Quimbee logo
DMCA.com Protection Status
From our private database of 17,600+ case briefs...

In the Matter of Michael Marchese

Securities and Exchange Commission
Release Nos. 34-47732; AAER-1764; Administrative Proceeding File No. 3-11092 (April 24, 2003)


In 1996, Michael Marchese (defendant) joined Chancellor Corporation’s (Chancellor) board of directors. Until 1999, Marchese sat on Chancellor’s audit committee. Marchese’s friend, Brian Adley, was chairman, chief executive officer, and controlling shareholder of Chancellor. Marchese did not oversee accounting and “generally deferred” to Adley. In 1997, Chancellor had to write off $1.14 million in unsubstantiated payments to companies controlled by Adley. Chancellor signed a letter of intent to acquire MRB in August 1998. Chancellor listed that date as the date of the acquisition for accounting purposes and consolidated MRB’s revenue with its own. Chancellor’s independent auditors determined that Chancellor did not have sufficient control to consolidate the companies’ financial statements until February 1999 under Generally Accepted Accounting Principles (GAAP). Adley had Chancellor’s chief financial officer backdate a management agreement to justify the 1998 date, but the auditors would not accept it. With Marchese’s approval, Adley fired the auditors and hired new ones, whom he presented with fabricated documents. The new auditors accepted the 1998 date. Marchese knew about the discrepancy between the auditors’ decisions, but made no investigation. Chancellor was charged $3.3 million in unsubstantiated consulting fees by Vestex Capital Corporation (Vestex), a company Adley owned. Adley had Chancellor list the fees as an asset rather than an expense, as it should have. Marchese was aware of the fees and the earlier write offs. Chancellor filed its annual report with the Securities and Exchange Commission (SEC), Form 10-KSB, in April 1999. The form listed MRB’s acquisition date as August 1998 and included MRB’s finances, as well as the miscategorized $3.3 million fee to Vestex. Adley and Marchese signed the form. After Marchese left the board, he wrote to the SEC about Chancellor’s financial practices.

Rule of Law


Holding and Reasoning (Katz, Sec.)

What to do next…

  1. Unlock this case brief with a free (no-commitment) trial membership of Quimbee.

    You’ll be in good company: Quimbee is one of the most widely used and trusted sites for law students, serving more than 458,000 law students since 2011. Some law schools—such as Yale, Vanderbilt, Berkeley, and the University of Illinois—even subscribe directly to Quimbee for all their law students. Read our student testimonials.

  2. Learn more about Quimbee’s unique (and proven) approach to achieving great grades at law school.

    Quimbee is a company hell-bent on one thing: helping you get an “A” in every course you take in law school, so you can graduate at the top of your class and get a high-paying law job. We’re not just a study aid for law students; we’re the study aid for law students. Read more about Quimbee.

Here's why 458,000 law students have relied on our case briefs:

  • Written by law professors and practitioners, not other law students. 17,600 briefs, keyed to 984 casebooks. Top-notch customer support.
  • The right amount of information, includes the facts, issues, rule of law, holding and reasoning, and any concurrences and dissents.
  • Access in your classes, works on your mobile and tablet. Massive library of related video lessons and high quality multiple-choice questions.
  • Easy to use, uniform format for every case brief. Written in plain English, not in legalese. Our briefs summarize and simplify; they don’t just repeat the court’s language.

Questions & Answers

Have a question about this case?

Sign up for a free 7-day trial and ask it

Sign up for a FREE 7-day trial