SouthPeak Games is in trouble with the SEC, but the publisher wants you to know that it messed up and is trying to set things right.
Games publisher SouthPeak has not been earning a lot of goodwill, based on all its recent appearances in the news lately. Aside being embroiled in some nasty legal cases (now settled) and getting called out for delaying Two Worlds II, the company is currently in hot water with the Securities and Exchange Commission. Regarding that last issue, the publisher is now admitting, publicly, that it screwed up.
SouthPeak issued a statement in response to a Cease and Desist letter the SEC sent it last week, explaining that the publisher hadn't filed financial reports properly. It's claiming this was an error that it tried to correct before the SEC got involved:
A number of news stories have been written over the past days that make a number of statements regarding our former CFO, Reba McDermott, and SEC issues regarding the company that require correction and clarification. With respect to Reba McDermott, her separation from the Company was amicable and there are no allegations of wrongful termination or lawsuits stemming from her departure. Reba chose to leave the Company on her own accord and we wish her well.
In terms of the SEC, an investigation was prompted into the background of the need to file restated financial statements for the quarter ended March 31, 2009. The SEC staff's inquiry was fully disclosed in our public filings as of June 30, 2009, and was based on the manner in which we recorded a loan during this quarter which was made by our chairman to help support our business but was not properly reported in our financial statements.
During the investigation, we fully explained to the SEC staff that when we discovered the error in our statements, we acted promptly on our own accord with the support of our auditor and outside counsel to fully rectify the issue. The recommendation of the SEC staff resulting from this investigation is that cease and desist orders issue in which we agree to comply with our SEC filing obligations in the future. We are currently negotiating the exact provisions of the orders. The SEC is not proposing that our Company be prohibited from doing business as some are saying, but rather, as is the case with proceedings of like nature, the SEC is trying to assure our Company's compliance in the future with our reporting obligations.
As we mature as a public company, we have taken great pains to install better internal controls and procedures to further assure our adherence with financial reporting obligations and we are seeking a replacement for our prior CFO, who was instrumental in installing better controls and procedures, with the experience necessary to help us make sure similar incidents do not happen again.
SouthPeak's mention of McDermott's departure is probably based on the fact that her predecessor, Andrea Jones, was asked to leave the company in August and she is suing the publisher for wrongful termination.