Terry Phillips is the principle owner and Chairmen of the Board for SouthPeak Games. On May 2, 2007, the Securities and Exchange Commission wrapped up a case against Terry Philips and his former company, game publisher "Capitol Distributing, LLC" for violations of anti-fraud, financial reporting, and record-keeping. Here are some excerpts from the official SEC Litigation Release:

The Securities and Exchange Commission ("Commission") today announced that it filed a settled civil action in federal district court against video game distributor Capitol Distributing, L.L.C. ("Capitol") and one of its owners, Terry M. Phillips ("Phillips").

...Specifically, the complaint alleges that Take-Two shipped to Capitol hundreds of thousands of video games, typically at the end of reporting periods, and fraudulently recorded those shipments as sales when, in actuality, Capitol only temporarily parked the games for Take-Two and did not intend to sell them....

...According to the complaint, Capitol in two instances returned the games to Take-Two under invoices falsely describing them as "purchases" of "assorted product." The scheme enabled Take-Two to report approximately $15 million in phantom revenue from four separate parking transactions with Capitol.

In summary, the SEC was after Terry Phillips for using his company Capitol Distributing and one of his unrelated side companies "Philips Land Company", or "PLC", to shuffle hundreds of thousands of games into temporary limbo for Take-Two. The SEC claims Capitol and PLC operated an elaborate hoax, acting as if they were buying the games so Take-Two could inflate it's profits, by merely holding the inventory while Take-Two reported the games as actually sold. Capitol and PLC would then fraudulently return the games to Take-Two under false invoices, enabling Take-Two to report $15 million in phantom revenue.

Terry Phillips "without admitting or denying" the SEC's findings was fined $50,000 for his part in the fraud and consented to a cease and desist order.

Official SEC Litigation Release

Official copy of the SEC Complaint (PDF, 11 Pages)

Check out the Capitol Distributing, LLC address. Look familiar?


















POTENTIAL FRAUD AT SOUTHPEAK GAMES?

If there is any fraud that has led to or stemmed from SouthPeak not paying their legally owed debts to any deserving contractors and vendors, or if you have any information or evidence of a violation of securities laws in the business dealings of Terry Phillips' new publisher, SouthPeak Games, please contact the SEC immediately