Boston jury finds entrepreneur guilty in fraud
Posted 13h 18m ago
By Greg Farrell, USA TODAY
A jury in Boston determined Friday that a local entrepreneur who claimed to run a $29 million trucking company had defrauded investors.
After a three-week trial in federal court, jurors agreed with prosecutors from the Securities and Exchange Commission that Brian Adley, former chairman and CEO of Chancellor Corporation, had fabricated documents designed to inflate the revenues and earnings of his company.
R. Daniel O'Connor, the SEC's lead prosecutor on the case, says he relied on a USA TODAY profile of Adley from February 1999 to help convince the jury that Adley was actively deceiving investors.
In that profile, Adley claimed his company was generating $29 million a year in revenue.
O'Connor presented evidence that at the time of the USA TODAY article, Chancellor was only a $10 million company, and that Adley had back-dated a merger agreement with a competitor, Tomahawk, that allowed him to claim the higher number.
A month after the story ran, Chancellor filed a disclosure with the SEC stating that it had fired its auditor, Reznick Fedder, but that there was no reason behind the action. Two weeks later, Reznick Fedder filed its own disclosure with the SEC, claiming the firm had been fired because it didn't agree with management's view that the merger with Tomahawk had taken place the previous year.
When the company filed an annual report claiming the merger took place in 1998, the SEC launched an investigation.
At the trial, Adley testified that even though he told USA TODAY his company had $29 million in annual revenue, he wasn't trying to deceive investors. He described the article as more of a human interest story than a profile. Trial testimony showed he bought 25,000 reprints of the article, which he then sent to investors.
"Instead of honoring his obligations to shareholders, Mr. Adley used the company has his personal piggy bank," O'Connor said Friday.
The SEC will seek fines and a permanent bar preventing Adley from ever serving as an officer or director of a public company.
The USA TODAY article, which appeared Feb. 16, 1999, quoted one of the company's auditors as saying, "Brian's not the smoothest person in the world, but you know exactly where he's coming from. There's never any doubt he'll get where he wants to go. He doesn't take no for an answer." |
