Terry M. Phillips

U.S. Securities and Exchange Commission

Litigation Release No. 21941 / April 21, 2011

Accounting and Auditing Enforcement Release No. 3273 / April 21, 2011

Securities and Exchange Commission v. Terry M. Phillips, Civil Action No. 1: 11 CV 422 AJT/IDD (E.D. Va. April 20, 2011)

Commission Files Settled Charges Against Chairman of SouthPeak Interactive Corporation

The Securities and Exchange Commission today announced that it filed a civil action in federal district court against Terry M. Phillips, chairman of the board of directors of SouthPeak Interactive Corporation ("SouthPeak"). In its Complaint, the Commission alleges that, in February 2009, Phillips used personal funds to pay for the purchase of inventory for SouthPeak. The Commission further alleges that, in violation of SouthPeak's internal policy, Phillips failed to bring the proposed payment to the attention of the Audit Committee of SouthPeak's board of directors for its approval. According to the Complaint, Phillips also failed to ensure that the related party transaction was properly and accurately recorded in SouthPeak's books and records and disclosed in the relevant periodic report that SouthPeak filed with the Commission. The Commission further alleges that Phillips signed a management letter to SouthPeak's outside auditor representing that all related party transactions had been disclosed for the quarter ended March 31, 2009, even though Phillips' use of his personal funds to purchase inventory for SouthPeak had not been disclosed to the auditor.

The Commission alleges that, by this conduct, Phillips violated Rule 13b2-2 of the Securities Exchange Act of 1934 ("Exchange Act"), which prohibits officers and directors of public companies from making materially false or misleading statements to accountants in connection with, among other things, the preparation of any report required to be filed with the Commission, and aided and abetted violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20 and 13a-13 thereunder, which are the public company periodic reporting, books and records, and internal controls provisions of the federal securities laws.

Without admitting or denying the Commission's allegations, Phillips consented to the entry of a permanent injunction against future violations of these provisions and a court order directing Phillips to pay a $50,000 civil penalty. Phillips further consented to the entry of an order requiring him to comply with the Order Instituting Cease-and-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order Pursuant to Section 21C of the Securities Exchange Act of 1934 that was issued against Phillips by the Commission on May 2, 2007.

The settlement is subject to the approval of the United States District Court for the Eastern District of Virginia.

In related proceedings, the Commission today issued cease-and-desist orders against SouthPeak and its former vice president of operations, Patrice K. Strachan. Without admitting or denying the Commission's findings, SouthPeak consented to the issuance an order requiring SouthPeak to cease and desist from committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-13 thereunder. Without admitting or denying the Commission's findings, Strachan consented to the issuance of an order finding that Strachan failed to ensure that Phillips' payment was properly recorded in SouthPeak's books and records, that Strachan instructed her subordinate not to inform the chief financial officer that Phillips had made the payment with his personal funds, and that Strachan made false material statements in an interview with SouthPeak's auditor. The order requires Strachan to cease and desist from causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20 and 13a-13 thereunder, and committing or causing any violations and any future violations of Rule 13b2-2 thereunder and orders her to pay a $10,000 civil penalty.