SouthPeak: We're Fully Complying With Government Regulators

Publicly-held SouthPeak said it has taken appropriate steps to resolve problems with its financial reporting methods, issues that recently prompted the U.S. Securities and Exchange Commission to launch an investigation into the Two Worlds and Stronghold III publisher, the company told Gamasutra on Monday. The SEC investigation stems from SouthPeak's failure to properly report and record a loan from company chairman Terry Philips that occurred during the quarter ended March 31, 2009, according to a statement from SouthPeak. "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," read SouthPeak's statement. Following that investigation, the SEC staff recommended cease and desist orders which ordered SouthPeak to comply with financial reporting standards and future SEC obligations. "We are currently negotiating the exact provisions of the orders," adds the statement. "The SEC is not proposing that our company be prohibited from doing business as some are saying." SouthPeak went public in 2008 following a merger with Global Services Partners Acquisition. "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," the statement said. The publisher is currently seeking a new CFO to replace Reba McDermott, who left the company in November this year. McDermott came on board at SouthPeak following the termination of former CFO Andrea Jones, who held the position when the SEC violation occurred. Jones is now threatening legal action against SouthPeak related to discrimination and "retaliation against a whistle blower and wrongful termination," according to a recent SEC filing.