On September 5, 2008, a federal jury returned a verdict in the SEC’s favor, finding John P. Miller, the former CEO, President, and Chairman of the Board of Master Graphics, Inc., liable on securities fraud and other charges. According to the SEC, the verdict followed a two-week jury trial before Judge Alan J. Baverman, a Magistrate Judge for the United States District Court for the Northern District of Georgia, Atlanta Division.
The Commission’s Complaint alleged that in 1999, Miller devised and implemented a scheme to fraudulently overstate the company’s net income to meet analyst expectations. The scheme allegedly involved fraudulently reclassifying rent and salary expenses that Master Graphics had already paid to its division presidents in the first quarter as assets on the company’s balance sheet. The SEC claimed that this misstatement caused Master Graphics to materially overstate its earnings for the first quarter of 1999, and materially understate its losses for the second and third quarters of 1999.
The SEC stated in a litigation release that, among other things, the jury found that Miller violated: (1) the antifraud provisions of both the Securities Act of 1933 (Section 17(a)) and the Securities Exchange Act of 1934 (Section 10(b) and Rule 10b-5); and (2) the internal controls and books and records provisions of the Exchange Act (Section 13(b)(5) and Exchange Act Rule 13b2-1).
