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Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Monday, September 8, 2008

Jury Finds Former Master Graphics CEO Committed Securities Fraud

On September 5, 2008, a federal jury returned a verdict in the SEC's favor on securities fraud and other charges against John P. Miller, the former Chief Executive Officer, President, and Chairman of the Board of Master Graphics, Inc., a printing company based in Memphis, Tennessee that was publicly traded on the NASDAQ national market system, but is now defunct. The Commission's Complaint, filed June 8, 2004, alleged that Miller, in the spring of 1999, devised and implemented a scheme to fraudulently overstate the company's net income to meet analyst expectations. Pursuant to the plan, the company fraudulently reclassified 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. 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 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). Additionally, the jury found that Miller aided and abetted violations of the issuer reporting, books and records, and internal control provisions of the Exchange Act (Sections 13(a) and 13(b)(2)(A), and Exchange Act Rules 12b-20 and 13a-13).

http://lawprofessors.typepad.com/securities/2008/09/jury-finds-form.html

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