income. He was also found guilty of paying
unwarranted fees to entities under his control.
The
Securities
and Exchange Commission (SEC) charged that after an initial audit firm
refused to report suspect financial results and information proposed by Adley,
he fired them and hired new auditors, BKR Metcalf Davis, which enabled the
fraudulent scheme to proceed by conducting deficient audits of the company’s
financial statements. Gregory Davis, the concurring partner on the Chancellor
audits performed by his firm, oversaw and signed the deficient, misleading audit
reports.
In 1999, Chancellor reportedly overstated its revenue by 177%, net profit by
73% and assets by 12%. In 2000, the company allegedly made false filings
overstating its assets and income by 32% to 173%. The court will determine civil
sanctions and remedies at a later date.
SEC previously settled with 10 defendants, including Chancellor and former
company officials, including its president, chief financial officer, treasurer,
two directors and audit-committee members, outside auditing firm and three
audit-team members.
Further reading:
False accounting charges for ‘bulletproof’ executive
Business fraud: face up to the facts