U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 20177 / July 2, 2007

Accounting and Auditing Enforcement Release No. 2630 / July 2, 2007

SEC v. Chancellor Corporation, et al., (United States District Court for the District of Massachusetts, C.A. No. 03-10762-PBS)

Commission Moves for Order Holding Defendant Brian Adley in Civil Contempt, Subject to Default Judgment and Other Sanctions for Failing to Comply with Court Orders

The Securities and Exchange Commission announced that on June 14, 2007, the Commission filed a motion for civil contempt, default judgment, and other sanctions against Defendant Brian Adley. Adley is the last remaining defendant in the Commission's accounting fraud case related to the now defunct Chancellor Corporation. The Commission filed its motion based on Adley's failure to comply with the Court's May 16, 2007 and June 11, 2007 Orders, entered by the Honorable Patti B. Saris of the United States District Court for the District of Massachusetts, requiring that Adley appear for a deposition, as well as Adley's failure to appear at properly noticed depositions.

According to the Commission's Memorandum in Support of its Motion, at a May 16, 2007 status conference, the Court ordered that Adley sit for a deposition "in early June." The SEC properly noticed Adley's deposition on several occasions, but, each time, Adley failed to appear. On June 8, 2007, the SEC moved on an emergency basis to compel Adley's deposition. The Emergency Motion to Compel requested that the Court order Adley to sit for a deposition to start on June 12 or June 13, 2007. On June 11, 2007, the Court granted the Commission's Emergency Motion to Compel. The Commission scheduled Adley's deposition for June 13, 2007. On that day, however, Adley again failed to appear.

The Commission's June 14, 2007 Motion requests that the Court hold Adley in civil contempt, impose default judgment and other sanctions including (to the extent that the Court allows a trial to proceed): (1) prohibiting Adley from introducing his own testimony at trial; (2) allowing the Commission to introduce evidence of Adley's failure to appear at his deposition at trial and instructing the jury that they may draw an adverse inference from Adley's refusal to appear; (3) requiring Aldey to pay reasonable expenses, including attorney's fees; and (4) imposing other sanctions.

The Court has set a hearing on the Commission's Motion for July 18th. For further information, see Litigation Release Nos. 18104 (April 24, 2003) and 19177(April 11, 2005).

http://www.sec.gov/litigation/litreleases/2007/lr20177.htm