Chancellor Corporation, et al.

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20812 / November 18, 2008

Accounting and Auditing Enforcement Release No. 2902 / November 18, 2008

Securities and Exchange Commission v. Chancellor Corporation, et al. (United States Court of Appeals (1st Cir.) No. 08-1347)

First Circuit Court of Appeals Dismisses Appeal of Brian M. Adley, Former Chairman and CEO of Boston-Based Chancellor Corporation, in Securities Fraud Case

The Securities and Exchange Commission announced that on November 3, 2008, the United States Court of Appeals for the First Circuit dismissed the appeal of defendant Brian M. Adley of a judgment that was entered against him in January 2008 in a securities fraud action. Adley is the former Chairman and Chief Executive Officer of Chancellor Corporation, a now defunct Boston, Massachusetts transportation equipment-leasing company.

The Commission originally filed an action against Adley and ten other defendants on April 24, 2003, in the United States District Court 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, by instructing that the fabricated documents be given to the company's auditors, and by coordinating the filing of false financial statements with the Commission. By the fall of 2007, all defendants other than Adley had settled the case with the Commission, and the Commission went to trial against Adley in November 2007. After a three week trial, on November 26, 2007, a Massachusetts federal court jury found Adley liable for violating the antifraud and record-keeping provisions of the federal securities laws, for making false statements to Chancellor's accountants, and for aiding and abetting Chancellor's reporting and recordkeeping provisions of the federal securities laws. SEC v. Chancellor Corporation, et al., (United States District Court for the District of Massachusetts, C.A. No. 03-10762-PBS).

On January 3, 2008, the District Court entered a Final Judgment against Brian Adley for his role in the multi-faceted financial fraud. The District Court ordered that Adley be enjoined from future violations of the federal securities laws, that he pay $930,000 in disgorgement and that Adley be barred from acting as an officer or director of a public company for twenty-years. Thereafter, on February 27, 2008, Adley filed a Notice of Appeal. The First Circuit Court of Appeals notified Adley on October 3, 2008, that he was in default for failure to file an opening brief in his appeal, and warned him to file the brief by October 20 or face dismissal. Adley failed to file the required brief. The First Circuit dismissed his appeal on November 3.

The Commission had previously settled with ten other defendants, including: Chancellor Corporation; the company's former President and Chief Operating Officer; the company's former acting Chief Financial Officer; the company's former treasurer; two former Chancellor directors and audit committee members; Chancellor's outside auditing firm and three members of its audit team.

For further information, see Litigation Release Nos. 18104 (April 24, 2003), 19177 (April 11, 2005), 20177 (July 2, 2007), 20370 (November 26, 2007) and 20426 (January 10, 2008).